Document:

exh10_5.htm

    

       

      LUFKIN
INDUSTRIES, INC.

      STOCK
OPTION AGREEMENT

      

      

      

      Agreement made effective the ___ day of
______, 2008 (the “Grant Date”) between
Lufkin Industries, Inc., a Texas corporation (the "Company"),
and    ___________ ("Optionee").  Except
as otherwise defined herein, capitalized terms shall have the meaning set forth
in the Lufkin Industries, Inc. Incentive Stock Compensation Plan 2000 (the
"Plan").

      

      To carry out the purposes of the Plan,
to which this Agreement is expressly subject and a copy of which is attached
hereto as Exhibit A, by affording Optionee the opportunity to purchase shares of
Common Stock, and in consideration of the mutual agreements and other matters
set forth herein and in the Plan, the Company and Optionee hereby agree as
follows:

      

      1. Grant of
Option.  The company hereby grants to the Optionee the right
and option (the "Option") to purchase
all or any part of an aggregate of _______ shares of
Common Stock, on the terms and conditions set forth herein and in the
Plan.  The Option is not intended to be an "incentive stock option"
within the meaning of the Section 422 of the Code.

      

      2. Exercise Price.  The
exercise price of the Option shall be ______ per
share.

      

      3. Exercise of
Option.  (a) Subject to the further provisions of this
Agreement, the Option granted pursuant to this Agreement may be exercised only
as set forth below:

      

      
        	
                Exercise
      Date

              	
                Percentage
      of Option Shares Exercisable

              	 
      
	
                1.

              	
                Prior
      to first anniversary of Grant Date

              	
                 
      0%

              	 
      
	
                2.

              	
                After
      1, and prior to February 12, 2010

              	
                25%

              	 
      
	
                3.

              	
                After
      2, and prior to February 12, 2011

              	
                50%

              	 
      
	
                4.

              	
                After
      3, and prior to February 12, 2012

              	
                75%

              	 
      
	
                5.

              	
                After
      4, and prior to February 12, 2013

              	
                 
      100%

              	 
      

      

      

      

      The
"Percentage of Option Shares Exercisable" shall be determined with reference to
the aggregate number of shares of Common Stock subject to the Option as set
forth in Section 1 above.  The Optionee's right to exercise the Option
in accordance with the foregoing shall accrue only to the extent the Optionee
remains in the continuous employment or service of the Company.

      

      (b)Subject to the earlier expiration of
the Option as herein provided and subject to the terms and conditions contained
herein, the Option may be exercised by written notice (which complies in all
respects with the provisions of this Agreement) and payment of the Option
exercise price to the Company at its principal executive office addressed to the
attention of the Secretary of the Company, identifying the Option and specifying
the number of shares that the Optionee decides to purchase, such exercise to be
effective at the time of receipt of such written notice at the Company's
principal executive office during normal business hours.  The notice
shall not be considered to be properly given unless accompanied by all
documentation deemed appropriate by the committee to reflect exercise of the
Option and compliance with all applicable laws, rules and
regulations.

      

      (c)The vesting and exercisability of
the Option shall be subject to acceleration on the terms and conditions stated
in Section 8 of the Plan, which relates to a "Change in Control".

      

      (d)Notwithstanding anything herein to
the contrary, in no event shall the Option, or any part thereof, be exercisable
after the tenth anniversary of the Grant Date.

      

      4. Payment of Option Exercise
Price.  Upon exercise of an Option, the full option exercise
price for the shares with respect to which the Option is being exercised shall
be payable to the Company (i) in cash or by check payable and acceptable to the
Company or (ii) subject to the approval of the Committee, by tendering to the
Company shares of Common Stock owned by the Optionee having an aggregate Fair
Market Value per share as of the date of exercise and tender that is not greater
than the full Option exercise price for the shares with respect to which the
Option is being exercised and by paying any remaining amount of the Option
exercise price as provided in (i) above (provided that the Committee may, upon
confirming that the Optionee owns the number of shares being tendered, authorize
the issuance of a new certificate for the number of shares being acquired
pursuant to the exercise of the Option less the number of shares being tendered
upon the exercise and return to the Optionee (or not require surrender of) the
certificate for the shares being tendered upon the exercise).  Payment
instructions will be received subject to collection.

      

      5. Transferability.  The
Option may be transferred by Optionee to immediate family members, related
family trusts, or similar entities for estate planning purposes upon advance
notice to and approval by the Committee.

      

      6. Termination of
Employment.  a) If the Optionee's employment with the Company
is terminated for reasons other than (i) retirement with the consent of the
Company ("retirement"), (ii)
permanent disability or (iii) death, the Option shall be exercisable by him,
subject to Section 3(d) above, only within three months after such termination
and only to the extent the Option was exercisable on the date of termination of
employment.

      

      (b)If, however, any termination of
employment is due to retirement or permanent disability (as determined by the
Committee in its discretion), the Option shall be exercisable by the Optionee in
full at any time, subject to Section 3(d) above, after such termination of
employment.

      

      (c)If the Optionee shall die while
entitled to exercise the Option, the Optionee's estate, personal representative
or beneficiary, as the case may be, shall have the right subject to the
provisions of Section 3(d) above, to exercise the Option at any time within 12
months after the date of the Optionee's death, to the extent that the Optionee
was entitled to exercise the same on the day immediately prior to the Optionee's
death.

      (d)Except as provided above in this
Section 7, to the extent the Option is not exercisable on such termination of
employment, the Option, or applicable portion thereof, shall be terminated and
forfeited in full.

      

      

      7. Withholding of
Tax.  Any cash payment under this Agreement shall be reduced by
any amounts required to be withheld or paid with respect thereto under all
present or future federal, state and local tax and other laws and regulations
that may be in effect as of the date of each such payment ("Tax
Amounts").  Any issuance of Stock pursuant to the exercise of
the Option under this Agreement shall not be made until appropriate arrangements
have been made for the payment of any amounts that may be required to be
withheld or paid with respect thereto.  Such arrangements may, at the
discretion of the Committee and subject to the terms of the Plan, include
allowing the Optionee to tender to the Company shares of Stock owned by
Optionee, or to request the Company to withhold a portion of the shares of Stock
being acquired pursuant to the exercise or otherwise distributed to Optionee,
which have a Market Value Per Share as of the date of such exercise, tender or
withholding that is not greater than the sum of all Tax Amounts, together with
payment of any remaining portion of all tax amounts in cash or by check payable
and acceptable to the Company.  Payment instruments will be received
subject to collection.

      

      8. Securities
Matters.  The Option granted herein shall be subject to the
requirement that, if at any time the Board or the Committee shall determine, in
its discretion, that the listing, registration or qualification of the shares
subject to such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the issue of
purchase of shares hereunder, such Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not reasonably acceptable
to the Board or the Committee.

      

      9. Employment
Relationship.  For purposes of this Agreement, the Optionee
shall be considered to be in the employment of the Company as long as the
Optionee remains an employee of either the Company, a parent or subsidiary
corporation (as defined in Section 425 of the Code) of the Company, or a
corporation or a parent or subsidiary of such corporation assuming or
substituting a new agreement for this Agreement.  Any question as to
whether and when there has been a termination of such employment, for purposes
of this Agreement, and the cause of such termination, for purposes of this
Agreement, shall be determined by the Committee, and its determination shall be
final.  Nothing herein shall give the Optionee any right to continued
employment or affect in any manner the right of the Company or any parent or
subsidiary corporation to terminate the employment of the Optionee.

      

      10. Binding
Effect.  This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
the Optionee.  This Agreement and all actions taken shall be governed
by and constructed in accordance with the laws of the State of
Texas.  In the event of conflict between this Agreement and the Plan,
the terms of the Plan shall control.  All undefined capitalized terms
used herein shall have the meaning assigned to them in the Plan.  The
Committee shall have authority to construe the terms of this Agreement, and the
Committee's determinations shall be final and binding on the Optionee and the
Company.

      

      IN WITNESS WHEREOF, the
Company has caused this Agreement to be duly executed and the Optionee has
executed this Agreement as of the day and year first above written.

      LUFKIN INDUSTRIES, INC.

      

        

        
          	 
      	
                  LUFKIN
      INDUSTRIES, INC.

                
	 
      	
                  By:

                	 
      
	 
      	
                  Its:

                	
                  Chief
      Executive Officer

                
	 
      	
                  OPTIONEE:

                	 
      
	 
      	 
      	
                  (Name)exh10_6.htm

    LUFKIN
INDUSTIES, INC.

    NONEMPLOYEE
DIRECTOR STOCK OPTION AGREEMENT

     

    Agreement
made effective the _____ day of ____, 2008, (the "Grant Date") between
Lufkin Industries, Inc., a Texas corporation (the "Company"), and
___________ ("Optionee").

    

    To carry
out the decision of the Lufkin Industries, Inc.’s Board of Directors and in
accordance with the Lufkin Industries, Inc.’s Incentive Stock Option Plan 2000,
to which this Agreement is expressly subject and a copy of which is attached
hereto as Exhibit A, by affording Optionee the opportunity to purchase shares of
Common Stock, par value $1.00 per share, of the Company ("Stock"), and in
consideration of the mutual agreements and other matters set forth herein and in
the Plan, the Company and Optionee hereby agree as follows:

    

     1.            Grant of
Option.  The Company hereby grants to the Optionee the right
and option (the "Option") to purchase all or any part of an aggregate of 2,000
shares of Stock, on the terms and conditions set forth herein and in the
Plan.

    

     2.            Exercise Price.  The
exercise price of the Option shall be $75.10 per share.

    

     3.            Exercise of
Option.  (a) Subject to the further provisions of this
Agreement, the Option granted pursuant to this Agreement may be exercised
immediately on the date of grant.

    

    (b)            Subject
to the earlier expiration of the Option as herein provided and subject to the
terms and conditions contained herein, the Option may be exercised by written
notice (which complies in all respects with the provisions of this Agreement) to
the Company at its principal executive office addressed to the attention of the
Secretary of the Company, identifying the Option and specifying the number of
shares that the Optionee decides to purchase, such exercise to be effective at
the time of receipt of such written notice at the Company's principal executive
office during normal business hours.  The notice shall not be
considered to be properly given unless accompanied by all documentation deemed
appropriate by the Company to reflect exercise of the Option and compliance with
all applicable laws, rules and regulations.

    

    (c)            Notwithstanding
anything herein to the contrary, in no event shall the Option, or any part
thereof, be exercisable after the tenth anniversary of the Grant
Date.

    

     4.            Payment of Option Exercise
Price.  Upon exercise of an Option, the full option exercise
price for the shares with respect to which the Option is being exercised shall
be payable to the Company in cash or by check payable and acceptable to the
Company. Payment instructions will be received subject to
collection.

    

     5.            Non-Transferability.  The
Option may not be transferred by Optionee separately or otherwise than by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined in the Internal Revenue Code of 1986, as
amended.

    

     6.            Termination.  (a) If
the Optionee gives notice of his resignation from the Board of Directors of the
Company, the Option shall be exercisable by him, subject to Section 3(c) above,
only within three months after such date of resignation.

    

    (b)            If,
however, Optionee gives notice that he does not intend to stand for reelection,
is given notice that he will be asked to retire from the Board of Directors or
becomes disabled and is unable to serve while a member of the Board of
Directors, the Option shall be exercisable by the Optionee at any time within
twelve months after the effective date of such retirement or termination of
service, subject to Section 3(c) above.

    

    (c)            If
the Optionee shall die while entitled to exercise the Option, the Optionee's
estate, personal representative or beneficiary, as the case may be, shall have
the right subject to the provisions of Section 3(c) above, to exercise the
Option at any time within 12 months after the date of the Optionee's death, to
the extent that the Optionee was entitled to exercise the same on the day
immediately prior to the Optionee's death.

    

     7.            Withholding of Tax. Any
issuance of Stock pursuant to the exercise of the Option under this Agreement
shall not be made until appropriate arrangements have been made for the payment
of any amounts that may be required to be withheld or paid with respect
thereto.  Such arrangements may be paid in cash or by check payable
and acceptable to the Company.  Payment instruments will be received
subject to collection.

    

     8.            Securities
Matters.  The Option granted herein shall be subject to the
requirement that, if at any time the Board of Directors shall determine, in its
discretion, that the listing, registration or qualification of the shares
subject to such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the issue of
purchase of shares hereunder, such Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not reasonably acceptable
to the Board of Directors.

    

     9.            Relationship. Any question as
to whether and when there has been a termination of Optionee's services on the
Board of Directors, for purposes of this Agreement, and the cause of such
termination, for purposes of this Agreement, shall be determined by the Board of
Directors, and its determination shall be final.  Nothing herein shall
give the Optionee any right to continued service or affect in any manner the
right of the Company to terminate the service of the Optionee.

    

    10.            Binding
Effect.  This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
the Optionee. This Agreement and all actions taken shall be governed by and
constructed in accordance with the laws of the State of Texas.  In the
event of conflict between this Agreement and the Plan, the terms of the Plan
shall control.  All undefined capitalized terms used herein shall have
the meaning assigned to them in the Plan.  The Board of Directors
shall have authority to construe the terms of this Agreement, and the Board of
Directors' determinations shall be final and binding on the Optionee and the
Company.

    

    IN WITNESS WHEREOF, the
Company has caused this Agreement to be duly executed and the Optionee has
executed this Agreement as of the day and year first above
written.

     

    
      	 
      	
              LUFKIN
      INDUSTRIES, INC.

            
	 
      	
              By:

            	 
      
	 
      	
              Its:

            	
              President
      and CEO

            
	 
      	
              OPTIONEE:

            	 
      
	 
      	 
      	
              (Name)

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