3. Acquisitions

On March 1, 2009, the Company acquired International Lift Systems (“ILS”), a Louisiana limited partnership. As a result of this acquisition, the Company entered into a hold back agreement with the former owners of ILS. The total hold back is $4.5 million payable in three equal installments of $1.5 million each plus interest. Interest is calculated annually at 4% of the remaining balance of the hold back portion. The first installment was paid on March 1, 2010; the second installment, plus interest to date, was paid on March 1, 2011; and the third installment, plus interest to date, is payable on March 1, 2012. These hold back payments are not contingent upon any subsequent events. At September 30, 2011, the liabilities for this hold back payment was included in the accrued liabilities section of the Company's condensed consolidated balance sheet.

On November 1, 2010, the Company completed the acquisition of Petro Hydraulic Lift Systems, LLC (“PHL”) and certain related companies, based in South Louisiana. PHL specializes in the design, manufacture and leasing of hydraulic rod pumping units for oil and gas wells. In connection with the acquisition, the Company also entered into a royalty agreement with the former owners of PHL. The agreement is for a ten year period, beginning November 1, 2010, and is payable at a rate of 5% for the first five years and 8% for the subsequent five years. Royalties are payable quarterly and are based on product revenues.

The PHL preliminary purchase price allocation, which is based on relevant facts and circumstances and discussions with an independent third-party consultant, are subject to change upon completion of the final valuation analysis by the Company's management. The final valuation for PHL, which was required to be completed by October 2011, did not result in material changes to the preliminary allocations.

On September 1, 2011, the Company completed the acquisition of Pentagon Optimization Services, Inc. (“Pentagon”), a Canadian corporation based in Red Deer, Alberta, Canada. Pentagon, a diversified well optimization company serving the oil and gas industry, provides a wide range of products and services, including plunger lift systems and well engineering and testing. The addition of the proprietary “Angel” pump, which can pump both liquid and gas simultaneously without gas locking, will upgrade the Company's product portfolio and provide a cost effective method to produce pressure-depleted gas wells.

The Pentagon acquisition was recorded using the acquisition method of accounting, and accordingly, the acquired operations have been included in the results of operations since the date of acquisition. The preliminary purchase price consideration consists of the following (in thousands of dollars):

Cash paid at closing, net	$	18,982
Royalty consideration		2,381

Total consideration paid	$	21,363

The following table indicates (in thousands of dollars) the preliminary purchase price allocation to net assets acquired, which was based on estimated fair values as of the acquisition date. The excess of the purchase price over the net assets acquired, which totaled $14.5 million, was recorded as goodwill in the Company's condensed consolidated balance sheet as of September 30, 2011. Based on the structure of the transaction, the majority of the goodwill related to the transaction is not expected to be deductible for tax purposes.

Purchase price	$	21,363

Receivables		1,756
Inventories		1,124
Other current assets		7
Property, plant and equipment		669
Intangible assets		3,891
Accounts payable		(562	)
Other short-term accrued liabilities		(60	)

Goodwill recorded	$	14,538

In connection with the acquisition, the Company also entered into a royalty agreement with the former owners of Pentagon. The agreement is for a ten year period, beginning October 1, 2011, and is payable at a rate of 10%. Royalties are payable quarterly and are based on Angel pump product revenues. The fair value of these royalties, which are based on estimates, are included in the purchase price consideration. Any changes in this estimate will impact earnings in future periods.

Revenues and earnings to date for the Pentagon and PHL acquisitions are not material. Pro forma schedules have not been included as the impact on the prior and current periods presented is not material.

The Pentagon preliminary purchase price allocation, which is based on relevant facts and circumstances and discussions with an independent third-party consultant, is subject to change upon completion of the final valuation analysis by the Company's management. The final valuation for Pentagon, which is required to be completed by September 2012, is not expected to result in material changes to the preliminary allocations.