Document:

Exhibit 10.5

    
      

    

    
      Exhibit
        10.5

      

      EMPLOYMENT
        AGREEMENT

      

      THIS
        EMPLOYMENT AGREEMENT (“Agreement”)
        is made and entered into effective as of August 18, 2006 (the “Effective Date”),
        by and between LUFKIN
        INDUSTRIES, INC.,
        a Texas
        corporation (the “Company”), and Robert
        D. Leslie
        of
        Lufkin, Texas (the “Executive”).

      

      WHEREAS,
        the
        Company wishes to continue the employment of the Executive as a Vice President
        of the Company, under the terms and conditions set forth herein;
        and

      

      WHEREAS,
        the
        Executive wishes to continue his employment under those terms and conditions;
        

      

      NOW,
        THEREFORE,
        in
        consideration of the premises and mutual covenants contained herein, and
        for
        other consideration mutually acknowledged the Company and the Executive (the
        “Parties”) agree as follows:

      

      1.    
        Employment.

      

      The
        Company hereby agrees to continue to employ the Executive, and the Executive
        hereby agrees to continue his employment with the Company, for the term set
        forth in Section 2 below, in the positions and with the duties and
        responsibilities set forth in Section 3 below, at an office location in Lufkin,
        Texas or such other location as the Parties may mutually agree, and upon
        such
        other terms and conditions as are hereinafter stated.

      
        
          
          

        

        
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      2.    
        Term.

      

      Subject
        to renewal and other provisions as hereinafter set forth in this Section
        2, the
        term of the Executive’s employment with the Company shall commence on the
        Effective Date and shall continue through the second annual anniversary of
        the
        Effective Date (the “Initial Term”), unless sooner terminated in accordance with
        the terms and provisions hereinafter set forth. The Initial Term shall be
        automatically renewed and extended for a period of twelve (12) months commencing
        on the first annual anniversary of the Effective Date and on each successive
        annual anniversary thereafter on the same terms and conditions contained
        herein
        in effect as of the time of renewal (the “Extended Term”), unless either Party
        shall give the other Party written notice, at least sixty (60) days prior
        to the
        first annual anniversary of the Effective Date of this Agreement (or, if
        previously renewed and extended, at least sixty (60) days prior to any
        succeeding annual anniversary), of the notifying Party’s desire not to renew
        this Agreement. The non-renewal or non-extension of this Agreement by either
        Party at the end of the Initial Term or any Extended Term (hereinafter, the
        “Term,” unless otherwise indicated) shall not be deemed a termination by the
        Company without Cause (as such term is defined below) and the Executive shall
        only receive those amounts set forth in Section 5.4 in such circumstances.
        The
        Executive shall, unless requested otherwise by the Company, remain in the
        employ
        of the Company during the entirety of the remaining Term. Notwithstanding
        any
        other provision of this Section 2 to the contrary, in no event shall the
        Term
        extend beyond the Executive’s “normal retirement age” under the U.S. Social
        Security Act, as amended from time to time.

      

      3.    
        Position
        and Duties.

      

      (a)    During
        the Term, the Executive shall serve as Vice President of the Company reporting
        directly to the President or Chief Operating Officer of the Company. As such,
        the Executive shall have the responsibilities, duties and authority customarily
        pertaining to such office and such other duties as may reasonably be assigned
        to
        the Executive by the President or Chief Operating Officer of the Company
        and
        consistent with such position.

      
        
          
          

        

        
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      (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
        $195,000 (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. 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 in the form of a lump sum cash payment on the last
        day of
        the bonus year to which the annual bonus relates; provided, however, if
        calculation of the amount of the annual bonus is
        not
        administratively practicable due to events beyond the control of the Company,
        such annual
        bonus shall be paid during the first bonus year in which calculation is
        administratively practicable.

      
        
          
          

        

        
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      (c)    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, subject to the regular
        eligibility requirements with respect to each such employee benefit program,
        and
        such other benefits or perquisites as may be approved for the Executive by
        the
        Board of Directors of the Company.

      

      (d)    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)    
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.

      (ii)    Club
        memberships - in addition to the other business and entertainment expenses
        reimbursable pursuant to item (i) above, the Company shall pay membership
        fees,
        dues and assessments for one luncheon or country club membership as the Board
        of
        Directors of the Company may deem to be justified by business
        usage.

      

      (iii)   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 up to a maximum of $2,000 per
        year.

      

      (iv)   Life
        insurance - the Executive’s life insurance benefit coverage will be the same as
        that provided to other salaried employees.

      
        
          
          

        

        
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      Such
        reimbursements and payments shall be paid in a lump sum in cash not later
        than
        the 15th day of the third month following the last day of the calendar year
        in
        which the reimbursable costs were incurred or the payment was initially
        due.

      

      5.    
        Termination
        of Employment.

      

      The
        Executive’s employment is subject to termination during the Term only as
        provided in this Section 5.

      

      5.1   Death
        or Disability.

      

      If
        the
        Executive’s employment is terminated due to his death or total disability, as
        determined under the Company’s applicable long-term disability plan, then,
        subject to the subsequent provisions of this Section 5.1 and Section
        23:

      

      (i)    
To
        the
        extent permitted without contravening the requirements of applicable law,
        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.

       

      To
        the
        extent that any benefit described in the immediately preceding sentence cannot
        be provided without contravening the requirements of applicable law because
        the
        Executive ceased to be employed by the Company, the Company shall pay an
        amount
        hereunder equal to its cost of providing such benefit for the period described
        in the immediately preceding sentence and such amount shall be payable in
        accordance with the Company’s payroll procedures commencing with the first
        payroll period that begins on or immediately after the Executive’s termination
        of employment due to death or total disability.

      
        
          
          

        

        
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      5.2   Termination
        by the Company without Cause.

      

      The
        Company may terminate the Executive’s employment at any time without Cause as
        such term is defined in Section 5.3 below, in which case, subject to Section
        23:

      

      (i)    
The
        Executive shall be paid a lump sum cash payment, payable within 30 days after
        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
        after
        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)   Benefits
        (as described in Sections 4(c) and 4(d) 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 or because providing
        the benefit would subject the Executive to additional income taxes under
        Section
        409A of the Internal Revenue Code of 1986, as amended (the “Code”), the
        Company shall pay the Executive in accordance with the Company’s payroll
        procedures (commencing with the first payroll period that begins on or
        immediately after the termination by the Company of the Executive’s employment
        without cause) an amount equal to its cost of providing such benefit at the
        same
        rate or level 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 or because providing the benefit would subject
        the
        Executive to additional income taxes under Section 409A of the Code and;
        provided, further, that any such benefit shall be discontinued 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.

      
        
          
          

        

        
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      5.3   Termination
        by the Company for Cause.

      

      If
        the
        Company terminates the Executive’s employment for Cause, as defined in this
        Agreement, subject to Section 23, the Executive shall be entitled only to
        Salary, and any benefits, accrued as of the effective date of termination.
        Any
        other benefits shall be determined under applicable plans, programs or other
        coverages of the Company. For purposes of this Agreement, the term “Cause” shall
        mean:

      

      (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.

      
        
          
          

        

        
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      The
        existence of “Cause” shall be determined by an affirmative vote of not less than
        two-thirds of the members of the Board of Directors of the Company. If the
        requisite affirmative vote by two-thirds of the members of the Board of
        Directors of the Company is not obtained, any termination of the Executive’s
        employment by the Company shall be deemed to be a termination by the Company
        without Cause.

      

      5.4   Voluntary
        Termination by the Executive Without Good Reason.

      

      The
        Executive may terminate his employment at any time without Good Reason (as
        such
        term is defined in Section 5.5 below) on 30 days’ written notice, in which case,
        subject to Section 23, the Executive shall be entitled only to his Salary
        earned
        through the effective date of termination and any benefits accrued as of
        the
        effective date of termination as determined under applicable plans, programs
        or
        other coverages of the Company.

      

      5.5   Termination
        of the Executive for Good Reason.

      

      In
        the
        event the Executive’s employment by the Company is terminated by the Executive
        for Good Reason, as defined in this Section 5.5, such termination shall be
        deemed to be a termination by the Company of the Executive’s employment without
        Cause, as such term is defined in Section 5.3 above, in which case, subject
        to
        Section 23, the Executive shall be entitled to the benefits described in
        Section
        5.2 of this Agreement. For purposes of this Agreement, the term “Good Reason”
shall mean any one of the following shall have occurred and shall not been
        corrected within thirty days following written notice by the Executive to
        the
        Company:

      
        
          
          

        

        
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      (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.

      

      For
        purposes of this Section 5.5, any good faith determination of “Good Reason” made
        by the Executive shall be final and binding upon the Parties, unless, within
        thirty days following the Executive’s providing written notice to the Company
        under the first sentence of this Section 5.5, not less than two-thirds of
        the
        members of the Board of Directors of the Company affirmatively votes not
        to
        confirm the Executive’s determination that such termination is for Good Reason.
        If two-thirds of the members of the Board of Directors of the Company
        affirmatively vote not to confirm the Executive’s determination that such
        termination is for Good Reason, any termination by the Executive of his
        employment by the Company shall be deemed to be a termination by the Executive
        without Good Reason.

      
        
          
          

        

        
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      6.    
        Non-Competition.

      

      The
        Executive recognizes that the Company’s willingness to enter into this Agreement
        is based in material part on the Executive’s agreement to the provisions of this
        paragraph 6 and that the Executive’s breach of the provisions of this paragraph
        6 could materially damage the Company. Subject to the further provisions
        of this
        Agreement and in consideration of the Company’s agreement to provide the
        Executive Confidential Information (as defined in Section 7) to which the
        Executive did not have access prior to the execution of this Agreement, and
        the
        receipt of which is hereby acknowledged, during the term of his employment
        hereunder, and, for the period extending to the first anniversary of his
        termination of employment for any reason other than termination of the
        Executive’s employment by the Company without Cause or termination of the
        Executive’s employment by the Executive for Good Reason (the “No-Compete
        Period”), the Executive shall not, directly or indirectly, manage, control,
        participate in, consult with, render services to, or in any manner engage
        in any
        pumping unit or gear manufacturing business (the “Subject Businesses”) with (any
        such action to be referred to as an “Association” with) any person, corporation,
        partnership, trust or other business organization (any such person or entity
        to
        be referred to as a “Person”) if such business is directly competitive with the
        Subject Businesses of the Company; provided, however, that the foregoing
        shall
        not restrict the Executive from having an Association with a Person that
        is
        engaged in the Subject Businesses so long as the Executive is not personally
        involved in a material respect in the Subject Businesses of such Person,
        it
        being understood that an indirect supervisory role of a Subject Business
        and
        other businesses of such Person shall not constitute involvement in a material
        respect. If any court having jurisdiction determines that the provisions
        of this
        Section 6 are not enforceable to the fullest extent, because of the provisions
        as to the time period, the geographical area or the scope of activity covered,
        the Parties agree that such court may narrow any such provision as the court
        deems necessary to enforceability, and this Section 6 shall be enforced as
        so
        narrowed.

      
        
          
          

        

        
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      The
        Executive acknowledges that monetary damages would not constitute an adequate
        remedy for the Company in the event of a breach of this Section 6, and he
        therefore agrees that the Company shall be entitled to injunctive or other
        equitable relief for the enforcement hereof. However, in no event shall an
        asserted violation of the provisions of this Section 6 constitute a basis
        for
        deferring or withholding any amounts otherwise payable to the Executive under
        this Agreement.

      

      7.    
        Confidential
        Information.

      

      (a)    The
        Executive acknowledges and agrees that all Confidential Information (as defined
        below) of the Company is confidential and a valuable, special and unique
        asset
        of the Company that gives the Company an advantage over its actual and
        potential, current and future competitors. The Executive further acknowledges
        and agrees that the Executive owes the Company a fiduciary duty to preserve
        and
        protect all Confidential Information from unauthorized disclosure or
        unauthorized use, that certain Confidential Information constitutes “trade
        secrets” under applicable laws and that unauthorized disclosure or unauthorized
        use of the Company’s Confidential Information would irreparably injure the
        Company.

      
        
          
          

        

        
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      (b)    Both
        during the term of the Executive’s employment and after the termination of the
        Executive’s employment for any reason (including wrongful termination), the
        Executive shall hold all Confidential Information in strict confidence, and
        shall not use any Confidential Information except for the benefit of the
        Company, in accordance with the duties assigned to the Executive. The Executive
        shall not, at any time (either during or after the term of the Executive’s
        employment), disclose any Confidential Information to any person or entity
        (except other employees of the Company who have a need to know the information
        in connection with the performance of their employment duties and except
        such
        person or persons to whom such information is required to be divulged, in
        which
        case the Executive shall give the Company prompt notice of such required
        disclosure and use his reasonable best efforts, in cooperation with the Company,
        to defend against any such required disclosure), or copy, reproduce, modify,
        decompile or reverse engineer any Confidential Information, or remove any
        Confidential Information from the Company’s premises, without the prior written
        consent of the Board of Directors, or permit any other person to do so. The
        Executive shall take reasonable precautions to protect the physical security
        of
        all documents and other material containing Confidential Information (regardless
        of the medium on which the Confidential Information is stored). This Agreement
        applies to all Confidential Information, whether now known or later to become
        known to the Executive.

      

      (c)    Upon
        the
        termination of the Executive’s employment with the Company for any reason, and
        upon request of the Company at any other time, the Executive shall promptly
        surrender and deliver to the Company all documents and other written material
        of
        any nature containing or pertaining to any Confidential Information and shall
        not retain any such document or other material. Within five days of any such
        request, the Executive shall certify to the Company in writing that all such
        materials have been returned.

      

      (d)    As
        used
        in this Agreement, the term “Confidential Information” shall mean any
        information or material known to or used by or for the Company (whether or
        not
        owned or developed by the Company and whether or not developed by the Executive)
        that is not generally known to persons in the Subject Businesses. Confidential
        Information includes, but is not limited to, the following: all trade secrets
        of
        the Company; all information that the Company has marked as confidential
        or has
        otherwise described to the Executive (either in writing or orally) as
        confidential; all nonpublic information concerning the Company’s products,
        services, prospective products or services, research, product designs, prices,
        discounts, costs, marketing plans, marketing techniques, market studies,
        test
        data, customers, customer lists and records, suppliers and contracts; all
        business records and plans; all personnel files; all financial information
        of or
        concerning the Company; all information relating to operating system software,
        application software, software and system methodology, hardware platforms,
        technical information, inventions, computer programs and listings, source
        codes,
        object codes, copyrights and other intellectual property; all technical
        specifications; any proprietary information belonging to the Company; all
        computer hardware or software manuals; all training or instruction manuals;
        and
        all data and all computer system passwords and user codes.

      
        
          
          

        

        
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      (e)    However,
        in no event shall an asserted violation of the provisions of this Section
        7
        constitute a basis for deferring or withholding any amounts otherwise payable
        to
        the Executive under this Agreement.

      

      8.    
        Indemnification.

      

      8.1    If
        at any
        time the Executive is a party or is threatened to be made a party to any
        threatened, pending or completed action, suit or proceeding, whether civil,
        criminal, administrative or investigative, by reason of the fact that he
        is or
        was a director, officer, employee or agent of the Company, or is or was serving
        at the request of the Company as a director, officer, employee or agent of
        another corporation, partnership, joint venture, trust, employee benefit
        plan or
        other enterprise, the Company shall indemnify the Executive and hold him
        harmless against reasonable expenses (including attorneys’ fees), judgments,
        fines, penalties, amounts paid in settlement and other liabilities actually
        and
        reasonably incurred by him in connection with such action, suit or proceeding
        to
        the full extent permitted by law.

      
        
          
          

        

        
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      8.2    Expenses
        (including attorneys’ fees) incurred by the Executive in appearing at,
        participating in, or defending any threatened, pending or completed action,
        suit
        or proceeding, whether civil, criminal, administrative or investigative,
        shall
        be paid by the Company at reasonable intervals in advance of the final
        disposition of such action, suit or proceeding upon receipt of an undertaking
        by
        the Executive to repay such amounts if it shall ultimately be determined
        that he
        is not entitled to be indemnified.

      

      8.3    All
        claims for indemnification under this Agreement shall be asserted and resolved
        as is set forth below in this Section 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.

      
        
          
          

        

        
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      (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.

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      (d)    
        The
        indemnification provided by this Section 8 shall apply whether or not the
        negligence of a party is alleged or proved.

      

      9.    
        Withholding.

      

      Anything
        to the contrary notwithstanding, all payments required to be made by the
        Company
        hereunder to the Executive, his spouse, his estate or beneficiaries, shall
        be
        subject to withholding of such amounts relating to taxes as the Company may
        reasonably determine it should withhold pursuant to any applicable law or
        regulation. In lieu of withholding such amounts in whole or in part, the
        Company
        may, in its sole discretion, accept other provisions for payment of taxes
        as
        required by law, provided it is satisfied that all requirements of law affecting
        its responsibilities to withhold such taxes have been satisfied.

      

      10.   Assignability;
        Binding Nature.

      

      This
        Agreement is binding upon, and shall inure to the benefit of, the Parties
        hereto
        and their respective successors, heirs, administrators, executors and assigns.
        No rights or obligations of the Executive under this Agreement may be assigned
        or transferred by the Executive except that (i) his rights to compensation
        and
        benefits hereunder, which rights shall remain subject to the limitations
        of this
        Agreement, may be transferred by will or operation of law, and (ii) his rights
        under employee benefit plans or programs as referred to in Section 4, above,
        may
        be assigned or transferred in accordance with such plans or programs. No
        rights
        or obligations of the Company under this Agreement may be assigned or
        transferred except that such rights or obligations may be assigned or
        transferred by operation of law in the event of a merger or consolidation
        in
        which the Company is not the continuing entity, or the sale or liquidation
        of
        all or substantially all of the assets of the Company, provided that the
        assignee or transferee is the successor to all or substantially all of the
        assets of the Company and such assignee or transferee assumes the liabilities,
        obligations and duties of the Company, as contained in this Agreement, either
        contractually or as a matter of law.

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      

      11.   Effect
        of Agreement.

      

      This
        Agreement contains the entire agreement between the Parties concerning the
        subject matter hereof and supersedes all prior agreements, understandings,
        discussions, negotiations, and undertakings, whether written or oral, between
        the Parties with respect thereto.

      

      12.   Amendments
        and Waivers.

      

      This
        Agreement may not be modified or amended except by a writing signed by both
        Parties. A Party may waive compliance by the other Party with any term or
        provision of this Agreement, or any part thereof, provided that the term
        or
        provision, or part thereof, is for the benefit of the waiving Party. Any
        waiver
        shall be limited to the facts or circumstances giving rise to the noncompliance
        and shall not be deemed either a general waiver or modification with respect
        to
        the term or provision, or part thereof, being waived, or as to any other
        term or
        provision of this Agreement, nor shall it be deemed a waiver of compliance
        with
        respect to any other facts or circumstances then or thereafter
        occurring.

      

      13.   Arbitration.

      

      Except
        with respect to injunctive relief which may be sought by the Company or the
        Executive, the Parties agree to resolve any and all claims or controversies
        arising out of or relating to this Agreement, the Executive’s employment and/or
        termination of employment with Company including, but not limited to, claims
        for
        wrongful termination of employment, and claims under the Civil Rights Act
        of
        1866, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
        Act, the Age Discrimination in Employment Act, the Family Medical Leave Act,
        the
        Sarbanes-Oxley Act, the Equal Pay Act, Chapter 21 of the Texas Labor Code,
        formerly known as the Texas Commission on Human Rights Act, the retaliatory
        discharge provisions of the Texas Worker’s Compensation Act, the Texas Pay Day
        Act, and any similar state law or local ordinance by binding arbitration
        under
        the Federal Arbitration Act, before one arbitrator in the City of Houston,
        State
        of Texas, in a non-administered proceeding under the American Arbitration
        Association National Rules for the Resolution of Employment Disputes. The
        Parties further agree that the work of the Executive involves interstate
        commerce, the award rendered by the arbitrator is final and binding, and
        judgment thereon may be entered in any court having jurisdiction thereof.
        The
        invalidity of unenforceability of any provision of this Section 13 shall
        not
        affect the validity or enforceability of any other provision of this Agreement
        which shall remain in full force and effect. If any Party to this Agreement
        brings legal action to enforce the terms of this Agreement against another
        Party
        to this Agreement, except as may otherwise be ordered by the court or other
        forum, each such Party shall be liable for his or its own expenses incurred
        in
        such legal action including costs of court or other forum and the fees and
        expenses of counsel.

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      

      14.   Notices.

      

      Any
        notice given hereunder shall be in writing and shall be deemed given when
        delivered personally or by courier, or five days after being mailed, certified
        or registered mail, duly addressed to the Party concerned at the address
        indicated below or at such other address as such Party may subsequently
        provide:

      

      
        	
                To
                  the Company:

              	 	
                Lufkin
                  Industries, Inc.

              
	 	 	
                601
                  South Raguet

              
	 	 	
                Lufkin,
                  Texas 75901

              
	 	 	
                Attn:
                  Secretary

              

      

      

      

      
        	
                with
                  a copy to:

              	 	
                Michael
                  O’Leary, Esq.

              
	 	 	
                Andrews
                  Kurth LLP

              
	 	 	
                600
                  Travis, Suite 4200

              
	 	 	
                Houston,
                  Texas 77002

              

      

      

      

      
        	
                To
                  the Executive:

              	 	
                Robert
                  D. Leslie

              
	 	 	
                1005
                  Augusta

              
	 	 	
                Lufkin,
                  Texas 75901

              

      

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      

      15.   Severability.

      

      In
        the
        event that any provision or portion of this Agreement shall be determined
        to be
        invalid or unenforceable for any reason, the remaining provisions or portions
        of
        this Agreement shall be unaffected thereby and shall remain in full force
        and
        effect to the fullest extent permitted by law.

      

      16.   Survivorship.

      

      The
        respective rights and obligations of the Parties hereunder shall survive
        any
        termination of this Agreement to the extent necessary to the intended
        preservation of such rights and obligations.

      

      17.   References.

      

      In
        the
        event of the Executive’s death or a judicial determination of his incompetence,
        reference in this Agreement to the Executive shall be deemed, where appropriate,
        to refer to his legal representative or, where appropriate, to his beneficiary
        or beneficiaries.

      

      18.   Governing
        Law.

      

      THIS
        AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
        WITH
        THE LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS
        OF LAW.

      

      19.   Legal
        Fees.

      

      The
        Company promptly shall reimburse the Executive for all of his reasonable
        legal
        fees and expenses incurred in connection with the negotiation and documentation
        of this Agreement.

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      

      20.   Mitigation.

      

      In
        no
        event shall the Executive be obligated to seek other employment or take any
        other action by way of mitigation of the amounts payable to the Executive
        under
        any of the provisions of this Agreement.

      

      21.   Headings.

      

      The
        headings of paragraphs contained in this Agreement are for convenience only
        and
        shall not be deemed to control or affect the meaning or construction of any
        provision of this Agreement.

      

      22.   Counterparts.

      

      This
        Agreement may be executed in one or more counterparts.

      

      23.   Compliance
        with Code Section 409A.
        This
        Agreement is intended to comply with the requirements of Section 409A of
        the
        Code and, as a result, this Agreement (i) shall automatically be amended
        to the
        extent necessary to incorporate any provisions required to ensure such
        compliance (which the Parties hereby agree are hereby adopted, approved,
        consented to, ratified and incorporated herein by reference) and (ii) shall
        be
        construed, interpreted and operated in a manner that will ensure such
        compliance. Without limiting the scope of the preceding provisions of this
        Section 23, to the extent that the Executive is a key employee (as defined
        in
        Section 416(i) of the Code without regard to paragraph 5 thereof) at any
        time
        prescribed under regulations or other regulatory guidance issued under Section
        409A of the Code, no distribution or payment that is subject to Code Section
        409A shall be made under this Agreement on account of the Executive’s separation
        from service with the Company (at any time when the Executive is deemed under
        regulations or other regulatory guidance issued under Code Section 409A to
        be a
        specified employee described in Code Section 409A and regulations or other
        regulatory authority issued thereunder and any stock of the Company is publicly
        traded on an established securities market or otherwise) before the date
        that is
        the first day of the month that occurs six months after the date of his
        separation from service (or, if earlier, the date of death of the Executive
        or
        any other date permitted under regulations or other regulatory guidance issued
        under Code Section 409A).

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      

      IN
        WITNESS WHEREOF,
        the
        Parties have executed this Agreement effective for all purposes as the date
        first written above.

      

      
        	 	
                LUFKIN
                  INDUSTRIES, INC.

              
	 	 	 	 
	 	 	 	 
	 	
                By:

              	
                /s/

              	
                Douglas
                  V. Smith

              
	 	
                Name:

              	
                Douglas
                  V. Smith

              
	 	
                Title:

              	
                President
                  & CEO

              

      

      

      
        	 	
                EXECUTIVE

              
	 	 	 
	 	 	 
	 	
                /s/
                  Robert D. Leslie

              
	 	
                Name:

              	
                Robert
                  D. Leslie

              
	 	
                Title:

              	
                Vice
                  President, Treasurer and Chief Financial
                  Officer

              

      

      
 

       21Unassociated Document

    EXHIBIT
      10.25 

    PROMISSORY
      NOTE 

    

    September
      26, 2005 

    

     
      

    
      	
               
                Vienna,
                Virginia 

            	
                
                $
                70,000 

            

    

     
      

    FOR
      VALUE RECEIVED ,
      the
      undersigned, ARIEL
      WAY, INC. ,
      a
      Florida corporation (the “ Company
      ”),
      promises to pay EVA
      DUNHEM (the
“
      Lender
      ”)
      at
      7901 Ariel Way, McLean, Virginia 22102 or other address as the Lender shall
      specify in writing, the principal sum of Seventy
      Thousand U.S. Dollars and 00/100 ($70,000) (the
“
      Principal
      Amount ”)
      and
      interest at the annual rate of twelve percent (12%) on the unpaid balance
      pursuant to the following terms: 

    

    1.
        
      Principal
      and Interest .
      The
      Principal Amount of this Promissory Note (this “Note”) was funded to the Company
      on May 17, 2005 (the “Funding Date”). 

    

    The
      Company hereby promises to pay to the order of the Lender in lawful money of
      the
      United States of American and in immediately available funds, the Principal
      Amount of Seventy Thousand Dollars ($70,000), together with interest on the
      unpaid principal of this Note on or before the twelve (12) month anniversary
      of
      the Funding Date which will be May 17, 2006. 

    

    2.
        
      Right
      of Prepayment .
      Notwithstanding the payment(s) pursuant to Section 1, the Company at its option
      shall have the right to prepay, with three (3) business days advance written
      notice, a portion or all outstanding principal plus outstanding Interest of
      this
      Note. 

    

    3.
        
      Warrants
      .
      The
      Company shall issue, on the date hereof, to the Lender, a warrant to purchase
      Two Hundred Thousand (200,000) shares of the Company’s Common Stock (the “
Warrant
      Shares ”)
      for a
      period of three (3) years at an exercise price per share pursuant to the terms
      noted on the form of Warrant attached hereto as Schedule I. The Warrant Shares
      shall have “piggy-back” and demand registration rights. 

    

    

    4.
        
      Waiver
      and Consent .
      To the
      fullest extent permitted by law and except as otherwise provided herein, the
      Company waives demand, presentment, protest, notice of dishonor, suit against
      or
      joinder of any other person, and all other requirements necessary to charge
      or
      hold the Company liable with respect to this Note. 

    

    5.
        
      Costs,
      Indemnities and Expenses .
      In the
      event of default as described herein, the Company agrees to pay all reasonable
      fees and costs incurred by the Lender in collecting or securing or attempting
      to
      collect or secure this Note, including reasonable attorneys’ fees and expenses,
      whether or not involving litigation, collecting upon any judgments and/or
      appellate or bankruptcy proceedings. The Company agrees to pay any documentary
      stamp taxes, intangible taxes or other taxes which may now or hereafter apply
      to
      this Note or any payment made in respect of this Note, and the Company agrees
      to
      indemnify and hold the Lender harmless from and against any liability, costs,
      attorneys’ fees, penalties, interest or expenses relating to any such taxes, as
      and when the same may be incurred. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6.
        
      Event
      of Default .
      An “
Event
      of Default ”
shall
      be deemed to have occurred upon the occurrence of any of the following: (i)
      the
      Company should fail for any reason or for no reason to make any payment of
      the
      interest or principal pursuant to this Note within ten (10) days of the date
      due
      as prescribed herein; (ii) the Company shall fail to observe or perform any
      other covenant, agreement or warranty contained in, or otherwise commit any
      material breach or default of any material provision of this Note or any of
      the
      Transaction Documents (as defined herein), which is not cured within ten (10)
      days notice of the default; (iii) the Company or any subsidiary of the
      Company shall commence, or there shall be commenced against the Company or
      any
      subsidiary of the Company under any applicable bankruptcy or insolvency laws
      as
      now or hereafter in effect or any successor thereto, or the Company or any
      subsidiary of the Company commences any other proceeding under any
      reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
      insolvency or liquidation or similar law of any jurisdiction whether now or
      hereafter in effect relating to the Company or any subsidiary of the Company
      or
      there is commenced against the Company or any subsidiary of the Company any
      such
      bankruptcy, insolvency or other proceeding which remains undismissed for a
      period of 61 days; or the Company or any subsidiary of the Company is
      adjudicated insolvent or bankrupt; or any order of relief or other order
      approving any such case or proceeding is entered; or the Company or any
      subsidiary of the Company suffers any appointment of any custodian, private
      or
      court appointed receiver or the like for it or any substantial part of its
      property which continues undischarged or unstayed for a period of sixty one
      (61)
      days; or the Company or any subsidiary of the Company makes a general assignment
      for the benefit of creditors; or the Company or any subsidiary of the Company
      shall fail to pay, or shall state that it is unable to pay, or shall be unable
      to pay, its debts generally as they become due; or the Company or any subsidiary
      of the Company shall call a meeting of its creditors with a view to arranging
      a
      composition, adjustment or restructuring of its debts; or the Company or any
      subsidiary of the Company shall by any act or failure to act expressly indicate
      its consent to, approval of or acquiescence in any of the foregoing; or any
      corporate or other action is taken by the Company or any subsidiary of the
      Company for the purpose of effecting any of the foregoing; (iv) the Common
      Stock
      of the Company shall cease to be quoted for trading or listed for trading on
      the
      National Association of Securities Dealers Inc.’s Over the Counter Bulletin
      Board, Nasdaq SmallCap Market, New York Stock Exchange, American Stock Exchange
      or the Nasdaq National Market (each, a “ Subsequent
      Market ”)
      and
      shall not again be quoted or listed for trading thereon within five (5) Trading
      Days of such delisting; or (v) a breach by the Company of its obligations,
      or an
      event of default, under any of the Transaction Documents, or any other
      agreements entered into between the Company and the Lender which is not cured
      by
      any applicable cure period set forth therein. 

    Upon
      an
      Event of Default (as defined above), the entire principal balance and accrued
      interest outstanding under this Note, and all other obligations of the Company
      under this Note, shall be immediately due and payable without any action on
      the
      part of the Lender, interest shall accrue on the unpaid principal balance at
      twenty four percent (24%) or the highest rate permitted by applicable law,
      if
      lower, and the Lender shall be entitled to seek and institute any and all
      remedies available to it. 

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    7.
        
      Maximum
      Interest Rate .
      In no
      event shall any agreed to or actual interest charged, reserved or taken by
      the
      Lender as consideration for this Note exceed the limits imposed by Virginia
      law.
      In the event that the interest provisions of this Note shall result at any
      time
      or for any reason in an effective rate of interest that exceeds the maximum
      interest rate permitted by applicable law, then without further agreement or
      notice the obligation to be fulfilled shall be automatically reduced to such
      limit and all sums received by the Lender in excess of those lawfully
      collectible as interest shall be applied against the principal of this Note
      immediately upon the Lender’s receipt thereof, with the same force and effect as
      though the Company had specifically designated such extra sums to be so applied
      to principal and the Lender had agreed to accept such extra payment(s) as a
      premium-free prepayment or prepayments. 

    

    8.
        
      Issuance
      of Capital Stock .
      So long
      as any portion of this Note is outstanding, the Company shall not, without
      the
      prior written consent of the Lender, (i) issue or sell shares of common stock
      or
      preferred stock without consideration or for a consideration per share less
      than
      the bid price of the common stock determined immediately prior to its issuance,
      or (ii) issue any warrant, option, right, contract, call, or other security
      instrument granting the holder thereof, the right to acquire common stock
      without consideration or for a consideration less than such common stock’s bid
      price value determined immediately prior to it’s issuance. 

    

    9.
        
      Cancellation
      of Note .
      Upon
      the repayment by the Company of all of its obligations hereunder to the Lender,
      including, without limitation, the principal amount of this Note, plus accrued
      but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled
      and paid in full. Except as otherwise required by law or by the provisions
      of
      this Note, payments received by the Lender hereunder shall be applied first
      against expenses and indemnities, next against interest accrued on this Note,
      and next in reduction of the outstanding principal balance of this Note.

    

    10.
        
      Severability
      .
      If
      any
      provision of this Note is, for any reason, invalid or unenforceable, the
      remaining provisions of this Note will nevertheless be valid and enforceable
      and
      will remain in full force and effect. Any provision of this Note that is held
      invalid or unenforceable by a court of competent jurisdiction will be deemed
      modified to the extent necessary to make it valid and enforceable and as so
      modified will remain in full force and effect. 

    

    11.
        
      Amendment
      and Waiver .
      This
      Note
      may be amended, or any provision of this Note may be waived, provided that
      any
      such amendment or waiver will be binding on a party hereto only if such
      amendment or waiver is set forth in a writing executed by the parties hereto.
      The waiver by any such party hereto of a breach of any provision of this Note
      shall not operate or be construed as a waiver of any other breach. 

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    12.
        
      Successors
      .
      Except
      as
      otherwise provided herein, this Note shall bind and inure to the benefit of
      and
      be enforceable by the parties hereto and their permitted successors and assigns.
      

    

    13.
        
      Assignment
      .
      This
      Note
      shall not be directly or indirectly assignable or delegable by the Company.
      The
      Lender may assign this Note as long as such assignment complies with the
      Securities Act of 1933, as amended. 

    

    14.
        
      No
      Strict Construction .
      The
      language used in this Note will be deemed to be the language chosen by the
      parties hereto to express their mutual intent, and no rule of strict
      construction will be applied against any party. 

    

    15.
        
      Further
      Assurances .
      Each
      party hereto will execute all documents and take such other actions as the
      other
      party may reasonably request in order to consummate the transactions provided
      for herein and to accomplish the purposes of this Note. 

    

    16.
        
      Notices,
      Consents, etc.   Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms hereof must be in writing and will be deemed to have
      been
      delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
      when
      sent by facsimile (provided confirmation of transmission is mechanically or
      electronically generated and kept on file by the sending party); or (iii) one
      (1) trading day after deposit with a nationally recognized overnight delivery
      service, in each case properly addressed to the party to receive the same.
      The
      addresses and facsimile numbers for such communications shall be: 

    

    

    
      	
              If
                to Company: 

            	
              Ariel
                Way, Inc. 

            
	
               
                

            	
              8000
                Towers Crescent Drive 

              Suite
                1220 

            
	
               
                

            	
              Vienna,
                VA 22182 

            
	
               
                

            	
              Attention:
                 
                Chief
                Executive Officer 

            
	
               
                

            	
              Telephone:
                 
                (703)
                918-2420 

            
	
               
                

            	
              Facsimile:
                 
                (703)
                991-0841 

            
	
               
                

            	
               
                

            
	
              With
                a copy to: 

            	
              Kelley
                Drye & Warren, LLP 

            
	
               
                

            	
              8000
                Towers Crescent Drive 

              Suite
                1200 

            
	
               
                

            	
              Vienna,
                VA 22182 

            
	
               
                

            	
              Attention:
                 
                Jay
                Schifferli, Esq. 

            
	
               
                

            	
              Telephone:
                 
                (703)
                918-2394 

            
	
               
                

            	
              Facsimile:
                 
                (703)
                918-2450 

            
	
               
                

            	
               
                

            
	
              If
                to the Lender: 

            	
              Eva
                Dunhem 

            
	
               
                

            	
              7901
                Ariel Way 

            
	
               
                

            	
              McLean,
                VA 22102 

            
	
               
                

            	
              Telephone:
                (703) 847-0940 

            
	
               
                

            	
               
                

            

    

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    or
      at
      such other address and/or facsimile number and/or to the attention of such
      other
      person as the recipient party has specified by written notice given to each
      other party three (3) trading days prior to the effectiveness of such change.
      Written confirmation of receipt (A) given by the recipient of such notice,
      consent, waiver or other communication, (B) mechanically or electronically
      generated by the sender's facsimile machine containing the time, date, recipient
      facsimile number and an image of the first page of such transmission or (C)
      provided by a nationally recognized overnight delivery service, shall be
      rebuttable evidence of personal service, receipt by facsimile or receipt from
      a
      nationally recognized overnight delivery service in accordance with clause
      (i),
      (ii) or (iii) above, respectively. 

    

    17.
        
      Remedies,
      Other Obligations, Breaches and Injunctive Relief .
      The
      Lender’s remedies provided in this Note shall be cumulative and in addition to
      all other remedies available to the Lender under this Note, at law or in equity
      (including a decree of specific performance and/or other injunctive relief),
      no
      remedy of the Lender contained herein shall be deemed a waiver of compliance
      with the provisions giving rise to such remedy and nothing herein shall limit
      the Lender’s right to pursue actual damages for any failure by the Company to
      comply with the terms of this Note. No remedy conferred under this Note upon
      the
      Lender is intended to be exclusive of any other remedy available to the Lender,
      pursuant to the terms of this Note or otherwise. No single or partial exercise
      by the Lender of any right, power or remedy hereunder shall preclude any other
      or further exercise thereof. The failure of the Lender to exercise any right
      or
      remedy under this Note or otherwise, or delay in exercising such right or
      remedy, shall not operate as a waiver thereof. Every right and remedy of the
      Lender under any document executed in connection with this transaction may
      be
      exercised from time to time and as often as may be deemed expedient by the
      Lender. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Lender and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, the Lender shall be entitled,
      in
      addition to all other available remedies, to an injunction restraining any
      breach, and specific performance without the necessity of showing economic
      loss
      and without any bond or other security being required. 

    

    18.
        
      Governing
      Law; Jurisdiction .
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the Commonwealth
      of
      Virginia, without giving effect to any choice of law or conflict of law
      provision or rule (whether of the Commonwealth of Virginia or any other
      jurisdictions) that would cause the application of the laws of any jurisdictions
      other than the Commonwealth of Virginia. Each party hereby irrevocably submits
      to the exclusive jurisdiction of the Superior Court of the Commonwealth of
      Virginia sitting in Richmond, Virginia and the United States Federal District
      Court for the District of Washington, D.C., for the adjudication of any dispute
      hereunder or in connection herewith or therewith, or with any transaction
      contemplated hereby or discussed herein, and hereby irrevocably waives, and
      agrees not to assert in any suit, action or proceeding, any claim that it is
      not
      personally subject to the jurisdiction of any such court, that such suit, action
      or proceeding is brought in an inconvenient forum or that the venue of such
      suit, action or proceeding is improper. Each party hereby irrevocably waives
      personal service of process and consents to process being served in any such
      suit, action or proceeding by mailing a copy thereof to such party at the
      address for such notices to it under this Agreement and agrees that such service
      shall constitute good and sufficient service of process and notice thereof.
      Nothing contained herein shall be deemed to limit in any way any right to serve
      process in any manner permitted by law. 

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    19.
        
      No
      Inconsistent Agreements .
      None
      of
      the parties hereto will hereafter enter into any agreement, which is
      inconsistent with the rights granted to the parties in this Note. 

    

    20.
        
      Third
      Parties .
      Nothing
      herein expressed or implied is intended or shall be construed to confer upon
      or
      give to any person or entity, other than the parties to this Note and their
      respective permitted successor and assigns, any rights or remedies under or
      by
      reason of this Note. 

    

    21.
        
      Waiver
      of Jury Trial .
      AS A MATERIAL INDUCEMENT FOR THE LENDER TO LOAN TO THE COMPANY THE MONIES
      HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL
      PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER
      DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 

    

    22.
        
      Entire
      Agreement .  This
      Note (including any recitals hereto) set forth the entire understanding of
      the
      parties with respect to the subject matter hereof, and shall not be modified
      or
      affected by any offer, proposal, statement or representation, oral or written,
      made by or for any party in connection with the negotiation of the terms hereof,
      and may be modified only by instruments signed by all of the parties hereto.

    

    

    

    

    [REMAINDER
      OF PAGE INTENTIONALY LEFT BLANK] 

    

    

    

     

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF ,
      this
      Promissory Note is executed by the undersigned as of the date hereof.

    

    

    
      	
               
                

            	
              EVA
                DUNHEM 

            
	
               
                

            	
               
                

            
	
               
                

            	
               
                

            
	
               
                

            	
              By:
                ______________________________ 

            
	
               
                

            	
              Name:
                Eva Dunhem 

            
	
               
                

            	
               
                

            
	
               
                

            	
               
                

            
	
               
                

            	
              ARIEL
                WAY, INC. 

            
	
               
                

            	
               
                

            
	
               
                

            	
              By:
                _____________________________ 

            
	
               
                

            	
              Name:
                Leif T. Carlsson 

            
	
               
                

            	
              Title:
                Director 

            

    

    

    
      
         

      

        7

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