Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers.

The Board of Directors (the "Board") of Lufkin Industries, Inc. ("Lufkin"), upon the recommendation of the Compensation Committee of the Board, approved the 2009 Variable Compensation Plan. The Plan was established to encourage sustained high performance and continued employment with Lufkin Industries. In order for the Plan to become operational, operational earnings as a percentage of average equity must exceed a 9% hurdle rate. Operational earnings are defined as earnings before adjustments for LIFO inventory, pension income and other income and expense. Individuals are classified into one of five tiers that determine the potential variable compensation for that individual as a percentage of base salary (ranging from 8% to 116%). Individual awards are based on both individual and total company goals. The Compensation Committee must approve all awards under the Plan. This Plan is filed as Exhibit 10.1 hereto and is incorporated herein by reference.