Retirement Plan Restoration Plan for Salaried Employees of Lufkin Industries, Inc. as amended

(a)

the monthly benefit that would have been paid to such Participant, or on his behalf to his Beneficiary or Beneficiaries, as of his date of termination of employment with the Employer, under the Basic Plan as in effect on the date of termination of his employment with the Employer, if the provisions of the Basic Plan had been administered without regard to the limitations imposed by Section 415 of the Code and without the limitation imposed by Section 401(a)(17) of the Code on the amount of his Compensation under the Basic Plan and if the Participant’s Compensation under the Basic Plan had not been reduced by any deferrals of his Compensation which he elected to make under a deferred compensation agreement with the Employer pursuant to a nonqualified defined contribution plan restoration plan maintained by the Employer;

over

(b)

the monthly benefit that is actually payable to such Participant, or on his behalf to his Beneficiary or Beneficiaries, as of his date of termination of employment with the Employer, under the Basic Plan as in effect on the date of his termination of employment with the Employer.

 

 

 

 

 

 

(CORPORATE SEAL)

 

 

 

ATTEST:

 

LUFKIN INDUSTRIES, INC.

 

 

 

/s/ C.J. Haley, Jr.

 

By

 

/s/ F.B. Stevenson

Secretary

 

Title:

 

President

(a)

Pre-2005 Accruals. The present value as of December 31, 2004 of the monthly retirement benefit that would be payable to a Participant (or Beneficiary) if the Participant voluntarily terminated service without cause on December 31, 2004 and received a payment of the benefits with the maximum value available from the Restoration Plan on the earliest possible date allowed under the Plan to receive a payment of benefits following the termination of services within the meaning of applicable guidance relating to the provisions of Section 409A of the Internal Revenue Code shall herein be referred to as the “Pre-2005 Accruals”. Increases in the present value of the future payments to which the Participant or Beneficiary are entitled as of December 31, 2004, due solely to the passage of time determined using the same interest rate used to determine the amounts under the Restoration Plan before January 1, 2005 resulting from the shortening of the discount period before the future payments are made, plus, if applicable an increase in the present value resulting from the Participant’s survivorship during the year shall also be included in the “Pre-2005 Accruals”, however, an increase in the potential benefits under the Restoration Plan due to an application of an increase in compensation after December 31, 2004 to prior years or service or subsequent eligibility for an early retirement subsidy shall not constitute “Pre-2005 Accruals”. The payment of Pre-2005 Accruals shall be coincident with and in the same manner as the payment of the benefits to such Participant or Beneficiary under the Basic Plan

(b)

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

(i)

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

(ii)

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

(iii)

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

1.

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

2.

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

3.

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

(iv)

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

(c)

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

(d)

The Beneficiary or Beneficiaries of a Participant under the Basic Plan shall be the Beneficiary or Beneficiaries of such Participant under this Restoration Plan. For the purposes of this Restoration Plan, a Participant’s service with an Employer shall not be considered to have terminated so long as such Participant is in the employee of a Controlled Group Member.

(e)

Subject to the foregoing and other provisions of the Restoration Plan, a Participant’s rights under this Restoration Plan, including his rights to vested benefits, shall be the same as his rights under the Basic Plan, except that he shall not be entitled to any payments from the trust fund maintained under the Basic Plan on the basis of any benefits to which he may be entitled under this Restoration Plan. All benefits payable under this Restoration Plan to or on behalf of Participants who are Employees of a particular Employer shall be paid from the general assets of that Employer. An Employer shall not be required to set aside any funds to discharge its obligations hereunder, but the Employer may set aside such funds if it chooses to do so. Any and all funds so set aside shall remain subject to the claims of the general creditors of the Employer, present and future. No Employee, his Beneficiary or Beneficiaries, or any other person shall have, under any circumstances, any interest whatever in any particular property or assets of the Employer by virtue of this Restoration Plan, and the rights of the Employee, his Beneficiary or Beneficiaries, or any other person who may claim a right to receive benefits under this Restoration Plan shall be no greater than the rights of an unsecured general creditor of the Employer.

/s/ P G Perez

By:

/s/ R D Leslie

Secretary

Title:

Vice President/Treasurer/Chief Financial Officer