**Exhibit        10.22**

**AMENDED        AND RESTATED**

**EMPLOYMENT        AGREEMENT**

**THIS        AMENDED AND RESTATED EMPLOYMENT AGREEMENT**
**LUFKIN        INDUSTRIES, INC**
**DOUGLAS        V. SMITH**

**WHEREAS**

**WHEREAS**

**WHEREAS**

**NOW**
**THEREFORE**

**1.**
**Employment**

**2.**
**Terms**
**.**

**3.**
**Position        and Duties**
**.**

|   | (a) | During                  the Term, the Executive shall serve as President and Chief Executive                  Officer of the Company reporting directly to the Board of Directors                  of the                  Company. During the Term, the Company shall cause the Executive                  to be                  nominated for election as the Chairman of the Board of Directors                  of the                  Company and shall use its reasonable best efforts to secure such                  election.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (b) | While                  employed hereunder, the Executive shall devote his full business                  time and                  attention to the operations and activities of the Company, and                  shall not                  be employed by, consult with or otherwise render services to, any                  other                  business, except with the consent of the Board of Directors of                  the                  Company. The foregoing notwithstanding, the Parties recognize and                  agree                  that the Executive may engage in passive personal investments and                  other                  business, industry, civic and charitable activities that do not                  conflict                  with the business and affairs of the Company or interfere with                  the                  Executive’s performance of his duties                  hereunder. |

**4.**
**Compensation        and Benefits**
**.**

|   | (a)    | **Salary**.                  The Company shall pay the Executive a base salary (“Salary”) at an annual                  rate of $360,000 (the “Base Rate”). Salary shall be payable in accordance                  with the Company’s payroll practices. The Compensation Committee of the                  Board of Directors of the Company (the “Committee”) shall review with the                  Executive the Salary during February of each year in the Term,                  and may                  adjust such Salary in its sole discretion, provided that such Salary                  shall                  never be at an annual rate less than the Base Rate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (b)    | **Bonus**.                  The Executive will have an opportunity to receive a bonus with                  respect to                  each year during the Term; provided, however, that the maximum                  annual                  bonus opportunity for each such year shall not be less than one                  hundred                  percent (100%) of the Executive’s Salary for the bonus year. The level or                  levels of the annual bonus for each year during the Term and the                  criteria                  for entitlement to such level or levels shall be reasonable and                  reflective                  of industry norms as shall be determined in good faith by the Company                  with                  the advice and counsel of competent compensation consultants of                  the                  Company’s choosing who shall currently review such data as may be                  available with respect to bonuses that are made available to similarly                  situated executives of companies that are in the same industry                  and are                  approximately the same size (based on sales) as the Company. The                  bonus for                  any bonus year during the Term shall be paid at the time bonuses                  for such                  year are generally paid under the Company’s bonus program and shall be in                  the form of a lump sum cash payment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | (c)    | **Stock                  Options**.                  On the date of the first regular meeting of the Committee which                  occurs                  each calendar year during the Term, the Company shall grant the                  Executive                  a ten- year stock option under the Company’s 1990 Stock Option Plan or any                  successor or other plan maintained by the Company (“Stock Plan”). With                  respect to any Stock Plan under which the Executive is granted                  options to                  purchase shares of the Company’s common stock reserved thereunder at any                  time when such stock is publicly traded (i) on a national securities                  exchange on which such stock is listed or (ii) over the counter                  on an                  established market, prior to such time as options granted under                  the Stock                  Plan to the Executive are first exercisable, the Company shall                  register                  the interests in the Stock Plan and the shares of the Company’s common                  stock reserved thereunder under all applicable securities laws.                  On the                  date of the first regular meeting of the Committee in 1999, 2000,                  2001 and                  any subsequent year during the Term, the Company shall grant the                  Executive                  an additional ten-year option under the Company’s Stock Plan (or any                  successor plan) to purchase a number of shares of the Company’s common                  stock not less than that number (rounded up to the next full number)                  which                  is equal to the Executive’s Base Rate on such grant date multiplied by 2.5                  which product shall be divided by the fair market value of a share                  of                  common stock (as defined in the Stock Plan) on such date. Each                  option                  granted hereunder shall provide that it shall not terminate prior                  to the                  expiration of its ten-year term unless the Company terminates the                  Executive’s employment for Cause and no less than one-third of the                  Company’s common stock subject to the option shall be cumulatively                  exercisable on the date of the grant and on each of the succeeding                  two                  anniversaries so that after the second anniversary of the grant                  date of                  the option the Executive (or his representative or estate, as applicable)                  may exercise any unexercised portion of such option throughout                  the                  remainder of the option’s ten-year term. Subject to the preceding                  provisions of this Section 4(c), the form and other terms and conditions                  of such options shall be substantially as set forth in Exhibit                  A, “Lufkin                  Industries, Inc. Stock Option Agreement” attached to and forming a part of                  this Agreement. |
|   | (d)    | **Employee                  Benefit Programs**.                  During the Term, the Executive shall be entitled to participate                  in all                  employee benefit programs of the Company as in effect from time                  to time                  and in which the Company’s senior executives are eligible to participate,                  provided that, with respect to all plans other than plans subject                  to                  nondiscrimination rules under Section 79, 105(h), 125, 129 or 401(a)                  of                  the Internal Revenue Code of 1986, as amended (the “Code”), any minimum                  service requirement shall be waived. In addition, the Company shall                  continue to maintain a nonqualified supplemental executive retirement                  plan                  (the “SERP”) in which the Executive shall continue to participate                  effective from and after the Effective Date and for the remainder                  of the                  Term, including any extensions thereof, with terms substantially                  the same                  as those set forth in the Lufkin Industries, Inc. Supplemental                  Retirement                  Plan attached hereto as Exhibit B.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | (e)    | **Other                  Benefits**.                  During his employment hereunder, the Executive shall be afforded                  each and                  every one of the following benefits as incidences of his                  employment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Company                  automobile - the Company will provide to the Executive for his                  personal                  and business use a top-of-the-line automobile, and shall provide,                  or                  reimburse the Executive for, maintenance and insurance (liability                  and                  collision coverage insuring both the Company and the Executive                  and                  covering both business and personal use) for such automobile. Such                  automobile shall be owned or leased by the Company, and, if requested                  by                  the Executive, shall be replaced not less frequently than three                  (3) years                  after the date the automobile was provided to the Executive by                  the                  Company. |
|   |   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Business                  and entertainment expenses - the Company will reimburse the Executive                  for,                  or pay on behalf of the Executive, reasonable and appropriate expenses                  incurred by the Executive for business related purposes, including                  dues                  and fees to industry and professional organizations, costs of                  entertainment and business development, and costs reasonably incurred                  as a                  result of the Executive’s wife accompanying the Executive on business                  travel. |
|   |   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Club                  memberships - in addition to the other business and entertainment                  expenses                  reimbursable pursuant to item (ii) above, the Company shall pay                  membership                  fees, dues and assessments for (a) one country club located in                  Angelina                  County, Texas, to be selected by the Executive, (b) one luncheon                  club                  located in Houston, Texas, to be selected by the Executive, and                  (c) such                  other luncheon or country club memberships as the Board of Directors                  of                  the Company may deem to be justified by business usage. |
|   |   | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Annual                  physical examination - the Company shall pay for the cost of an                  annual                  physical examination to be conducted by a doctor or clinic of the                  Executive’s choosing in Houston, Texas or in Lufkin,                  Texas. |
|   |   | (v)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Life                  insurance - the Company will provide, or cause to be provided,                  to the                  Executive, at no cost to the Executive, term life insurance coverage                  equal                  to twice the Executive’s Salary. Proceeds of such insurance shall be                  payable to a beneficiary to be designated in writing by the                  Executive. |
|   |   | (vi)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Tax                  preparation expenses - the Company will reimburse the Executive                  for                  expenses incurred by him in connection with the preparation of                  his federal                  income tax return up to a maximum of $3,000 per                  year. |

**5.**
**Termination        of Employment**
**.**

**5.1**
**Death        or Disability.**

|   |   | (i)   | The                  Executive (or his estate) shall be entitled to receive salary and                  benefit                  coverages for a period of six months from and after the date of                  termination of employment; and                                                                                                                                                                                                                                                                             |
|--------|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (ii)  | The                  Executive (or his estate) shall be entitled to a bonus payment                  for the                  year in which termination occurs equal to the bonus amount paid                  or payable                  by the Company to the Executive for the immediately preceding bonus                  year                  prorated to reflect the actual number of full weeks worked during                  the year                  in which the Executive’s employment terminates; and |
|   |   | (iii) | The                  Executive (or his estate) shall be entitled to the pension provided                  under                  the SERP as described in Section 4(d)                  above.                                                                                                                                                                                                                                                                                                                               |

**5.2**
**Termination        by the Company without Cause**
**.**

|   |   | (i)    | The                  Executive shall be paid a lump sum cash payment, payable within                  30 days of                  his termination of employment, equal to the total Salary which                  would have                  been paid to him under this Agreement for the remainder of the                  Term, based                  on a Salary rate equal to the greater of (A) the rate in effect                  on the                  Effective Date, or (B) the rate in effect on termination of his                  employment; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (ii)   | The                  Executive shall be entitled to a lump sum payment, payable within                  30 days                  of his termination of employment, equal to the amount of annual                  bonuses                  which would have been paid to him under this Agreement for the                  remainder                  of the Term based upon the bonus rate per annum that is equal to                  the bonus                  paid or payable by the Company to the Executive for the immediately                  preceding bonus year; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (iii)  | The                  Executive shall be entitled to the pension provided under the SERF                  as                  described in Section 4(d) above;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (iv)   | Benefits                  (as described in Sections 4(d), other than the pension provided                  under the                  SERF that are payable upon termination of employment, and 4(e)                  above)                  shall continue to be provided to the Executive by the Company during                  the                  period of Salary continuation described in item (i) above as if                  the                  Executive’s employment had continued for the remainder of the Term;                  provided, however, that to the extent any such benefit cannot be                  continued                  as a matter of law during the remaining period of the Term because                  the                  Executive is no longer employed by the Company, the Company shall                  pay the                  Executive an amount equal to the economic value of such benefit                  at the                  same rate or level and at the same time as such benefit was provided                  or                  available at the time the benefit was required as a matter of law                  to be                  discontinued because the Executive ceased to be employed by the                  Company                  and; provided, further, that any such benefit shall be discontinued,                  if                  earlier, on the date that the Executive becomes entitled to coverage                  for a                  substantially equivalent rate or level of a comparable benefit                  as a result                  of his employment by a successor                  employer. |

**5.3**
**Termination        by the Company for Cause**
**.**

|   |   | (i)   | the                  Executive’s conviction for, or plea of nolo contendere to, a felony;                  or                                                                                                                                                                                                                                                                                      |
|--------|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (ii)  | the                  commission by the Executive of an act involving fraud or intentional                  dishonesty, which act is intended to result in substantial personal                  enrichment of the Executive at the expense of the Company or any                  of its                  subsidiaries; or                                                                               |
|   |   | (iii) | the                  Executive’s material breach of any material provision of this Agreement                  which remains uncorrected for 30 days after written notice and                  an                  opportunity to correct; or                                                                                                                                                       |
|   |   | (iv)  | the                  Executive’s knowing and willful misconduct in the performance of his                  duties, which continues for 30 days after written notice from the                  Company                  and which results in material injury to the reputation, business                  or                  operation of the Company or any of its                  subsidiaries. |

**5.4**
** **
**Voluntary        Termination by the Executive Without Good Reason.**

**5.5**
**Termination        of the Executive for Good Reason**
**.**

|   |   | (i)   | the                  assignment to the Executive of any duties inconsistent in any respect                  with                  the Executive’s position (including status, offices, titles and reporting                  requirements), authority, duties or responsibilities as contemplated                  by                  Section 3 of this Agreement, or any other action by the Company;                  or any                  affiliate which results in a diminution in such position, authority,                  duties or responsibilities, excluding for this purpose an isolated,                  insubstantial and inadvertent action not taken in bad faith and                  which is                  remedied by the Company promptly after receipt of written notice                  thereof                  given by the Executive; or |
|--------|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (ii)  | any                  failure by the Company to comply with any of the provisions of                  Section 3                  of this Agreement, other than an isolated, insubstantial and inadvertent                  failure not occurring in bad faith which is remedied by the Company                  promptly after receipt of written notice thereof given by the Executive;                  or                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | (iii) | the                  Company’s requiring the Executive to be based at any office or location                  other than that described in Section 1 hereof, except for travel                  reasonably required in the performance of the Executive’s                  responsibilities; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | (iv)  | any                  purported termination by the Company of the Executive’s employment                  otherwise than as expressly permitted by this                  Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

**6.**
**Non-Competition**
**.**

**7.**
**Confidential        Information**
**.**

**8.**
**Indemnification.**

**8.1**

**8.2**

**8.3**

|   | (a) | The                  Executive (i) shall promptly notify the Company of any third-party                  claim                  or claims asserted against him (“Third Party Claim”) that could give rise                  to a right of indemnification under this Agreement and (ii) shall                  transmit                  to the Company a written notice (“Claim Notice”) describing in reasonable                  detail the nature of the Third Party Claim, a copy of all papers                  served                  with respect to such claim (if any), and the basis of his request                  for                  indemnification under this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (b) | Within                  30 days after receipt of any Claim Notice (“Election Period”), the Company                  shall notify the Executive (i) whether the Company disputes its                  potential                  liability to the Executive under this Section 8 with respect to                  such Third                  Party Claim and (ii) whether the Company desires, at its sole cost                  and                  expense, to defend the Executive against such Third Party Claim                  by any                  appropriate proceedings, which proceedings shall be prosecuted                  diligently                  by the Company to a final conclusion or settled at the discretion                  of the                  Company in accordance with this Subsection 8.3(b). The Company                  shall have                  full control of such defense and proceedings, including any compromise                  or                  settlement thereof. The Executive is hereby authorized, at the                  Company’s                  sole cost and expense (but only if he is actually entitled to                  indemnification hereunder or if the Company assumes the defense                  with                  respect to the Third Party Claim), to file, during the Election                  Period,                  any motion, answer or other pleadings which he shall deem necessary                  or                  appropriate to protect his interests or those of the Company and                  not                  prejudicial to the Company. If requested by the Company, the Executive                  agrees, at the Company’s sole cost and expense, to cooperate with the                  Company and its counsel in contesting any Third Party Claim that                  the                  Company elects to contest, including without limitation, through                  the                  making of any related counterclaim against the person asserting                  the Third                  Party Claim or any cross-complaint against any person. The Executive                  may                  participate in but not control, any defense or settlement of any                  Third                  Party Claim controlled by the Company pursuant to this Section                  8.3 and the                  Company shall bear his costs and expenses with respect to such                  participation. |
|   | (c) | If                  the Company fails to notify the Executive within the Election Period                  that                  the Company elects to defend the Executive pursuant to Subsection                  8.3(b),                  or if the Company elects to defend the Executive pursuant to Subsection                  8.3(b) but fails to diligently and promptly prosecute or settle                  the Third                  Party Claim, then the Executive shall have the right to defend,                  at the                  sole cost and expense of the Company, the Third Party Claim. The                  Executive                  shall have full control of such defense and proceedings; provided,                  however, that the Executive may not enter into, without the Company’s                  consent, which shall not be unreasonably withheld, any compromise                  or                  settlement of such Third Party Claim. Notwithstanding the foregoing,                  if                  the Company has delivered a written notice to the Executive to                  the effect                  that the Company disputes its potential liability to the Executive                  under                  this Section 8, and if such dispute is resolved in favor of the                  Company by                  final, nonappealable order of a court of competent jurisdiction,                  the                  Company shall not be required to bear the costs and expenses of                  the                  Executive’s defense pursuant to this Section 8 or of the Company’s                  participation therein at the Executive’s request, and the Executive shall                  reimburse the Company promptly in full for all costs and expenses                  of such                  litigation. The Company may participate in, but not control, any                  defense                  or settlement controlled by the Executive pursuant to this Section                  8.3(c),                  and the Company shall bear its own costs and expenses with respect                  to such                  participation.                                                                                                                                                                                                                                                                                                                |
|   | (d) | The                  indemnification provided by this Section 8 shall apply whether                  or not the                  negligence of a party is alleged or                  proved.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

**9.**
**Withholding.**

**10.**
**Assignability;        Binding Nature.**

**11.**
**Effect        of Agreement.**

**12.**
**Amendments        and Waivers.**

**13.**
**Mediation        and Legal Actions.**

**14.**
**Notices.**

|   | To                  the Company:         | Lufkin                  Industries, Inc.601                  South RaguetLufkin,                  Texas 75901Attn:                  Secretary |
|--------|------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
|   | with                  a copy to:         | ________________Andrews                  Kurth, LLP________________________________                                                           |
|   |  To                  the Executive: |  Mr.                  Douglas W. Smith2210                  Copeland StreetLufkin,                  Texas 75901                          |

**15.**
**Severability**
**.**

**16.**
**Survivorship**
**.**

**17.**
**References**
**.**

**18.**
**Governing        Law**
**.**

**19.**
**Legal        Fees.**

**20.**
**Mitigation**
**.**

**21.**
**Headings.**

**22.**
**Counterparts.**

**IN        WITNESS WHEREOF**

|   | **LUFKIN                    INDUSTRIES, INC.**   |
|--------|------------------------------------------------------------|
|   | By:                                                        | /s/                    C. J. Haley, Sr. |
|   | Name:                                                      | C.                    J. Haley, Sr |
|   | Title:                                           | Secretary/Treasurer |
|   | **EXECUTIVE**                                    |
|   | By:                                                        | /s/                    Douglas V. Smith |
|   | Name:                                                      | Douglas                    V. Smith |
|   | Title:                                                     | President/Chief                    Executive Officer |