(a) Subject to the terms and conditions of this Agreement and in consideration of the obligations of the Buyer as provided herein, and except as otherwise provided in Section 1.02 hereof, at the Closing, the Seller shall sell, assign, transfer, grant, bargain, deliver and convey to the Buyer, free and clear of all Liens, the Seller's entire right, title and interest in, to and under the Business, as a going concern, and all assets owned or used by the Seller in connection with or arising out of the Business of every type and description, tangible and intangible, wherever located and whether or not reflected on the books and records of the Seller (all of such assets, properties, rights and business being hereinafter sometimes collectively referred to as the "Transferred Assets"), including, but not limited to,

(b) The Seller shall use its best efforts to obtain such consents of third parties as are necessary for the assignment of the Transferred Assets. To the extent that any of the Transferred Assets are not assignable by the terms thereof or consents to the assignment thereof cannot be obtained as herein provided, the Transferred Assets shall be held by the Seller in trust for the Buyer and shall be performed by the Buyer in the name of the Seller and all benefits and obligations derived thereunder shall be for the account of the Buyer, provided, however, that where entitlement of the Buyer to such Transferred Assets hereunder is not recognized by any third party, the Seller shall, at the request of the Buyer, enforce in a reasonable manner, at the cost of and for the account of the Buyer, any and all rights of the Seller against such third party.

(c) Schedule 1.01 identifies the location of all of the scheduled Transferred Assets and the locations in which Transferred Assets that are not scheduled are located. The Seller shall for a reasonable period following the Closing Date provide the Buyer with access to all locations in which the Transferred Assets may be located so as to permit the Buyer to take physical possession of such Transferred Assets or to arrange for the storage or transfer of such Transferred Assets. The Seller shall also notify each Person which may have possession of the Transferred Assets at the Closing of the transfer of such Transferred Assets to the Buyer.

(a) In consideration of the transfer to the Buyer of the Transferred Assets, the Buyer shall (i) pay to the Seller an amount in cash equal to the Cash Purchase Price; (ii) deliver the Partners Notes in the form attached hereto in Exhibit A, to the following persons and in the following amounts:

Joe K. Roemisch $137,250.00

(iii) an amount equal to twenty percent (20%) of the annual earnings before interest, taxes, depreciation and amortization of the business acquired by the Buyer pursuant to this Agreement for sixty (60) months from the Closing Date hereof (the "Contingent Purchase Price"). The Bonus will be paid to the Partners in equal amounts within ninety (90) days of the close of each calendar year included within said sixty (60) month period. In the event of the death or termination of employment with Purchaser of any Partner the Contingent Purchase Price will be paid to the remaining Partners in equal amounts. Notwithstanding anything herein to the contrary the maximum amount of Contingent Purchase Price to be paid for said sixty (60) month period shall not exceed Two Hundred Fifty Thousand Eight Hundred and No/100 Dollars ($250,800.00); and (iv) assume (x) the payment obligations of the Seller with respect to all Trade Payables and other liabilities specifically set out on the April 30, 2006 Financial Statement, (y) the obligations of the Seller under the express written terms of the Contracts and other Agreements to the extent and only to the extent such obligations are not Pre-Closing Obligations, and (z) the Assumed Loans listed in Schedule 1.03(a) ((x),(y) and (z) shall constitute the "Assumed Liabilities"). The Cash Purchase Price, the Partners Notes, the Contingent Purchase Price and the Assumed Liabilities are herein collectively referred to as the "Purchase Price". The Partner Notes shall be guaranteed by DXP Enterprises, Inc. in the form of guaranty attached hereto as Exhibit F. The Partner Notes shall be subordinated to all indebtedness of Buyer to Wells Fargo Bank, National Association as evidenced by the form of Subordination Agreement attached hereto as Exhibit G, which shall be executed by Seller, Buyer and the Partners.

(b) At the Closing, the Buyer shall pay to the Seller by wire transfer of same day funds an amount equal to the Cash Purchase Price.

(c) If the Net Assets on April 30, 2006 exceeds the Net Assets, as of October 31, 2005, the Cash Purchase Price will be increased by an amount equal to fifty percent (50%) of the amount of cash shown on the April 30, 2006 balance sheet of Seller, which shall be prepared in accordance with GAAP.

(a) any liability or obligation of the Seller arising out of or in connection with the negotiation and preparation of this Agreement and the consummation and performance of the transactions contemplated hereby, whether or not such transactions are consummated;

(b) any liability or obligation for any and all federal income taxes of, or pertaining or attributable to, (i) the Seller for any period that ends on or before, or includes, March 31, 2006, or (ii) the Business and/or the Transferred Assets for any period or portion thereof that ends on or before March 31, 2006 (including, but in no way limited to, any and all Taxes described in clauses (i) and (ii) of this Section 1.05(b) for which liability is or may be sought to be imposed on the Buyer under any successor liability, transferee liability or similar provision of any applicable federal, foreign, state or local law (including, without limitation, Section 111.020 of the Texas Tax Code));

(c) any liability (other than with respect to the Assumed Liabilities) to which any of the parties may become subject as a result of the fact that the transactions contemplated by this Agreement are being effected without compliance with the bulk sales provisions of the Uniform Commercial Code as in effect in any state or any similar statute as enacted in any jurisdiction; and

(d) except as provided in Section 7.09 hereof, the Pre-Closing Obligations and the specific liabilities, obligations or litigation listed on Schedule 1.05 hereto or in Schedules 3.04(e), 3.07, 3.08(b), 3.13 or 6.05 of the Disclosure Schedule.

(a) The Seller warrants that the Transferred Assets are not, and on the Closing Date will not be, subject to or liable for any special assessments or similar types of impositions.

(b) Except as otherwise provided in this Agreement, the Seller and the Buyer agree that amounts payable by Buyer with respect to utility charges and other items of expense attributable to the conduct of the Business shall be reasonable and ordinary expenses that are not past due and are reflected in the April 30, 2006 financial statements of Seller.

(c) The ad valorem taxes associated with the Transferred Assets shall be prorated between Seller and Buyer effective April 30, 2006.

(a) The Buyer and the Seller acknowledge and agree that the Purchase Price includes and is inclusive of any and all sales, use, transfer or other similar Taxes imposed as a result of the consummation of the transactions contemplated by this Agreement. The Seller and the Partners hereby agrees to indemnify the Buyer against, and agrees to protect, save and hold the Buyer harmless from, any loss, liability, obligation or claim (whether or not ultimately successful) for sales, use, transfer or other similar Taxes (and any interest, penalties, additions to tax and fines thereon or related thereto) imposed as a result of the consummation of the transactions contemplated by this Agreement.

(b) The Buyer shall pay any and all recording, filing or other fees relating to the conveyance or transfer of the Transferred Assets from the Seller to the Buyer.

(a) Seller, Buyer and the Partners have prepared a written statement setting forth the allocation of the consideration (including, without limitation, the Purchase Price and any adjustments thereto) deemed to have been paid for federal income tax purposes by the Buyer to the Seller and the Partners pursuant to this Agreement (the "Tax Consideration") among the Transferred Assets (the "Allocation") and a copy of such written statement is attached hereto as Exhibit H.

(b) For federal income tax purposes (including, without limitation, the Buyer's, the Seller's and the Partner's compliance with the reporting requirements of Section 1060 of the Code), each of the Seller, the Partners and the Buyer hereby agree to use the Allocation and to cooperate in good faith with each other in connection with the preparation and filing of any information required to be furnished to the Internal Revenue Service under Section 1060 of the Code (including, without limitation, Section 1060(b) and (e) of the Code) and any applicable regulations thereunder. Without limiting the generality of the preceding sentence, the Buyer, the Seller and the Partners agree to (i) report such allocations to the Internal Revenue Service on Form 8594 and, if required, supplemental Forms 8594, in accordance with the instructions to Form 8594 and the provisions of Section 1060 of the Code and the applicable regulations thereunder, and (ii) coordinate their respective preparation and filing of each such Form 8594 and any other forms or information statements or schedules required to be filed under Section 1060 of the Code and the applicable regulations thereunder so that the Allocation and information reflected on such forms, statements and schedules shall be consistent.

(a) The Seller is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Texas. The Seller is duly authorized, qualified and licensed and has all requisite power and authority under all applicable laws, ordinances and orders of public authorities to own, operate and lease its properties and assets and to carry on its business in the places and in the manner currently conducted. The Seller is qualified to transact business as a foreign corporation and is in good standing in the jurisdictions, if any, specified in Schedule 3.01(a) of the Disclosure Schedule, and there is no other jurisdiction in which the nature and extent of the Seller's business or the character of its assets makes such qualification necessary. The Seller has all requisite partnership power and authority to enter into this Agreement and to perform its obligations under this Agreement.

(b) The Seller has no Subsidiaries.

(c) Attached as Schedule 3.01(c) of the Disclosure Schedule is a true, correct and complete copy of the Certificate of Limited Partnership certified by the Secretary of State of the State of Texas and the Partnership Agreement certified by the partnership secretary, of the Seller, in each case as amended and in full force and effect.

(d) The Seller does not do business in any state or commonwealth under any name other than the partnership name set forth in the first paragraph of this Agreement.

(e) Each Partner represents and warrants to the Buyer that each Partner holds of record and owns beneficially the amount of partnership interest of Seller set forth next to such Partner's name in Schedule 3.01(c), free and clear of any encumbrances. Such Partner is not a party to an option, warrant, purchase right, or other contract or commitment that could require such Partner to sell, transfer, or otherwise dispose of any partnership interest of the Seller (other than this Agreement). Such Partner is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any partnership interest of the Seller. To his knowledge, the partnership interest of such Partner have been duly authorized and validly issued.

(a) This Agreement has been duly authorized by the Partners of the Seller. No further partnership action is necessary on the part of the Seller to execute and deliver this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and the Partners and is a legal, valid and binding obligation of the Seller and the Partners enforceable against the Seller and the Partners in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors' rights generally and by legal and equitable limitations on the availability of specific remedies.

(b) The covenant not to compete set out in Section 7.10 hereof has necessary partnership action on the part of Seller and individually for the Partners and, when executed and delivered at the Closing as contemplated by this Agreement, shall be legal, valid and binding obligations of the Seller and the Partners, enforceable against the Seller and the Partners in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors' rights generally and by legal and equitable limitations on the availability of specific remedies.

(c) The execution, delivery and performance of this Agreement and the other agreements and documents to be delivered by the Seller and the Partners to the Buyer, the consummation of the transactions contemplated hereby or thereby, and the compliance with the provisions hereof or thereof, by the Seller and the Partners will not, with or without the passage of time or the giving of notice or both:

other than violations, defaults or conflicts that would not materially and adversely affect the ability of the Seller to consummate the transactions provided for in this Agreement.

(d) Attached as Schedule 3.02(d) of the Disclosure Schedule are true, correct and complete copies of the resolutions adopted by the Partners of the Seller approving this Agreement and the transactions contemplated hereby. Such resolutions were adopted at a meeting duly called and convened at which a quorum was present and acting throughout or by unanimous written consents. Such resolution is in full force and effect without amendment or modification.

(a) No order, license, consent, waiver, authorization or approval of, or exemption by, or the giving of notice to, or the registration with, or the taking of any other action in respect of, any Person not a party to this Agreement, including any Governmental Entity, and no filing, recording, publication or registration in any public office or any other place is now, or under existing law in the future will be, necessary on behalf of the Seller to authorize the execution, delivery and performance of this Agreement or any other agreement contemplated hereby to be executed and delivered by them and the consummation of the transactions contemplated hereby or thereby (including, but not limited to, assignment of the Transferred Assets), or to effect the legality, validity, binding effect or enforceability thereof.

(b) All licenses, permits, concessions, warrants, franchises and other governmental authorizations and approvals of all Governmental Entities required or necessary for the Seller to carry on its business in the places and in the manner currently conducted have been duly obtained, are in full force and effect and are set forth truly, correctly and completely in Schedule 3.03(b) of the Disclosure Schedule. No violations are in existence or have been recorded with respect to such licenses, permits or other authorizations and no proceeding is pending or, to the best knowledge of the Seller, threatened with respect to the revocation or limitation of any of such licenses, permits or other authorizations. The Seller has complied with all laws, rules, regulations and orders applicable to the Business, and all rules, regulations and orders respecting the provision of services by the Seller, except for violations that would not have a Material Adverse Effect.

(a) The Seller owns or leases each Facility and has all power, right and authority to grant, sell and convey each owned Facility and assign each leased Facility to the Buyer the right to use such Facility as provided in Section 7.08 hereof. Each Facility is in reasonable condition for the operation of the Transferred Assets and the Business as the same are currently being conducted by the Seller.

(b) All Equipment (excluding Equipment that did not have a cost basis of $10,000 or more at their respective dates of acquisition by the Seller) is set forth in Schedule 1.01 hereto. The Seller has good and marketable title to all Equipment other than those liens set forth in Schedule 3.04(d) of the Disclosure Schedule. All of the Equipment is in the Seller's possession and control.

(c) All Inventories are set forth in Schedule 1.01 hereto. The Seller has good and marketable title to all Inventories free and clear of all Liens other than those Liens set forth in Schedule 3.04(d) of the Disclosure Schedule.

(d) The Accounts Receivable are owned by the Seller free and clear of all Liens (other than those Liens set forth in Schedule 3.04(d) of the Disclosure Schedule). All Accounts Receivable were generated in the ordinary course of business. The Seller is unaware of any existing facts or circumstances that could reasonably be expected to result in the Accounts Receivable not being fully collected in accordance with their terms.

(e) The Seller owns or possesses licenses or other rights to use, and will at the Closing transfer to the Buyer, all rights to all Proprietary Rights necessary for the conduct of the Business as currently conducted. Set forth in Schedule 3.04(e) of the Disclosure Schedule is a complete and accurate list of all patents, trademarks and licenses the Seller owns or possesses or otherwise has rights to use and all patents, trademarks and licenses pertaining to the Business that Seller owns or possesses or otherwise has rights to use. No licenses, sublicenses, covenants or agreements have been granted or entered into by the Seller in respect of the items listed in Schedule 3.04(e) of the Disclosure Schedule except as noted thereon. The Seller has not received any notice of infringement, misappropriation or conflict from any other Person with respect to such Proprietary Rights except as noted in Schedule 3.04(e) of the Disclosure Schedule, and the conduct of the Business has not infringed, misappropriated or otherwise conflicted with any Proprietary Rights of any such Person. The Seller has not given indemnification for patent, trademark, service mark or copyright infringements except to licensees or customers in the ordinary course of business. All of the Proprietary Rights that are owned by the Seller are owned free and clear of all Liens except as set forth in Schedule 3.04(e) of the Disclosure Schedule. All Proprietary Rights that are licensed by the Seller to third parties are licensed pursuant to valid and existing license agreements and such interests are not subject to any Liens other than those under the applicable license agreements. The consummation of the transactions contemplated by this Agreement will not result in the loss of any Proprietary Rights.

(f) The Seller owns or has rights to use, and is transferring to the Buyer hereunder, all tangible assets necessary for the conduct of the Business in the ordinary course consistent with past practices. The conduct of the Business in the ordinary course is not dependent upon the right to use the property of others, except such property as is leased or licensed to the Seller pursuant to any of the Transferred Assets.

(a) None of the Transferred Assets is subject to, and, except as set forth in Schedule  3.05(a) of the Disclosure Schedule and for the Retained Liabilities, the Seller is not a party to or bound by:

(b) Seller is not in breach of any provision of, or is in default (or knows of any event or circumstance that with notice, or lapse of time or both, would constitute an event of default) under the terms of any of the Contracts and Other Agreements that constitute a part of the Transferred Assets. All of the Contracts and Other Agreements that constitute a part of the Transferred Assets are in full force and effect. The Seller is not aware of any pending or threatened disputes with respect to any of the Contracts and Other Agreements.

(c) Except as set forth in Schedule 3.05(a) of the Disclosure Schedule, the enforceability of the Contracts and Other Agreements that constitute a part of the Transferred Assets will not be affected in any manner by the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby and none of the Contracts and Other Agreements that constitute a part of the Transferred Assets require the receipt of the consent or waiver of any Person or Governmental Entity prior to the sale, assignment, transfer, conveyance or delivery thereof pursuant to this Agreement.

(a) Attached as Schedule 3.06 of the Disclosure Schedule are true, correct and complete copies of (i) the unaudited balance sheet and statement of income of the Business (including the Excluded Assets and Retained Liabilities) as of December 31, 2004, October 31, 2005, December 31, 2005 and March 31, 2006 (collectively, the "Financial Statements"). The Financial Statements:

(b) The values at which the Inventories and Accounts Receivable are carried on the Financial Statements are in accordance with GAAP and reflect normal and consistent inventory valuation policies of the Seller. The amounts shown for the Accounts Receivable on the Financial Statements are collectible or are net of adequate reserves.

(a) All Tax Returns that are required to be filed (taking into account all extensions) on or before the Closing Date for, by, on behalf of or with respect to the Seller, including, but not limited to, those relating to the Business, the Transferred Assets and the Assumed Liabilities, and those which include or should include the Seller, the Business, the Transferred Assets or the Assumed Liabilities, and with respect to which the failure to timely file could have a Material Adverse Effect, have been or will be timely filed with the appropriate foreign, federal, state and local authorities on or before the Closing Date, and all Taxes shown to be due and payable on such Tax Returns or related to such Tax Returns, the failure to make payment of which could have a Material Adverse Effect, have been or will be timely paid in full on or before the Closing Date;

(b) All such Tax Returns and the information and data contained therein have been or will be properly and accurately compiled and completed, fairly present or will fairly present the information purported to be shown therein, and reflect or will reflect all liabilities for Taxes for the periods covered by such Tax Returns;

(c) None of such Tax Returns are now under audit or examination by any foreign, federal, state or local authority and there are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessment or collection of any Tax or deficiency of any nature against the Seller, the Business or the Transferred Assets, or with respect to any such Tax Return, or any suits or other actions, proceedings, investigations or claims now pending or threatened against the Seller, the Business or the Transferred Assets with respect to any Tax, or any matters under discussion with any foreign, federal, state or local authority relating to any Tax, or any claims for any additional Tax asserted by any such authority which could have a Material Adverse Effect;

(d) All Taxes due and owing from the Seller or assessed and due and owing against the Business or the Transferred Assets on or before the Closing Date have been or will be timely paid in full on or before the Closing Date;

(e) All withholding Tax and Tax deposit requirements imposed on the Seller and applicable to the Business for any and all periods prior to and including the Closing Date have been or will be timely satisfied in full on or before the Closing Date; and

(f) The Seller has made adequate provision in the Financial Statements for the payment in full of any and all unpaid Taxes which in any way may affect the Transferred Assets or the Business for any and all periods or portions thereof ending on or before the respective dates thereof.

(a) Seller has not violated or is currently in violation of, and the consummation of the transactions contemplated hereby will not cause any violation of, any order of any Governmental Entity or any law, ordinance, regulation, order, requirement, statute, rule, permit, concession, grant, franchise, license or other governmental authorization relating or applicable to the Seller, the Business or to any of the Seller's properties, assets or operations, including without limitation, the Transferred Assets.

(b) Except as set forth in Schedule 3.08(b) of the Disclosure Schedule, there is no action, suit, claim, investigation or legal, administrative, arbitration or other proceeding, or governmental investigation or examination, or any change in any zoning or building ordinance pending or, to the Seller's knowledge, threatened against or affecting the Seller, the Business or any of the Transferred Assets, at law or in equity, before or by any Governmental Entity and no basis exists for any such action, suit, claim, investigation or proceeding.

(a) any adverse change in the financial condition, assets, liabilities (contingent or otherwise), results of operations, business or prospects of the Seller except for such changes that in the aggregate have not had a Material Adverse Effect, or any occurrence, circumstance or combination thereof that might reasonably be expected to have a Material Adverse Effect before or after the Closing Date;

(b) any damage, destruction or loss, whether or not covered by insurance, adversely affecting the Transferred Assets or the Business;

(c) any increase in the compensation or rate of compensation or commissions or Contingent Purchase Price payable or to become payable by the Seller to any Transferred Employee that is not consistent with past practice, any payment or accrual of, or commitment with respect to, any Contingent Purchase Price plan or severance arrangement that is not consistent with past practice or any change or modification to any severance arrangement;

(d) any debt, obligation or liability incurred by the Seller, any assumption, guarantee, endorsement or other responsibility by the Seller for the liability or obligation of any other Person (whether absolute, accrued, contingent or otherwise), or any engagement in any other transaction by the Seller that might have a Material Adverse Effect;

(e) any mortgage, pledge or creation of any Lien with respect to any of the Transferred Assets;

(f) any sale, assignment, transfer or other disposition or lapse of any Proprietary Rights or disclosure to any Person (other than employees of the Seller in the scope of their employment) of any Proprietary Rights material to the Business;

(g) any write up or write down in the value of any Equipment or Inventories;

(h) any cancellation or compromise of any material claims, or any waiver of any other material rights relating to the Business, or any sale, transfer or other disposition of any properties or assets, real, personal or mixed, tangible or intangible, material to the Business (other than sales of Inventory in the ordinary course of business);

(i) any change in the Seller's method of accounting for financial, Tax or other purposes;

(j) any material change in the customary methods used in operating the Business (including the pricing practices) or any material change in the sales operations; or

(k) any change in the data required to be set forth on any Exhibit or Schedule to this Agreement, including the Disclosure Schedule, or any other event or condition of any character whatsoever pertaining to the Seller that has had or reasonably may be expected to have a Material Adverse Effect.

(a) neither the Seller nor to Seller's and the Partners' knowledge any prior owner or operator of the Business or the Transferred Assets has caused or allowed the generation, use, treatment, storage, or disposal of Hazardous Materials at any site or facility owned, leased or operated by the Seller or used in the Business except in accordance with all applicable Environmental Laws or except to the extent set out in Schedule 3.10;

(b) the Seller does not own or lease any real property, improvements or related assets that form a part of the Transferred Assets or the Business and that have been subject to the release of any Hazardous Materials except to the extent set out in Schedule 3.10;

(c) the Seller has secured all Environmental Permits necessary to the conduct of its businesses and operations and the Seller is in compliance with such permits except to the extent set out in Schedule 3.10;

(d) the Seller has not received any notice, nor is it aware, of any proposal to amend, revoke or replace any Environmental Permit, or requiring the issuance of any additional Environmental Permit;

(e) the Seller has not received inquiry or notice nor does it have any reason to suspect or believe it will receive inquiry or notice of any actual or potential proceedings, claims, lawsuits or losses related to or arising under any Environmental Law;

(f) the Seller is not currently operating or required to be operating under any compliance order, schedule, decree or agreement, any consent decree, order or agreement, and/or corrective action decree, order or agreement issued or entered into under any federal, state or local statute, regulation or ordinance regarding the environment and/or health or safety in the work place;

(g) neither the Seller nor to Seller's and Partners' knowledge, any prior owner or operator of the Business has transported, arranged for the transportation of or disposed of any substance in a manner that may lead to claims against the Buyer for clean-up costs, remedial work, damages to natural resources or for personal injury claims except to the extent set out in Schedule 3.10;

(h) each of the Seller, the Transferred Assets and the Business is in compliance in all material respects with all applicable limitations, restrictions, conditions, standards, prohibitions, requirements and obligations established under Environmental Laws except to the extent set out in Schedule 3.10; and

(a) Except for (i) warranties implied by law and (ii) warranties disclosed on Schedule 3.13 of the Disclosure Schedule, the Seller has not given or made any warranties in connection with the sale or rental of goods or services, including, without limitation, warranties covering the customer's consequential damages. Except as disclosed on Schedule 3.13 of the Disclosure Schedule, the Seller is not aware of any state of facts or the occurrence of any event forming the basis of any present claim against the Seller with respect to warranties relating to products manufactured, sold or distributed by the Seller or services performed by or on behalf of the Seller except any claim that would not individually or in the aggregate exceed $1,254.

(b) Except as disclosed on Schedule 3.13 of the Disclosure Schedule, there is no state of facts or any event forming the basis of any present claim against the Seller not fully covered by insurance, except for deductibles and self-insurance retentions, for personal injury or property damage alleged to be caused by products shipped or services rendered by or on behalf of the Seller.

(a) There are no collective bargaining or other labor union agreements to which the Seller is a party or by which it is bound. To the best knowledge of the Seller, it has not encountered any labor union organizing activity or had any actual or threatened employee strikes, work stoppages, slowdowns or walkouts.

(b) The Seller does not contribute to or have an obligation to contribute to, and has not at any time within six years prior to the Closing Date contributed to or had an obligation to contribute to, a multi-employer plan within the meaning of Section 3(37) of ERISA.

(c) The Seller does not have any defined benefit plan or employee benefit plan. Seller does have plan(s) established pursuant to Article 401(k) of the Code.

(a) The Buyer shall not be liable or obligated under any employee benefit plan or for any other employee benefits that may have been established by the Seller for the Seller's employees prior to the Closing, and the Seller expressly acknowledges that it has sole liability for all employee benefit costs accrued as of the Closing whether or not any or all of such employees are subsequently hired by the Buyer. Without limiting the generality of the foregoing, the Seller acknowledges and agrees that the Buyer does not assume the sponsorship of, the responsibility of contributions to, or any liabilities in connection with any employee benefit plan maintained by the Seller for active employees, retirees, former employees, their beneficiaries or any other Person, including any employee pension benefit plan within the meaning of Section 3(2) of ERISA, employee welfare plan within the meaning of Section 3(1) of ERISA and any personnel policy, stock option plan, bonus plan or arrangement, incentive award plan or arrangement, vacation policy, severance pay plan, policy or agreement, deferred compensation agreement arrangement, executive compensation or supplemental income arrangement, consulting agreement, employment agreement and each other employee benefit plan, agreement, arrangement, program, practice or understanding, except for the accrued 401(k) liability shown on Schedule 6.02(a).

(b) With respect to employees who accept employment with the Buyer, the Seller will remain responsible to the extent covered under its plans for any medical expenses Seller is required to cover that are (i) actually incurred prior to the Closing Date or (ii) actually incurred with respect to any hospitalization that began prior to the Closing Date until such hospitalization ends (as required under such plans), and the Buyer will be responsible for all other medical expenses incurred on or after the Closing Date to the extent covered under its plans without the application of any waiting period for coverage generally applicable to newly hired employees. The Seller shall provide medical coverage to the Transferred Employees with respect to any pre-existing medical conditions to the extent required by applicable law. To the fullest extent permitted under its applicable policies of insurance, the Seller shall maintain health, hospitalization, life, travel and accident insurance coverage for the Transferred Employees in effect until the first day of the month next following the Closing Date. The cost of such insurance coverage from and after the Closing Date shall be borne by the Buyer. The Seller shall cooperate with the Buyer to provide continuity of such insurance coverage to such employees.

(a) operate the Business and the Transferred Assets only in the usual, regular and ordinary manner with a view to maintaining the goodwill that the Seller now enjoys and, to the extent consistent with such operation, will use all reasonable efforts to preserve intact its present business organization, keep available the services of its employees and preserve its relationship with its customers, suppliers, jobbers, distributors and other Persons having business relations with it;

(b) use all reasonable efforts to maintain the Transferred Assets in a state of repair, order and condition consistent with its usual practice in connection with the Business;

(c) maintain its books of account and records relating to the Business in the usual, regular and ordinary manner, in accordance with the Seller's usual accounting practices applied on a consistent basis;

(d) comply in all material respects with all statutes, laws, orders and regulations applicable to it and to the conduct of the Business;

(e) not sell, assign, transfer, lease or otherwise dispose of any Proprietary Rights, Equipment or any of the other Transferred Assets except for dispositions of Inventories for value in the usual and ordinary course of business;

(f) preserve and maintain all rights that it now enjoys in and to the Proprietary Rights and not sell, assign, transfer, lease or otherwise dispose of any Proprietary Rights other than to the Buyer pursuant to the terms of this Agreement;

(g) not mortgage, pledge or otherwise create a security interest in any of the Transferred Assets or permit there to be created or exist any Liens thereon that would not be released upon the transfer of the Transferred Assets to the Buyer pursuant to this Agreement;

(h) not enter into any contract, commitment or lease in relation to the Business that is out of the ordinary course of the Business or, if effective on the date hereof, would be required to be disclosed in Schedule 3.05(a) of the Disclosure Schedule;

(i) not amend or modify any of the Contracts and Other Agreements disclosed in Schedule 3.05(a) of the Disclosure Schedule or any other contract, commitment, lease or other agreement that would, if entered into on the date hereof, be required to be disclosed on any Schedule to this Agreement, including the Disclosure Schedule;

(j) not consent to the termination of any of the Contracts and Other Agreements disclosed in Schedule 3.05(a) of the Disclosure Schedule or waive any of the Seller's rights with respect thereto;

(k) not grant any increase in the compensation or rate of compensation or commissions or bonus payable to or severance obligations for any of the Transferred Employees or in any bonus plan and not transfer or otherwise change any of the terms or conditions of employment of any of the Transferred Employees;

(l) not permit any insurance policy naming it as a beneficiary or a loss payee relating to the Business or the Transferred Assets to be canceled or terminated or any of the coverage thereunder to lapse unless simultaneously with such termination or cancellation replacement policies providing substantially the same coverage are in full force and effect;

(m) pay when due all accounts payable, all payments required by any of the Contracts and Other Agreements, and all Taxes other than Taxes that are being contested in good faith and for which adequate reserves against the Transferred Assets exist and which would not result in a Lien being imposed on any of the Transferred Assets; and

(n) promptly notify the Buyer in writing if the Seller becomes aware of any change that shall have occurred or that shall have been threatened (or any development that shall have occurred or that shall have been threatened involving a prospective change) in the Transferred Assets or the Business that would reasonably be expected to have a Material Adverse Effect whether or not occurring in the ordinary course of business.

(a) The Seller and the Partners shall use their best efforts to:

(b) The Seller and the Partners shall cause all Liens on the Transferred Assets, except the Assumed Liabilities, to be released as of the Closing Date.

(a) The Seller, the Partners and the Buyer shall cooperate with each other after the Closing hereunder in clearing the title to any of the Transferred Assets to the Buyer pursuant hereto in the event that the Seller's title to any such property, as the case may be, as of the Closing Date, shall be defective, not marketable or nonassignable. In this connection, the Seller shall take all commercially reasonable action, including, but not limited to, the furnishing of documents and evidences of title and assistance in the preparation and trial of any necessary litigation, to clear title to any such property, all of which shall be at the expense of the Seller.

(b) For the greater of eight years from the Closing Date and such period as may be required by any statute, regulation or Governmental Entity or any then pending litigation, the Buyer shall permit the Seller and its representatives reasonable access to the business records and files of the Seller that are transferred to the Buyer in connection herewith in anticipation of, or preparation for, existing or future litigation or any Tax audit which the Seller or any of its affiliates is involved and which is related to the Business or the Transferred Assets, during regular business hours and upon reasonable notice at the Buyer's principal places of business or at any location where such records are stored; provided, however, that (i) any such access shall be had or done in such a manner so as to not interfere with the normal conduct of the Business, (ii) the Buyer shall not be required to provide access to any confidential record or records, the disclosure of which would violate any governmental statute or regulation or applicable confidentiality agreement with any Person, and (iii) the Buyer shall not be required to provide access to any confidential record or records, the disclosure of which would cause the Buyer or any of its Affiliates to waive its attorney-client privilege or attorney work product privilege, it being understood and agreed that the records delivered by the Seller to the Buyer shall not be deemed to be restricted from the Seller pursuant to either clause (ii) or (iii) above. The Buyer shall also provide the Seller with (i) reasonable access to each Facility for the purpose of complying with applicable Environmental Laws provided that such access does not interfere with the normal conduct of the Business and (ii) reasonable access to the accounting records and schedules necessary for the preparation of financial reports and tax returns for the year ended December 31, 2005, and for the 2006 accounting period ending on the Closing Date.

(c) For the greater of eight years from the Closing Date and such period as may be required by any statute, regulation or Governmental Entity or any then pending litigation, the Seller shall permit the Buyer and its representatives reasonable access to the general business records and files of the Seller in anticipation of, or preparation for, existing or future litigation or any Tax audit in which the Buyer or any of its affiliates is involved and which is related to the Business or the Transferred Assets, during regular business hours and upon reasonable notice at the Seller's principal places of business or at any location where such records are stored; provided, however, that (i) any such access shall be had or done in such a manner so as to not interfere with the normal conduct of the Seller's business, (ii) the Seller shall not be required to provide access to any confidential record or records, the disclosure of which would violate any governmental statute or regulation or applicable confidentiality agreement with any Person, and (iii) the Seller shall not be required to provide access to any confidential record or records, the disclosure of which would cause the Seller or any of its Affiliates to waive its attorney-client privilege or attorney work product privilege.

(d) The Seller, if requested by the Buyer, shall cause Peggy J. Dean to prepare and deliver to the Buyer and shall cooperate and assist in preparing such financial statements of the Business that the Buyer may reasonably require in order to permit Buyer to timely file a Current Report on Form 8-K with the Securities and Exchange Commission in accordance with the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder in connection with the transactions contemplated thereby and to comply with any other financial statement requirements with respect to the Business applicable to Buyer under the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as amended, and the rules and regulations thereunder. If requested, the Seller shall use its best efforts to cause Peggy J. Dean to deliver such financial statements to the Buyer within ten business days prior to the date that Buyer is required to file such financial statements with the Securities and Exchange Commission in connection with such obligations. The Seller shall cause Peggy J. Dean to provide the Buyer with access to such firm's work papers in support of the Business. The cost of such accounting work shall be borne by the Buyer, but the Seller shall use its best efforts to cause Peggy J. Dean to provide the Buyer with an estimate of such costs prior to the Closing. The Seller will also cooperate with and assist the Buyer in preparing, and, if requested, shall use reasonable efforts to cause Peggy J. Dean to cooperate, at Buyer's expense, in preparing, such other financial statements for the Business as may be specified by the Buyer.

(a) The Seller and the Partners agree that, from and after the Transfer Date, they and their affiliates shall:

(b) The Seller acknowledges that all documents and objects containing or reflecting any Proprietary Information, whether developed by the Seller or by someone else for it or any of its affiliates, will after the Closing Date become the exclusive property of the Buyer and be delivered to the Buyer.

(c) Because of the unique nature of the Proprietary Information, the Seller understands and agrees that the breach or anticipated breach of its or its affiliates obligations under this Section 7.07 will result in immediate and irreparable harm and injury to the Buyer and its affiliates, for which it will not have an adequate remedy at law, and that the Buyer and its affiliates and their successors and assigns shall be entitled to relief in equity to enjoin such breach or anticipated breach and to seek any and all other legal and equitable remedies to which they may be entitled.

(a) No preliminary or permanent injunction or other order of any court or other Governmental Entity shall be in effect nor shall there be in effect any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity that, in any such case, prevents the consummation of the transactions contemplated by this Agreement.

(b) No suit, action, claim, proceeding or investigation before any Governmental Entity shall have been commenced or threatened seeking to prevent the sale of the Transferred Assets or the Business or asserting that the sale of all or a portion of the Transferred Assets or the Business would be unlawful.

(a) All consents from third Persons shall have been received.

(b) The Seller shall have delivered to the Buyer releases of all Liens except the liens securing the Assumed Loans, on the Transferred Assets in form reasonably satisfactory to the Buyer.

(a) No preliminary or permanent injunction or other order of any Governmental Entity shall be in effect nor shall there be any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity that, in any such case, prevents the consummation of the transactions contemplated by this Agreement.

(b) No suit, action, claim, proceeding or investigation before any court or other Governmental Entity shall have been commenced or threatened seeking to prevent the sale of the Transferred Assets or the Business or asserting that the sale of all or a portion of the Transferred Assets or the Business would be unlawful.

(a) any misrepresentation (other than Section 3.10), breach of warranty or breach of any covenant or agreement made or undertaken by the Seller and/or the Partners in this Agreement or any misrepresentation in or omission from any other agreement, certificate, Schedule, Exhibit or writing delivered to the Buyer pursuant to this Agreement, including the Disclosure Schedule; or

(b) any Retained Liability.

(a) any misrepresentation, breach of warranty or breach of any covenant or agreement made or undertaken by the Buyer in this Agreement or any misrepresentation in or omission from any other agreement, certificate, Schedule, Exhibit or writing delivered to the Seller pursuant to this Agreement;

(b) any Assumed Liability;

(c) the obligations assumed by the Buyer pursuant to Section 7.09 hereof; or

(d) any losses, damages, costs and expenses incurred by any of them arising from the Buyer's operation of the Business or the Transferred Assets or the use of the Facility pursuant to the terms of the Lease after the Closing Date; provided, however, that the Buyer shall in no event be liable for or be required to provide indemnity pursuant to this Section 10.04 for the Buyer's failure to detect or remedy any Environmental Conditions or any Environmental Liabilities arising on or prior to the Closing Date.

(a) An Indemnitee shall promptly give the Indemnitor notice of any matter which an Indemnitee has determined has given or could give rise to a right of indemnification under this Agreement, stating the amount of the Loss, if known, and method of computation thereof, all with reasonable particularity, and stating with particularity the nature of such matter. Failure to provide such notice shall not affect the right of the Indemnitee to indemnification except to the extent such failure shall have resulted in liability to the Indemnitor that could have been actually avoided had such notice been provided within such required time period.

(b) The obligations and liabilities of an Indemnitor under this Article X with respect to Losses arising from claims of any third party that are subject to the indemnification provided for in this Article X ("Third Party Claims") shall be governed by and contingent upon the following additional terms and conditions: if an Indemnitee shall receive notice of any Third Party Claim, the Indemnitee shall give the Indemnitor prompt notice of such Third Party Claim and the Indemnitor may, at its option, assume and control the defense of such Third Party Claim at the Indemnitor's expense and through counsel of the Indemnitor's choice reasonably acceptable to Indemnitee. In the event the Indemnitor assumes the defense against any such Third Party Claim as provided above, the Indemnitee shall have the right to participate at its own expense in the defense of such asserted liability, shall cooperate with the Indemnitor in such defense and will attempt to make available on a reasonable basis to the Indemnitor all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitor. In the event the Indemnitor does not elect to conduct the defense against any such Third Party Claim, the Indemnitor shall pay all reasonable costs and expenses of such defense as incurred and shall cooperate with the Indemnitee (and be entitled to participate) in such defense and attempt to make available to it on a reasonable basis all such witnesses, records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitee. Except for the settlement of a Third Party Claim that involves the payment of money only and for which the Indemnitee is totally indemnified by the Indemnitor, no Third Party Claim may be settled without the written consent of the Indemnitee.

(a) mutual agreement of the Buyer and the Seller;

(b) the Buyer, if a material default shall be made in the observance or in the due and timely performance by the Seller of any agreements and covenants of the Seller herein contained, or if there shall have been a material breach by the Seller of any of the warranties and representations of the Seller herein contained, and such default or breach has not been cured or has not been waived;

(c) the Seller, if a material default shall be made by the Buyer in the observance or in the due and timely performance by the Buyer of any agreements and covenants of the Buyer herein contained, or if there shall have been a material breach by the Buyer of any of the warranties and representations of the Buyer herein contained, and such default or breach has not been cured or has not been waived; or

(d) the Buyer or the Seller (provided the terminating party has not materially breached any of its agreements, covenants or representations and warranties) if the Closing shall not have occurred on or before June 30, 2006.

14.01. "Account Receivables" shall have the meaning given such term in Section 1.01.

14.02. "Agreement" shall mean this Asset Purchase Agreement between the Seller, the Buyer and the Partners, as amended from time to time by the parties hereto.

14.03. "Assumed Liabilities" shall have the meaning given such term in Section 1.03 hereof.

14.04 "Assumed Loans" shall means the indebtedness of Seller to third parties that are specifically set out in the April 30, 2006 financial statements of the Seller and are listed in Schedule 1.03(a).

14.05. "Business" shall mean the businesses and operations of the Seller including, without limitation, pump remanufacturing, development of innovative pump solutions for capital pumps, fabrication of water flood systems and pump maintenance and repairs [Machine Tech: general machine shop services].

14.06. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Houston, Texas are authorized by law to close.

14.07. "Buyer" shall mean PMI OPERATING COMPANY, LTD., a Texas limited Partnership, or one or more of its designees.

14.08. "Cash Purchase Price" shall mean $617,846.00 and if the Net Assets of Seller as of the Closing Date exceeds the Net Assets as of October 31, 2005, then fifty percent (50%) of the Cash as of the Closing Date shall be added to the Cash Purchase Price. For purposes of this definition, Net Assets shall mean the book value of the Cash, Inventory, Accounts Receivable, Seller's prepaids, deposits, fixed assets and Trade Payables shall be determined under GAAP.

14.09. "Closing" shall mean the transfer by the Seller to the Buyer of the Transferred Assets, the assumption by the Buyer of the Assumed Liabilities and the transfer by the Buyer to the Seller of the other considerations set forth herein.

14.10. "Closing Date" shall mean the time and date of the Closing as specified in Article II hereof.

14.11. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or similar provisions of legislation replacing such law from time to time.

14.12. "Contracts and Other Agreements" shall mean all contracts, agreements, understandings, indentures, notes, bonds, loans, instruments, leases, mortgages, franchises, licenses, commitments or binding arrangements, whether express or implied, oral or written, to which the Seller is a party or bound or to which its properties or assets are subject.

14.13. "Damages" shall mean any and all liabilities, losses, damages, demands, assessments, claims, costs and expenses (including interest, awards, judgments, penalties, settlements, fines, costs of remediation, diminutions in value, costs and expenses incurred in connection with investigating and defending any claims or causes of action [including, without limitation, attorneys' fees and expenses and all fees and expenses of consultants and other professionals]).

14.14. "Disclosure Schedule" shall mean the disclosure schedule of even date delivered to the Buyer.

14.15. "Documents and Other Papers" shall mean and include any document, agreement, instrument, certificate, writing, notice, consent, affidavit, letter, telegram, telex, statement, file, computer disk, microfiche or other document in electronic format, schedule, exhibit or any other paper or record whatsoever.

14.16 "Employment Agreements" shall have the meaning given such term in Section 6.01 hereof.

14.17. "Environmental Laws" shall mean all federal, state, or municipal laws, rules, regulations, statutes, ordinances, or orders of any Governmental Entity relating to (a) the control of any potential pollutant or protection of the air, water, or land, (b) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation and (c) exposure to hazardous, toxic or other substances alleged to be harmful. "Environmental Laws" shall include, but not be limited to, the Clean Air Act, 42 U.S.C. Section  7401 et seq., the Clean Water Act, 33  U.S.C. Section  1251 et seq., the Resource Conservation Recovery Act ("RCRA"), 42 U.S.C. Section  6901 et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C. Section  11001, et seq., the Toxic Substances Control Act, 15 U.S.C. Section  2601 et seq., the Water Pollution Control Act, 33 U.S.C. Section  1251 et seq., the Safe Drinking Water Act, 42 U.S.C. Section  300f et seq. and the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section  9601 et seq. The term "Environmental Laws" shall also include all state, local and municipal laws, rules, regulations, statutes, ordinances and orders dealing with the same subject matter or promulgated by any governmental or quasi-governmental agency thereunder or to carry out the purposes of any federal, state, local and municipal law.

14.18. "Environmental Liabilities" shall mean any and all liabilities, responsibilities, claims, suits, losses, costs (including remedial, removal, response, abatement, clean-up, investigative, and/or monitoring costs and any other related costs and expenses), other causes of action recognized now or at any later time, damages, settlements, expenses, charges, assessments, liens, penalties, fines, pre-judgment and post-judgment interest, attorney's fees and other legal fees (a) pursuant to any agreement, order, notice, or responsibility, directive (including directives embodied in Environmental Laws), injunction, judgment, or similar documents (including settlements); or (b) pursuant to any claim by a Governmental Entity or other Person for personal injury, property damage, damage to natural resources, remediation, or payment or reimbursement of response costs incurred or expended by such Governmental Entity or Person pursuant to common law or statute.

14.19. "Environmental Losses" shall have the meaning given such term in Section 10.02 hereof.

14.20. "Environmental Permit" shall mean any permit, license, approval, registration, identification number or other authorization with respect to the Transferred Assets or the operations or businesses of the Seller under any applicable law, regulation or other requirement of the United States or any other country or of any state, municipality or other subdivision thereof relating to the control of any pollutant or protection of health or the environment, including laws, regulations or other requirements relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic materials or wastes into ambient air, surface water, groundwater or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of chemical substances, pollutants, contaminants or hazardous or toxic materials or wastes.

14.21. "Equipment" shall mean all machinery, transportation equipment, tools, equipment, furnishings and fixtures owned, leased or subject to a contract of purchase and sale, or lease commitment that is used in the Business as operated by the Seller.

14.22. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, and the related regulations, as amended from time to time.

14.23 "Facilities" shall mean the real properties that are owned or leased and are described in Exhibit B. Facilities shall include all fixtures and improvements erected or located on or affixed to the Facilities.

14.24. "Financial Statements" shall have the meaning given such term in Section 3.06 hereof.

14.25. "GAAP" shall have the meaning given such term in Section 3.06 hereof.

14.26. "General Buyer Losses" shall have the meaning given such term in Section 10.01 hereof.

14.27. "Governmental Entity" shall mean any arbitrator, court, administrative or regulatory agency, commission, department, board or bureau or body or other government or authority or instrumentality or any entity or Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

14.28. "Hazardous Materials" shall mean any (a) petroleum or petroleum products, (b) hazardous substances as defined by Section  101(14) of CERCLA and (c) any other chemical, substance or waste that is regulated by any Governmental Entity under any Environmental Law.

14.29. "Indemnitee" shall mean the Person or Persons indemnified, or entitled, or claiming to be entitled to be indemnified, pursuant to the provisions of Sections 10.01, 10.02 or 10.04 hereof, as the case may be.

14.30. "Indemnitor" shall mean the Person or Persons having the obligation to indemnify pursuant to the provisions of Sections 10.01, 10.02 or 10.04 hereof, as the case may be.

14.31. "Inventories" shall mean all inventories of finished goods, tooling inventory, work in progress, raw materials and other inventories relating to the Business, wherever situated.

14.32. "Lease Assignments" shall have the meaning given such term in Section 7.08 hereof.

14.33. "Letter of Intent" shall mean that certain letter of intent among Buyer and the Seller dated April 7, 2006.

14.34. "Lien" shall mean any lien, pledge, claim, charge, security interest or other encumbrance, option, defect or other rights of any third Person of any nature whatsoever.

14.35. "Losses" shall mean Seller Losses, General Buyer Losses or Environmental Losses, as the case may be.

14.36. "Material Adverse Effect" shall mean a single event, occurrence or fact that, together with all other events, occurrences and facts that could reasonably be expected to result in a loss to the Business, would have, or might reasonably be expected to have, a material adverse effect on the assets, business, operations, prospects or financial condition of the Transferred Assets or the Business that would result in a diminution in value of the Transferred Assets to an extent greater than three percent (3%) of the Purchase Price, or that would constitute a criminal violation of law involving a felony.

14.37. "Net Assets" shall have the meaning given such term in Section 14.08 hereof.

14.38. "Non-Competition Agreements" shall have the meaning given such term in Section 8.08 hereof.

14.39. "Partners" shall mean Joe K. Roemisch, Michael Goebel and J.M. Pevehouse.

14.40. "Partners' Notes" shall be the form of note attached as Exhibit A and in the amounts set out in Section 1.03.

14.41. "Permitted Liens" shall mean (a) Liens securing or relating to liabilities or obligations that are to be assumed by the Buyer pursuant to this Agreement, (b) Liens for current taxes and assessments not yet due, (c) inchoate mechanic and materialmen liens for construction in progress, (d) inchoate workmen, repairmen, warehousemen, customer, employee and carriers liens arising in the ordinary course of business, (e) Liens created by the Buyer and (f) Liens and imperfections of title that, singly or in the aggregate, would not have a Material Adverse Effect.

14.42. "Person" shall mean a corporation, an association, a partnership, an organization, a business, an individual or a Governmental Entity.

14.43. "Pre-Closing Obligations" shall mean all obligations of the Seller (including indemnification and other contingent obligations) relating to (i) acts, events or omissions by any Person or circumstances existing at or prior to the Closing, (ii)  any pending or threatened litigation or claims made or threatened prior to the Closing, (iii) any of the matters listed on Schedule 1.05 hereto, and (iv) contracts, agreements and other commitments that were required to be scheduled in Schedule 3.05(a) of the Disclosure Statement but were not scheduled.

14.44. "Proprietary Information" shall mean collectively (a) Proprietary Rights and (b) any and all other information and material proprietary to the Seller, owned, possessed or used by the Seller, whether or not such information is embodied in writing or other physical form, and which is not generally known to the public, that (i) relates to financial information regarding the Seller or the Business, including, without limitation, (y) business plans and (z) sales, financing, pricing and marketing procedures or methods of the Seller or (ii) relates to specific business matters concerning the Seller, including, without limitation, the identity of or other information regarding sales personnel or customers of the Seller.

14.45. "Proprietary Rights" means all patents, inventions, shop rights, know how, trade secrets, designs, plans, manuals, computer software, specifications, confidentiality agreements, confidential information and other proprietary technology and similar information; all registered and unregistered trademarks, service marks, logos, partnership names, trade names and all other trademark rights; all registered and unregistered copyrights; and all registrations for, and applications for registration of, any of the foregoing, that are used in the conduct of the Business.

14.46. "Purchase Price" shall have the meaning given such term in Section 1.03 hereof.

14.47. "Retained Liabilities" shall have the meaning given such term in Section 1.05 hereof.

14.48. "Seller" shall mean Production Pumps Systems of Levelland, L.P., a Texas limited partnership.

14.49. "Subsidiary" shall mean, as to a Person, any corporation, Partnership, joint venture, association or other entity or organization in which such Person owns (directly or indirectly) any equity or other similar Partnership interest.

14.50. "Tax Consideration" shall have the meaning given such term in Section 1.08(a) hereof.

14.51. "Tax Returns" shall mean all returns, declarations, reports, statements and other documents of, relating to, or required to be filed in respect of, any and all Taxes, and the term "Tax Return" means any one of the foregoing Tax Returns.

14.52. "Taxes" shall mean all federal, state, local, foreign and other taxes, charges, fees, duties, levies, imposts, customs or other assessments, including, without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, profit share, license, lease, service, service use, value added, withholding, payroll, employment, excise, estimated, severance, stamp, occupation, premium, property, windfall profits, or other taxes, fees, assessments, customs, duties, levies, imposts, or charges of any kind whatsoever, together with any interests, penalties, additions to tax, fines or other additional amounts imposed thereon or related thereto, and the term "Tax" means any one of the foregoing Taxes.

14.53. "Third Party Claims" shall have the meaning given such term in Section 10.05(b) hereof.

14.54. "Total Liabilities" shall mean the amount of all liabilities shown on the Closing Date balance sheet of Seller.

14.55. "Trade Payables" shall mean those obligations of the Seller relating to the provision of goods and services to the Seller for the conduct of the Business in the ordinary course of business of the Seller that relate to the Transferred Assets and that are classified as Trade Payables in accordance with GAAP and are shown in the April 30, 2006 Financial Statements of the Seller.

14.56. "Transferred Assets" shall have the meaning given such term in Section 1.01 hereof.

14.57. "Transferred Employees" shall have the meaning given such term in Section 6.01 hereof.

15.01. Notices. All notices, requests, consents, directions and other instruments and communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person, by courier, by overnight delivery service with proof of delivery or by prepaid registered or certified United States first-class mail, return receipt requested, addressed to the respective party at the address set forth below, or if sent by facsimile or other similar form of communication (with receipt confirmed) to the respective party at the facsimile number set forth below:

If to the Buyer, to: PMI OPERATING COMPANY, LTD.

15.02. Bulk Transfer Laws. The Seller agrees with the Buyer that the bulk sales provisions of the Uniform Commercial Code as in effect in Texas and the provisions of any similar statute of any other state or jurisdiction regulating bulk sales or transfers do not apply to this Agreement.

15.03. Assignment. Prior to the Closing Date, no party to this Agreement may sell, transfer, assign, pledge or hypothecate its rights, interests or obligations under this Agreement, except that the Buyer may assign its rights to any affiliate of the Buyer. Subsequent to the Closing Date, the parties may, from time to time, without the consent of the other parties hereto assign any or all of their respective rights under this Agreement. Notwithstanding the foregoing, no assignment of this Agreement or any of the rights, interests or obligations hereof by the Buyer shall relieve the Buyer of its obligations under this Agreement and, upon any such assignment occurring prior to the Closing, the representations, warranties, covenants and agreements contained in this Agreement shall be deemed to have been made by the Buyer's assignee as well as by the Buyer. The Buyer and the Seller agree that in connection with any sale or other disposition or series of sales or dispositions of all or substantially all of such party's assets to an affiliate of such party or any merger or liquidation of such party, the acquiring Person or other recipient of substantially all of such party's assets, as the case may be, shall assume the obligations of such party under this Agreement but the Buyer or Seller, as applicable, shall not be released from the terms, conditions and provisions of this Agreement. Such obligation shall apply to successive sales, dispositions, mergers and liquidations.

15.04. Successors. This Agreement shall inure to the benefit of, be binding upon and be enforceable by the parties hereto and their respective successors and assigns.

15.05. Entire Agreement. This Agreement and the Exhibits and Schedules hereto and the Disclosure Schedule constitute the entire agreement and understanding between the parties relating to the subject matter hereof and thereof and supersedes all prior representations, endorsements, premises, agreements, memoranda communications, negotiations, discussions, understandings and arrangements, whether oral, written or inferred, between the parties relating to the subject matter hereof. This Agreement may not be modified, amended, rescinded, canceled, altered or supplemented, in whole or in part, except upon the execution and delivery of a written instrument executed by a duly authorized representative of each of the parties hereto.

15.06. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas without giving effect to choice of law principles. The parties submit to the non-exclusive jurisdiction of the courts of the State of Texas.

15.07. Waiver. The waiver of any breach of any term or condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition.

15.08. Severability. Any provision hereof that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

15.09. No Third Party Beneficiaries. Any agreement contained, expressed or implied in this Agreement shall be only for the benefit of the parties hereto and their respective legal representatives, successors and assigns, and such agreements shall not inure to the benefit of the obligees of any indebtedness of any party hereto, it being the intention of the parties hereto that no Person shall be deemed a third party beneficiary of this Agreement, except to the extent a third party is expressly given rights herein.

15.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

15.11. Headings. Each statement set forth in the Disclosure Schedule with respect to a particular section herein shall be deemed made solely with respect to such section and not with respect to any other section hereof unless specifically set forth in the Disclosure Schedule as also being made with respect to such other section. The headings of the Articles and sections of this Agreement have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or provisions hereof or affect in any way the meaning or interpretation of this Agreement.

15.12. Negotiated Transaction. The provisions of this Agreement were negotiated by the parties hereto, and this Agreement shall be deemed to have been drafted by all of the parties hereto.

(a) Subject to the terms and conditions of this Agreement and in consideration of the obligations of the Buyer as provided herein, and except as otherwise provided in Section 1.02 hereof, at the Closing, the Seller shall sell, assign, transfer, grant, bargain, deliver and convey to the Buyer, free and clear of all Liens, the Seller's entire right, title and interest in, to and under the Business, as a going concern, and all assets owned or used by the Seller in connection with or arising out of the Business of every type and description, tangible and intangible, wherever located and whether or not reflected on the books and records of the Seller (all of such assets, properties, rights and business being hereinafter sometimes collectively referred to as the "Transferred Assets"), including, but not limited to,

(b) The Seller shall use its best efforts to obtain such consents of third parties as are necessary for the assignment of the Transferred Assets. To the extent that any of the Transferred Assets are not assignable by the terms thereof or consents to the assignment thereof cannot be obtained as herein provided, the Transferred Assets shall be held by the Seller in trust for the Buyer and shall be performed by the Buyer in the name of the Seller and all benefits and obligations derived thereunder shall be for the account of the Buyer, provided, however, that where entitlement of the Buyer to such Transferred Assets hereunder is not recognized by any third party, the Seller shall, at the request of the Buyer, enforce in a reasonable manner, at the cost of and for the account of the Buyer, any and all rights of the Seller against such third party.

(c) Schedule 1.01 identifies the location of all of the scheduled Transferred Assets and the locations in which Transferred Assets that are not scheduled are located. The Seller shall for a reasonable period following the Closing Date provide the Buyer with access to all locations in which the Transferred Assets may be located so as to permit the Buyer to take physical possession of such Transferred Assets or to arrange for the storage or transfer of such Transferred Assets. The Seller shall also notify each Person which may have possession of the Transferred Assets at the Closing of the transfer of such Transferred Assets to the Buyer.

(a) In consideration of the transfer to the Buyer of the Transferred Assets, the Buyer shall (i) pay to the Seller an amount in cash equal to the Cash Purchase Price; (ii) deliver the Partners Notes in the form attached hereto in Exhibit A, to the following persons and in the following amounts:

Joe K. Roemisch $205,875.00

Michael Goebel $205,875.00

J.M. Pevehouse $205,875.00

(iii) an amount equal to twenty percent (20%) of the annual earnings before interest, taxes, depreciation and amortization of the business acquired by the Buyer pursuant to this Agreement for sixty (60) months from the Closing Date hereof (the "Contingent Purchase Price"). The Bonus will be paid to the Partners in equal amounts within ninety (90) days of the close of each calendar year included within said sixty (60) month period. In the event of the death or termination of employment with Purchaser of any Partner the Contingent Purchase Price will be paid to the remaining Partners in equal amounts. Notwithstanding anything herein to the contrary the maximum amount of Contingent Purchase Price to be paid for said sixty (60) month period shall not exceed Three Hundred Five Thousand Six Hundred Dollars ($305,600.00); and (iv) assume (x) the payment obligations of the Seller with respect to all Trade Payables and other liabilities specifically set out on the April 30, 2006 Financial Statement, (y) the obligations of the Seller under the express written terms of the Contracts and other Agreements to the extent and only to the extent such obligations are not Pre-Closing Obligations, and (z) the Assumed Loans listed in Schedule 1.03(a) ((x),(y) and (z) shall constitute the "Assumed Liabilities"). The Cash Purchase Price, the Partners Notes, the Contingent Purchase Price and the Assumed Liabilities are herein collectively referred to as the "Purchase Price". The Partner Notes shall be guaranteed by DXP Enterprises, Inc. in the form of guaranty attached hereto as Exhibit F. The Partner Notes shall be subordinated to all indebtedness of Buyer to Wells Fargo Bank, National Association as evidenced by the form of Subordination Agreement attached hereto as Exhibit G, which shall be executed by Seller, Buyer and the Partners.

(b) At the Closing, the Buyer shall pay to the Seller by wire transfer of same day funds an amount equal to the Cash Purchase Price.

(c) If the Net Assets on April 30, 2006 exceeds the Net Assets, as of October 31, 2005, the Cash Purchase Price will be increased by an amount equal to fifty percent (50%) of the amount of cash shown on the April 30, 2006 balance sheet of Seller, which shall be prepared in accordance with GAAP.

(a) any liability or obligation of the Seller arising out of or in connection with the negotiation and preparation of this Agreement and the consummation and performance of the transactions contemplated hereby, whether or not such transactions are consummated;

(b) any liability or obligation for any and all federal income taxes of, or pertaining or attributable to, (i) the Seller for any period that ends on or before, or includes, March 31, 2006, or (ii) the Business and/or the Transferred Assets for any period or portion thereof that ends on or before March 31, 2006 (including, but in no way limited to, any and all Taxes described in clauses (i) and (ii) of this Section 1.05(b) for which liability is or may be sought to be imposed on the Buyer under any successor liability, transferee liability or similar provision of any applicable federal, foreign, state or local law (including, without limitation, Section 111.020 of the Texas Tax Code));

(c) any liability (other than with respect to the Assumed Liabilities) to which any of the parties may become subject as a result of the fact that the transactions contemplated by this Agreement are being effected without compliance with the bulk sales provisions of the Uniform Commercial Code as in effect in any state or any similar statute as enacted in any jurisdiction; and

(d) except as provided in Section 7.09 hereof, the Pre-Closing Obligations and the specific liabilities, obligations or litigation listed on Schedule 1.05 hereto or in Schedules 3.04(e), 3.07, 3.08(b), 3.13 or 6.05 of the Disclosure Schedule.

(a) The Seller warrants that the Transferred Assets are not, and on the Closing Date will not be, subject to or liable for any special assessments or similar types of impositions.

(b) Except as otherwise provided in this Agreement, the Seller and the Buyer agree that amounts payable by Buyer with respect to utility charges and other items of expense attributable to the conduct of the Business shall be reasonable and ordinary expenses that are not past due and are reflected in the April 30, 2006 financial statements of Seller.

(c) The ad valorem taxes associated with the Transferred Assets shall be prorated between Seller and Buyer effective April 30, 2006.

(a) The Buyer and the Seller acknowledge and agree that the Purchase Price includes and is inclusive of any and all sales, use, transfer or other similar Taxes imposed as a result of the consummation of the transactions contemplated by this Agreement. The Seller and the Partners hereby agrees to indemnify the Buyer against, and agrees to protect, save and hold the Buyer harmless from, any loss, liability, obligation or claim (whether or not ultimately successful) for sales, use, transfer or other similar Taxes (and any interest, penalties, additions to tax and fines thereon or related thereto) imposed as a result of the consummation of the transactions contemplated by this Agreement.

(b) The Buyer shall pay any and all recording, filing or other fees relating to the conveyance or transfer of the Transferred Assets from the Seller to the Buyer.

(a) Seller, Buyer and the Partners have prepared a written statement setting forth the allocation of the consideration (including, without limitation, the Purchase Price and any adjustments thereto) deemed to have been paid for federal income tax purposes by the Buyer to the Seller and the Partners pursuant to this Agreement (the "Tax Consideration") among the Transferred Assets (the "Allocation") and a copy of such written statement is attached hereto as Exhibit H.

(b) For federal income tax purposes (including, without limitation, the Buyer's, the Seller's and the Partner's compliance with the reporting requirements of Section 1060 of the Code), each of the Seller, the Partners and the Buyer hereby agree to use the Allocation and to cooperate in good faith with each other in connection with the preparation and filing of any information required to be furnished to the Internal Revenue Service under Section 1060 of the Code (including, without limitation, Section 1060(b) and (e) of the Code) and any applicable regulations thereunder. Without limiting the generality of the preceding sentence, the Buyer, the Seller and the Partners agree to (i) report such allocations to the Internal Revenue Service on Form 8594 and, if required, supplemental Forms 8594, in accordance with the instructions to Form 8594 and the provisions of Section 1060 of the Code and the applicable regulations thereunder, and (ii) coordinate their respective preparation and filing of each such Form 8594 and any other forms or information statements or schedules required to be filed under Section 1060 of the Code and the applicable regulations thereunder so that the Allocation and information reflected on such forms, statements and schedules shall be consistent.

(a) The Seller is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Texas. The Seller is duly authorized, qualified and licensed and has all requisite power and authority under all applicable laws, ordinances and orders of public authorities to own, operate and lease its properties and assets and to carry on its business in the places and in the manner currently conducted. The Seller is qualified to transact business as a foreign corporation and is in good standing in the jurisdictions, if any, specified in Schedule 3.01(a) of the Disclosure Schedule, and there is no other jurisdiction in which the nature and extent of the Seller's business or the character of its assets makes such qualification necessary. The Seller has all requisite partnership power and authority to enter into this Agreement and to perform its obligations under this Agreement.

(b) The Seller has no Subsidiaries.

(c) Attached as Schedule 3.01(c) of the Disclosure Schedule is a true, correct and complete copy of the Certificate of Limited Partnership certified by the Secretary of State of the State of Texas and the Partnership Agreement certified by the partnership secretary, of the Seller, in each case as amended and in full force and effect.

(d) The Seller does not do business in any state or commonwealth under any name other than the partnership name set forth in the first paragraph of this Agreement.

(e) Each Partner represents and warrants to the Buyer that each Partner holds of record and owns beneficially the amount of partnership interest of Seller set forth next to such Partner's name in Schedule 3.01(c), free and clear of any encumbrances. Such Partner is not a party to an option, warrant, purchase right, or other contract or commitment that could require such Partner to sell, transfer, or otherwise dispose of any partnership interest of the Seller (other than this Agreement). Such Partner is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any partnership interest of the Seller. To his knowledge, the partnership interest of such Partner have been duly authorized and validly issued.

(a) This Agreement has been duly authorized by the Partners of the Seller. No further partnership action is necessary on the part of the Seller to execute and deliver this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and the Partners and is a legal, valid and binding obligation of the Seller and the Partners enforceable against the Seller and the Partners in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors' rights generally and by legal and equitable limitations on the availability of specific remedies.

(b) The covenant not to compete set out in Section 7.10 hereof has necessary partnership action on the part of Seller and individually for the Partners and, when executed and delivered at the Closing as contemplated by this Agreement, shall be legal, valid and binding obligations of the Seller and the Partners, enforceable against the Seller and the Partners in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors' rights generally and by legal and equitable limitations on the availability of specific remedies.

(c) The execution, delivery and performance of this Agreement and the other agreements and documents to be delivered by the Seller and the Partners to the Buyer, the consummation of the transactions contemplated hereby or thereby, and the compliance with the provisions hereof or thereof, by the Seller and the Partners will not, with or without the passage of time or the giving of notice or both:

other than violations, defaults or conflicts that would not materially and adversely affect the ability of the Seller to consummate the transactions provided for in this Agreement.

(d) Attached as Schedule 3.02(d) of the Disclosure Schedule are true, correct and complete copies of the resolutions adopted by the Partners of the Seller approving this Agreement and the transactions contemplated hereby. Such resolutions were adopted at a meeting duly called and convened at which a quorum was present and acting throughout or by unanimous written consents. Such resolution is in full force and effect without amendment or modification.

(a) No order, license, consent, waiver, authorization or approval of, or exemption by, or the giving of notice to, or the registration with, or the taking of any other action in respect of, any Person not a party to this Agreement, including any Governmental Entity, and no filing, recording, publication or registration in any public office or any other place is now, or under existing law in the future will be, necessary on behalf of the Seller to authorize the execution, delivery and performance of this Agreement or any other agreement contemplated hereby to be executed and delivered by them and the consummation of the transactions contemplated hereby or thereby (including, but not limited to, assignment of the Transferred Assets), or to effect the legality, validity, binding effect or enforceability thereof.

(b) All licenses, permits, concessions, warrants, franchises and other governmental authorizations and approvals of all Governmental Entities required or necessary for the Seller to carry on its business in the places and in the manner currently conducted have been duly obtained, are in full force and effect and are set forth truly, correctly and completely in Schedule 3.03(b) of the Disclosure Schedule. No violations are in existence or have been recorded with respect to such licenses, permits or other authorizations and no proceeding is pending or, to the best knowledge of the Seller, threatened with respect to the revocation or limitation of any of such licenses, permits or other authorizations. The Seller has complied with all laws, rules, regulations and orders applicable to the Business, and all rules, regulations and orders respecting the provision of services by the Seller, except for violations that would not have a Material Adverse Effect.

(a) The Seller owns or leases each Facility and has all power, right and authority to grant, sell and convey each owned Facility and assign each leased Facility to the Buyer the right to use such Facility as provided in Section 7.08 hereof. Each Facility is in reasonable condition for the operation of the Transferred Assets and the Business as the same are currently being conducted by the Seller.

(b) All Equipment (excluding Equipment that did not have a cost basis of $10,000 or more at their respective dates of acquisition by the Seller) is set forth in Schedule 1.01 hereto. The Seller has good and marketable title to all Equipment other than those liens set forth in Schedule 3.04(d) of the Disclosure Schedule. All of the Equipment is in the Seller's possession and control.

(c) All Inventories are set forth in Schedule 1.01 hereto. The Seller has good and marketable title to all Inventories free and clear of all Liens other than those Liens set forth in Schedule 3.04(d) of the Disclosure Schedule.

(d) The Accounts Receivable are owned by the Seller free and clear of all Liens (other than those Liens set forth in Schedule 3.04(d) of the Disclosure Schedule). All Accounts Receivable were generated in the ordinary course of business. The Seller is unaware of any existing facts or circumstances that could reasonably be expected to result in the Accounts Receivable not being fully collected in accordance with their terms.

(e) The Seller owns or possesses licenses or other rights to use, and will at the Closing transfer to the Buyer, all rights to all Proprietary Rights necessary for the conduct of the Business as currently conducted. Set forth in Schedule 3.04(e) of the Disclosure Schedule is a complete and accurate list of all patents, trademarks and licenses the Seller owns or possesses or otherwise has rights to use and all patents, trademarks and licenses pertaining to the Business that Seller owns or possesses or otherwise has rights to use. No licenses, sublicenses, covenants or agreements have been granted or entered into by the Seller in respect of the items listed in Schedule 3.04(e) of the Disclosure Schedule except as noted thereon. The Seller has not received any notice of infringement, misappropriation or conflict from any other Person with respect to such Proprietary Rights except as noted in Schedule 3.04(e) of the Disclosure Schedule, and the conduct of the Business has not infringed, misappropriated or otherwise conflicted with any Proprietary Rights of any such Person. The Seller has not given indemnification for patent, trademark, service mark or copyright infringements except to licensees or customers in the ordinary course of business. All of the Proprietary Rights that are owned by the Seller are owned free and clear of all Liens except as set forth in Schedule 3.04(e) of the Disclosure Schedule. All Proprietary Rights that are licensed by the Seller to third parties are licensed pursuant to valid and existing license agreements and such interests are not subject to any Liens other than those under the applicable license agreements. The consummation of the transactions contemplated by this Agreement will not result in the loss of any Proprietary Rights.

(f) The Seller owns or has rights to use, and is transferring to the Buyer hereunder, all tangible assets necessary for the conduct of the Business in the ordinary course consistent with past practices. The conduct of the Business in the ordinary course is not dependent upon the right to use the property of others, except such property as is leased or licensed to the Seller pursuant to any of the Transferred Assets.

(a) None of the Transferred Assets is subject to, and, except as set forth in Schedule  3.05(a) of the Disclosure Schedule and for the Retained Liabilities, the Seller is not a party to or bound by:

(b) Seller is not in breach of any provision of, or is in default (or knows of any event or circumstance that with notice, or lapse of time or both, would constitute an event of default) under the terms of any of the Contracts and Other Agreements that constitute a part of the Transferred Assets. All of the Contracts and Other Agreements that constitute a part of the Transferred Assets are in full force and effect. The Seller is not aware of any pending or threatened disputes with respect to any of the Contracts and Other Agreements.

(c) Except as set forth in Schedule 3.05(a) of the Disclosure Schedule, the enforceability of the Contracts and Other Agreements that constitute a part of the Transferred Assets will not be affected in any manner by the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby and none of the Contracts and Other Agreements that constitute a part of the Transferred Assets require the receipt of the consent or waiver of any Person or Governmental Entity prior to the sale, assignment, transfer, conveyance or delivery thereof pursuant to this Agreement.

(a) Attached as Schedule 3.06 of the Disclosure Schedule are true, correct and complete copies of (i) the unaudited balance sheet and statement of income of the Business (including the Excluded Assets and Retained Liabilities) as of December 31, 2004, October 31, 2005, December 31, 2005 and March 31, 2006 (collectively, the "Financial Statements"). The Financial Statements:

(b) The values at which the Inventories and Accounts Receivable are carried on the Financial Statements are in accordance with GAAP and reflect normal and consistent inventory valuation policies of the Seller. The amounts shown for the Accounts Receivable on the Financial Statements are collectible or are net of adequate reserves.

(a) All Tax Returns that are required to be filed (taking into account all extensions) on or before the Closing Date for, by, on behalf of or with respect to the Seller, including, but not limited to, those relating to the Business, the Transferred Assets and the Assumed Liabilities, and those which include or should include the Seller, the Business, the Transferred Assets or the Assumed Liabilities, and with respect to which the failure to timely file could have a Material Adverse Effect, have been or will be timely filed with the appropriate foreign, federal, state and local authorities on or before the Closing Date, and all Taxes shown to be due and payable on such Tax Returns or related to such Tax Returns, the failure to make payment of which could have a Material Adverse Effect, have been or will be timely paid in full on or before the Closing Date;

(b) All such Tax Returns and the information and data contained therein have been or will be properly and accurately compiled and completed, fairly present or will fairly present the information purported to be shown therein, and reflect or will reflect all liabilities for Taxes for the periods covered by such Tax Returns;

(c) None of such Tax Returns are now under audit or examination by any foreign, federal, state or local authority and there are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessment or collection of any Tax or deficiency of any nature against the Seller, the Business or the Transferred Assets, or with respect to any such Tax Return, or any suits or other actions, proceedings, investigations or claims now pending or threatened against the Seller, the Business or the Transferred Assets with respect to any Tax, or any matters under discussion with any foreign, federal, state or local authority relating to any Tax, or any claims for any additional Tax asserted by any such authority which could have a Material Adverse Effect;

(d) All Taxes due and owing from the Seller or assessed and due and owing against the Business or the Transferred Assets on or before the Closing Date have been or will be timely paid in full on or before the Closing Date;

(e) All withholding Tax and Tax deposit requirements imposed on the Seller and applicable to the Business for any and all periods prior to and including the Closing Date have been or will be timely satisfied in full on or before the Closing Date; and

(f) The Seller has made adequate provision in the Financial Statements for the payment in full of any and all unpaid Taxes which in any way may affect the Transferred Assets or the Business for any and all periods or portions thereof ending on or before the respective dates thereof.

(a) Seller has not violated or is currently in violation of, and the consummation of the transactions contemplated hereby will not cause any violation of, any order of any Governmental Entity or any law, ordinance, regulation, order, requirement, statute, rule, permit, concession, grant, franchise, license or other governmental authorization relating or applicable to the Seller, the Business or to any of the Seller's properties, assets or operations, including without limitation, the Transferred Assets.

(b) Except as set forth in Schedule 3.08(b) of the Disclosure Schedule, there is no action, suit, claim, investigation or legal, administrative, arbitration or other proceeding, or governmental investigation or examination, or any change in any zoning or building ordinance pending or, to the Seller's knowledge, threatened against or affecting the Seller, the Business or any of the Transferred Assets, at law or in equity, before or by any Governmental Entity and no basis exists for any such action, suit, claim, investigation or proceeding.

(a) any adverse change in the financial condition, assets, liabilities (contingent or otherwise), results of operations, business or prospects of the Seller except for such changes that in the aggregate have not had a Material Adverse Effect, or any occurrence, circumstance or combination thereof that might reasonably be expected to have a Material Adverse Effect before or after the Closing Date;

(b) any damage, destruction or loss, whether or not covered by insurance, adversely affecting the Transferred Assets or the Business;

(c) any increase in the compensation or rate of compensation or commissions or Contingent Purchase Price payable or to become payable by the Seller to any Transferred Employee that is not consistent with past practice, any payment or accrual of, or commitment with respect to, any Contingent Purchase Price plan or severance arrangement that is not consistent with past practice or any change or modification to any severance arrangement;

(d) any debt, obligation or liability incurred by the Seller, any assumption, guarantee, endorsement or other responsibility by the Seller for the liability or obligation of any other Person (whether absolute, accrued, contingent or otherwise), or any engagement in any other transaction by the Seller that might have a Material Adverse Effect;

(e) any mortgage, pledge or creation of any Lien with respect to any of the Transferred Assets;

(f) any sale, assignment, transfer or other disposition or lapse of any Proprietary Rights or disclosure to any Person (other than employees of the Seller in the scope of their employment) of any Proprietary Rights material to the Business;

(g) any write up or write down in the value of any Equipment or Inventories;

(h) any cancellation or compromise of any material claims, or any waiver of any other material rights relating to the Business, or any sale, transfer or other disposition of any properties or assets, real, personal or mixed, tangible or intangible, material to the Business (other than sales of Inventory in the ordinary course of business);

(i) any change in the Seller's method of accounting for financial, Tax or other purposes;

(j) any material change in the customary methods used in operating the Business (including the pricing practices) or any material change in the sales operations; or

(k) any change in the data required to be set forth on any Exhibit or Schedule to this Agreement, including the Disclosure Schedule, or any other event or condition of any character whatsoever pertaining to the Seller that has had or reasonably may be expected to have a Material Adverse Effect.

(a) neither the Seller nor to Seller's and the Partners' knowledge any prior owner or operator of the Business or the Transferred Assets has caused or allowed the generation, use, treatment, storage, or disposal of Hazardous Materials at any site or facility owned, leased or operated by the Seller or used in the Business except in accordance with all applicable Environmental Laws or except to the extent set out in Schedule 3.10;

(b) the Seller does not own or lease any real property, improvements or related assets that form a part of the Transferred Assets or the Business and that have been subject to the release of any Hazardous Materials except to the extent set out in Schedule 3.10;

(c) the Seller has secured all Environmental Permits necessary to the conduct of its businesses and operations and the Seller is in compliance with such permits except to the extent set out in Schedule 3.10;

(d) the Seller has not received any notice, nor is it aware, of any proposal to amend, revoke or replace any Environmental Permit, or requiring the issuance of any additional Environmental Permit;

(e) the Seller has not received inquiry or notice nor does it have any reason to suspect or believe it will receive inquiry or notice of any actual or potential proceedings, claims, lawsuits or losses related to or arising under any Environmental Law;

(f) the Seller is not currently operating or required to be operating under any compliance order, schedule, decree or agreement, any consent decree, order or agreement, and/or corrective action decree, order or agreement issued or entered into under any federal, state or local statute, regulation or ordinance regarding the environment and/or health or safety in the work place;

(g) neither the Seller nor to Seller's and Partners' knowledge, any prior owner or operator of the Business has transported, arranged for the transportation of or disposed of any substance in a manner that may lead to claims against the Buyer for clean-up costs, remedial work, damages to natural resources or for personal injury claims except to the extent set out in Schedule 3.10;

(h) each of the Seller, the Transferred Assets and the Business is in compliance in all material respects with all applicable limitations, restrictions, conditions, standards, prohibitions, requirements and obligations established under Environmental Laws except to the extent set out in Schedule 3.10; and

(a) Except for (i) warranties implied by law and (ii) warranties disclosed on Schedule 3.13 of the Disclosure Schedule, the Seller has not given or made any warranties in connection with the sale or rental of goods or services, including, without limitation, warranties covering the customer's consequential damages. Except as disclosed on Schedule 3.13 of the Disclosure Schedule, the Seller is not aware of any state of facts or the occurrence of any event forming the basis of any present claim against the Seller with respect to warranties relating to products manufactured, sold or distributed by the Seller or services performed by or on behalf of the Seller except any claim that would not individually or in the aggregate exceed $1,528.00.

(b) Except as disclosed on Schedule 3.13 of the Disclosure Schedule, there is no state of facts or any event forming the basis of any present claim against the Seller not fully covered by insurance, except for deductibles and self-insurance retentions, for personal injury or property damage alleged to be caused by products shipped or services rendered by or on behalf of the Seller.

(a) There are no collective bargaining or other labor union agreements to which the Seller is a party or by which it is bound. To the best knowledge of the Seller, it has not encountered any labor union organizing activity or had any actual or threatened employee strikes, work stoppages, slowdowns or walkouts.

(b) The Seller does not contribute to or have an obligation to contribute to, and has not at any time within six years prior to the Closing Date contributed to or had an obligation to contribute to, a multi-employer plan within the meaning of Section 3(37) of ERISA.

(c) The Seller does not have any defined benefit plan or employee benefit plan. Seller does have plan(s) established pursuant to Article 401(k) of the Code.

(a) The Buyer shall not be liable or obligated under any employee benefit plan or for any other employee benefits that may have been established by the Seller for the Seller's employees prior to the Closing, and the Seller expressly acknowledges that it has sole liability for all employee benefit costs accrued as of the Closing whether or not any or all of such employees are subsequently hired by the Buyer. Without limiting the generality of the foregoing, the Seller acknowledges and agrees that the Buyer does not assume the sponsorship of, the responsibility of contributions to, or any liabilities in connection with any employee benefit plan maintained by the Seller for active employees, retirees, former employees, their beneficiaries or any other Person, including any employee pension benefit plan within the meaning of Section 3(2) of ERISA, employee welfare plan within the meaning of Section 3(1) of ERISA and any personnel policy, stock option plan, bonus plan or arrangement, incentive award plan or arrangement, vacation policy, severance pay plan, policy or agreement, deferred compensation agreement arrangement, executive compensation or supplemental income arrangement, consulting agreement, employment agreement and each other employee benefit plan, agreement, arrangement, program, practice or understanding, except for the accrued 401(k) liability shown on Schedule 6.02(a).

(b) With respect to employees who accept employment with the Buyer, the Seller will remain responsible to the extent covered under its plans for any medical expenses Seller is required to cover that are (i) actually incurred prior to the Closing Date or (ii) actually incurred with respect to any hospitalization that began prior to the Closing Date until such hospitalization ends (as required under such plans), and the Buyer will be responsible for all other medical expenses incurred on or after the Closing Date to the extent covered under its plans without the application of any waiting period for coverage generally applicable to newly hired employees. The Seller shall provide medical coverage to the Transferred Employees with respect to any pre-existing medical conditions to the extent required by applicable law. To the fullest extent permitted under its applicable policies of insurance, the Seller shall maintain health, hospitalization, life, travel and accident insurance coverage for the Transferred Employees in effect until the first day of the month next following the Closing Date. The cost of such insurance coverage from and after the Closing Date shall be borne by the Buyer. The Seller shall cooperate with the Buyer to provide continuity of such insurance coverage to such employees.

(a) operate the Business and the Transferred Assets only in the usual, regular and ordinary manner with a view to maintaining the goodwill that the Seller now enjoys and, to the extent consistent with such operation, will use all reasonable efforts to preserve intact its present business organization, keep available the services of its employees and preserve its relationship with its customers, suppliers, jobbers, distributors and other Persons having business relations with it;

(b) use all reasonable efforts to maintain the Transferred Assets in a state of repair, order and condition consistent with its usual practice in connection with the Business;

(c) maintain its books of account and records relating to the Business in the usual, regular and ordinary manner, in accordance with the Seller's usual accounting practices applied on a consistent basis;

(d) comply in all material respects with all statutes, laws, orders and regulations applicable to it and to the conduct of the Business;

(e) not sell, assign, transfer, lease or otherwise dispose of any Proprietary Rights, Equipment or any of the other Transferred Assets except for dispositions of Inventories for value in the usual and ordinary course of business;

(f) preserve and maintain all rights that it now enjoys in and to the Proprietary Rights and not sell, assign, transfer, lease or otherwise dispose of any Proprietary Rights other than to the Buyer pursuant to the terms of this Agreement;

(g) not mortgage, pledge or otherwise create a security interest in any of the Transferred Assets or permit there to be created or exist any Liens thereon that would not be released upon the transfer of the Transferred Assets to the Buyer pursuant to this Agreement;

(h) not enter into any contract, commitment or lease in relation to the Business that is out of the ordinary course of the Business or, if effective on the date hereof, would be required to be disclosed in Schedule 3.05(a) of the Disclosure Schedule;

(i) not amend or modify any of the Contracts and Other Agreements disclosed in Schedule 3.05(a) of the Disclosure Schedule or any other contract, commitment, lease or other agreement that would, if entered into on the date hereof, be required to be disclosed on any Schedule to this Agreement, including the Disclosure Schedule;

(j) not consent to the termination of any of the Contracts and Other Agreements disclosed in Schedule 3.05(a) of the Disclosure Schedule or waive any of the Seller's rights with respect thereto;

(k) not grant any increase in the compensation or rate of compensation or commissions or bonus payable to or severance obligations for any of the Transferred Employees or in any bonus plan and not transfer or otherwise change any of the terms or conditions of employment of any of the Transferred Employees;

(l) not permit any insurance policy naming it as a beneficiary or a loss payee relating to the Business or the Transferred Assets to be canceled or terminated or any of the coverage thereunder to lapse unless simultaneously with such termination or cancellation replacement policies providing substantially the same coverage are in full force and effect;

(m) pay when due all accounts payable, all payments required by any of the Contracts and Other Agreements, and all Taxes other than Taxes that are being contested in good faith and for which adequate reserves against the Transferred Assets exist and which would not result in a Lien being imposed on any of the Transferred Assets; and

(n) promptly notify the Buyer in writing if the Seller becomes aware of any change that shall have occurred or that shall have been threatened (or any development that shall have occurred or that shall have been threatened involving a prospective change) in the Transferred Assets or the Business that would reasonably be expected to have a Material Adverse Effect whether or not occurring in the ordinary course of business.

(a) The Seller and the Partners shall use their best efforts to:

(b) The Seller and the Partners shall cause all Liens on the Transferred Assets, except the Assumed Liabilities, to be released as of the Closing Date.

(a) The Seller, the Partners and the Buyer shall cooperate with each other after the Closing hereunder in clearing the title to any of the Transferred Assets to the Buyer pursuant hereto in the event that the Seller's title to any such property, as the case may be, as of the Closing Date, shall be defective, not marketable or nonassignable. In this connection, the Seller shall take all commercially reasonable action, including, but not limited to, the furnishing of documents and evidences of title and assistance in the preparation and trial of any necessary litigation, to clear title to any such property, all of which shall be at the expense of the Seller.

(b) For the greater of eight years from the Closing Date and such period as may be required by any statute, regulation or Governmental Entity or any then pending litigation, the Buyer shall permit the Seller and its representatives reasonable access to the business records and files of the Seller that are transferred to the Buyer in connection herewith in anticipation of, or preparation for, existing or future litigation or any Tax audit which the Seller or any of its affiliates is involved and which is related to the Business or the Transferred Assets, during regular business hours and upon reasonable notice at the Buyer's principal places of business or at any location where such records are stored; provided, however, that (i) any such access shall be had or done in such a manner so as to not interfere with the normal conduct of the Business, (ii) the Buyer shall not be required to provide access to any confidential record or records, the disclosure of which would violate any governmental statute or regulation or applicable confidentiality agreement with any Person, and (iii) the Buyer shall not be required to provide access to any confidential record or records, the disclosure of which would cause the Buyer or any of its Affiliates to waive its attorney-client privilege or attorney work product privilege, it being understood and agreed that the records delivered by the Seller to the Buyer shall not be deemed to be restricted from the Seller pursuant to either clause (ii) or (iii) above. The Buyer shall also provide the Seller with (i) reasonable access to each Facility for the purpose of complying with applicable Environmental Laws provided that such access does not interfere with the normal conduct of the Business and (ii) reasonable access to the accounting records and schedules necessary for the preparation of financial reports and tax returns for the year ended December 31, 2005, and for the 2006 accounting period ending on the Closing Date.

(c) For the greater of eight years from the Closing Date and such period as may be required by any statute, regulation or Governmental Entity or any then pending litigation, the Seller shall permit the Buyer and its representatives reasonable access to the general business records and files of the Seller in anticipation of, or preparation for, existing or future litigation or any Tax audit in which the Buyer or any of its affiliates is involved and which is related to the Business or the Transferred Assets, during regular business hours and upon reasonable notice at the Seller's principal places of business or at any location where such records are stored; provided, however, that (i) any such access shall be had or done in such a manner so as to not interfere with the normal conduct of the Seller's business, (ii) the Seller shall not be required to provide access to any confidential record or records, the disclosure of which would violate any governmental statute or regulation or applicable confidentiality agreement with any Person, and (iii) the Seller shall not be required to provide access to any confidential record or records, the disclosure of which would cause the Seller or any of its Affiliates to waive its attorney-client privilege or attorney work product privilege.

(d) The Seller, if requested by the Buyer, shall cause Peggy J. Dean to prepare and deliver to the Buyer and shall cooperate and assist in preparing such financial statements of the Business that the Buyer may reasonably require in order to permit Buyer to timely file a Current Report on Form 8-K with the Securities and Exchange Commission in accordance with the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder in connection with the transactions contemplated thereby and to comply with any other financial statement requirements with respect to the Business applicable to Buyer under the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as amended, and the rules and regulations thereunder. If requested, the Seller shall use its best efforts to cause Peggy J. Dean to deliver such financial statements to the Buyer within ten business days prior to the date that Buyer is required to file such financial statements with the Securities and Exchange Commission in connection with such obligations. The Seller shall cause Peggy J. Dean to provide the Buyer with access to such firm's work papers in support of the Business. The cost of such accounting work shall be borne by the Buyer, but the Seller shall use its best efforts to cause Peggy J. Dean to provide the Buyer with an estimate of such costs prior to the Closing. The Seller will also cooperate with and assist the Buyer in preparing, and, if requested, shall use reasonable efforts to cause Peggy J. Dean to cooperate, at Buyer's expense, in preparing, such other financial statements for the Business as may be specified by the Buyer.

(a) The Seller and the Partners agree that, from and after the Transfer Date, they and their affiliates shall:

(b) The Seller acknowledges that all documents and objects containing or reflecting any Proprietary Information, whether developed by the Seller or by someone else for it or any of its affiliates, will after the Closing Date become the exclusive property of the Buyer and be delivered to the Buyer.

(c) Because of the unique nature of the Proprietary Information, the Seller understands and agrees that the breach or anticipated breach of its or its affiliates obligations under this Section 7.07 will result in immediate and irreparable harm and injury to the Buyer and its affiliates, for which it will not have an adequate remedy at law, and that the Buyer and its affiliates and their successors and assigns shall be entitled to relief in equity to enjoin such breach or anticipated breach and to seek any and all other legal and equitable remedies to which they may be entitled.

(a) No preliminary or permanent injunction or other order of any court or other Governmental Entity shall be in effect nor shall there be in effect any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity that, in any such case, prevents the consummation of the transactions contemplated by this Agreement.

(b) No suit, action, claim, proceeding or investigation before any Governmental Entity shall have been commenced or threatened seeking to prevent the sale of the Transferred Assets or the Business or asserting that the sale of all or a portion of the Transferred Assets or the Business would be unlawful.

(a) All consents from third Persons shall have been received.

(b) The Seller shall have delivered to the Buyer releases of all Liens except the liens securing the Assumed Loans, on the Transferred Assets in form reasonably satisfactory to the Buyer.

(a) No preliminary or permanent injunction or other order of any Governmental Entity shall be in effect nor shall there be any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity that, in any such case, prevents the consummation of the transactions contemplated by this Agreement.

(b) No suit, action, claim, proceeding or investigation before any court or other Governmental Entity shall have been commenced or threatened seeking to prevent the sale of the Transferred Assets or the Business or asserting that the sale of all or a portion of the Transferred Assets or the Business would be unlawful.

(a) any misrepresentation (other than Section 3.10), breach of warranty or breach of any covenant or agreement made or undertaken by the Seller and/or the Partners in this Agreement or any misrepresentation in or omission from any other agreement, certificate, Schedule, Exhibit or writing delivered to the Buyer pursuant to this Agreement, including the Disclosure Schedule; or

(b) any Retained Liability.

(a) any misrepresentation, breach of warranty or breach of any covenant or agreement made or undertaken by the Buyer in this Agreement or any misrepresentation in or omission from any other agreement, certificate, Schedule, Exhibit or writing delivered to the Seller pursuant to this Agreement;

(b) any Assumed Liability;

(c) the obligations assumed by the Buyer pursuant to Section 7.09 hereof; or

(d) any losses, damages, costs and expenses incurred by any of them arising from the Buyer's operation of the Business or the Transferred Assets or the use of the Facility pursuant to the terms of the Lease after the Closing Date; provided, however, that the Buyer shall in no event be liable for or be required to provide indemnity pursuant to this Section 10.04 for the Buyer's failure to detect or remedy any Environmental Conditions or any Environmental Liabilities arising on or prior to the Closing Date.

(a) An Indemnitee shall promptly give the Indemnitor notice of any matter which an Indemnitee has determined has given or could give rise to a right of indemnification under this Agreement, stating the amount of the Loss, if known, and method of computation thereof, all with reasonable particularity, and stating with particularity the nature of such matter. Failure to provide such notice shall not affect the right of the Indemnitee to indemnification except to the extent such failure shall have resulted in liability to the Indemnitor that could have been actually avoided had such notice been provided within such required time period.

(b) The obligations and liabilities of an Indemnitor under this Article X with respect to Losses arising from claims of any third party that are subject to the indemnification provided for in this Article X ("Third Party Claims") shall be governed by and contingent upon the following additional terms and conditions: if an Indemnitee shall receive notice of any Third Party Claim, the Indemnitee shall give the Indemnitor prompt notice of such Third Party Claim and the Indemnitor may, at its option, assume and control the defense of such Third Party Claim at the Indemnitor's expense and through counsel of the Indemnitor's choice reasonably acceptable to Indemnitee. In the event the Indemnitor assumes the defense against any such Third Party Claim as provided above, the Indemnitee shall have the right to participate at its own expense in the defense of such asserted liability, shall cooperate with the Indemnitor in such defense and will attempt to make available on a reasonable basis to the Indemnitor all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitor. In the event the Indemnitor does not elect to conduct the defense against any such Third Party Claim, the Indemnitor shall pay all reasonable costs and expenses of such defense as incurred and shall cooperate with the Indemnitee (and be entitled to participate) in such defense and attempt to make available to it on a reasonable basis all such witnesses, records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitee. Except for the settlement of a Third Party Claim that involves the payment of money only and for which the Indemnitee is totally indemnified by the Indemnitor, no Third Party Claim may be settled without the written consent of the Indemnitee.

(a) mutual agreement of the Buyer and the Seller;

(b) the Buyer, if a material default shall be made in the observance or in the due and timely performance by the Seller of any agreements and covenants of the Seller herein contained, or if there shall have been a material breach by the Seller of any of the warranties and representations of the Seller herein contained, and such default or breach has not been cured or has not been waived;

(c) the Seller, if a material default shall be made by the Buyer in the observance or in the due and timely performance by the Buyer of any agreements and covenants of the Buyer herein contained, or if there shall have been a material breach by the Buyer of any of the warranties and representations of the Buyer herein contained, and such default or breach has not been cured or has not been waived; or

(d) the Buyer or the Seller (provided the terminating party has not materially breached any of its agreements, covenants or representations and warranties) if the Closing shall not have occurred on or before June 30, 2006.

14.01. "Account Receivables" shall have the meaning given such term in Section 1.01.

14.02. "Agreement" shall mean this Asset Purchase Agreement between the Seller, the Buyer and the Partners, as amended from time to time by the parties hereto.

14.03. "Assumed Liabilities" shall have the meaning given such term in Section 1.03 hereof.

14.04 "Assumed Loans" shall means the indebtedness of Seller to third parties that are specifically set out in the April 30, 2006 financial statements of the Seller and are listed in Schedule 1.03(a).

14.05. "Business" shall mean the businesses and operations of the Seller including, without limitation, pump remanufacturing, development of innovative pump solutions for capital pumps, fabrication of water flood systems and pump maintenance and repairs [Machine Tech: general machine shop services].

14.06. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Houston, Texas are authorized by law to close.

14.07. "Buyer" shall mean PMI OPERATING COMPANY, LTD., a Texas limited Partnership, or one or more of its designees.

14.08. "Cash Purchase Price" shall mean $2,236,540.00 and if the Net Assets of Seller as of the Closing Date exceeds the Net Assets as of October 31, 2005, then fifty percent (50%) of the Cash as of the Closing Date shall be added to the Cash Purchase Price. For purposes of this definition, Net Assets shall mean the book value of the Cash, Inventory, Accounts Receivable, Seller's prepaids, deposits, fixed assets and Trade Payables shall be determined under GAAP.

14.09. "Closing" shall mean the transfer by the Seller to the Buyer of the Transferred Assets, the assumption by the Buyer of the Assumed Liabilities and the transfer by the Buyer to the Seller of the other considerations set forth herein.

14.10. "Closing Date" shall mean the time and date of the Closing as specified in Article II hereof.

14.11. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or similar provisions of legislation replacing such law from time to time.

14.12. "Contracts and Other Agreements" shall mean all contracts, agreements, understandings, indentures, notes, bonds, loans, instruments, leases, mortgages, franchises, licenses, commitments or binding arrangements, whether express or implied, oral or written, to which the Seller is a party or bound or to which its properties or assets are subject.

14.13. "Damages" shall mean any and all liabilities, losses, damages, demands, assessments, claims, costs and expenses (including interest, awards, judgments, penalties, settlements, fines, costs of remediation, diminutions in value, costs and expenses incurred in connection with investigating and defending any claims or causes of action [including, without limitation, attorneys' fees and expenses and all fees and expenses of consultants and other professionals]).

14.14. "Disclosure Schedule" shall mean the disclosure schedule of even date delivered to the Buyer.

14.15. "Documents and Other Papers" shall mean and include any document, agreement, instrument, certificate, writing, notice, consent, affidavit, letter, telegram, telex, statement, file, computer disk, microfiche or other document in electronic format, schedule, exhibit or any other paper or record whatsoever.

14.16 "Employment Agreements" shall have the meaning given such term in Section 6.01 hereof.

14.17. "Environmental Laws" shall mean all federal, state, or municipal laws, rules, regulations, statutes, ordinances, or orders of any Governmental Entity relating to (a) the control of any potential pollutant or protection of the air, water, or land, (b) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation and (c) exposure to hazardous, toxic or other substances alleged to be harmful. "Environmental Laws" shall include, but not be limited to, the Clean Air Act, 42 U.S.C. Section  7401 et seq., the Clean Water Act, 33  U.S.C. Section  1251 et seq., the Resource Conservation Recovery Act ("RCRA"), 42 U.S.C. Section  6901 et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C. Section  11001, et seq., the Toxic Substances Control Act, 15 U.S.C. Section  2601 et seq., the Water Pollution Control Act, 33 U.S.C. Section  1251 et seq., the Safe Drinking Water Act, 42 U.S.C. Section  300f et seq. and the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section  9601 et seq. The term "Environmental Laws" shall also include all state, local and municipal laws, rules, regulations, statutes, ordinances and orders dealing with the same subject matter or promulgated by any governmental or quasi-governmental agency thereunder or to carry out the purposes of any federal, state, local and municipal law.

14.18. "Environmental Liabilities" shall mean any and all liabilities, responsibilities, claims, suits, losses, costs (including remedial, removal, response, abatement, clean-up, investigative, and/or monitoring costs and any other related costs and expenses), other causes of action recognized now or at any later time, damages, settlements, expenses, charges, assessments, liens, penalties, fines, pre-judgment and post-judgment interest, attorney's fees and other legal fees (a) pursuant to any agreement, order, notice, or responsibility, directive (including directives embodied in Environmental Laws), injunction, judgment, or similar documents (including settlements); or (b) pursuant to any claim by a Governmental Entity or other Person for personal injury, property damage, damage to natural resources, remediation, or payment or reimbursement of response costs incurred or expended by such Governmental Entity or Person pursuant to common law or statute.

14.19. "Environmental Losses" shall have the meaning given such term in Section 10.02 hereof.

14.20. "Environmental Permit" shall mean any permit, license, approval, registration, identification number or other authorization with respect to the Transferred Assets or the operations or businesses of the Seller under any applicable law, regulation or other requirement of the United States or any other country or of any state, municipality or other subdivision thereof relating to the control of any pollutant or protection of health or the environment, including laws, regulations or other requirements relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic materials or wastes into ambient air, surface water, groundwater or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of chemical substances, pollutants, contaminants or hazardous or toxic materials or wastes.

14.21. "Equipment" shall mean all machinery, transportation equipment, tools, equipment, furnishings and fixtures owned, leased or subject to a contract of purchase and sale, or lease commitment that is used in the Business as operated by the Seller.

14.22. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, and the related regulations, as amended from time to time.

14.23 "Facilities" shall mean the real properties that are owned or leased and are described in Exhibit B. Facilities shall include all fixtures and improvements erected or located on or affixed to the Facilities.

14.24. "Financial Statements" shall have the meaning given such term in Section 3.06 hereof.

14.25. "GAAP" shall have the meaning given such term in Section 3.06 hereof.

14.26. "General Buyer Losses" shall have the meaning given such term in Section 10.01 hereof.

14.27. "Governmental Entity" shall mean any arbitrator, court, administrative or regulatory agency, commission, department, board or bureau or body or other government or authority or instrumentality or any entity or Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

14.28. "Hazardous Materials" shall mean any (a) petroleum or petroleum products, (b) hazardous substances as defined by Section  101(14) of CERCLA and (c) any other chemical, substance or waste that is regulated by any Governmental Entity under any Environmental Law.

14.29. "Indemnitee" shall mean the Person or Persons indemnified, or entitled, or claiming to be entitled to be indemnified, pursuant to the provisions of Sections 10.01, 10.02 or 10.04 hereof, as the case may be.

14.30. "Indemnitor" shall mean the Person or Persons having the obligation to indemnify pursuant to the provisions of Sections 10.01, 10.02 or 10.04 hereof, as the case may be.

14.31. "Inventories" shall mean all inventories of finished goods, tooling inventory, work in progress, raw materials and other inventories relating to the Business, wherever situated.

14.32. "Lease Assignments" shall have the meaning given such term in Section 7.08 hereof.

14.33. "Letter of Intent" shall mean that certain letter of intent among Buyer and the Seller dated April 7, 2006.

14.34. "Lien" shall mean any lien, pledge, claim, charge, security interest or other encumbrance, option, defect or other rights of any third Person of any nature whatsoever.

14.35. "Losses" shall mean Seller Losses, General Buyer Losses or Environmental Losses, as the case may be.

14.36. "Material Adverse Effect" shall mean a single event, occurrence or fact that, together with all other events, occurrences and facts that could reasonably be expected to result in a loss to the Business, would have, or might reasonably be expected to have, a material adverse effect on the assets, business, operations, prospects or financial condition of the Transferred Assets or the Business that would result in a diminution in value of the Transferred Assets to an extent greater than three percent (3%) of the Purchase Price, or that would constitute a criminal violation of law involving a felony.

14.37. "Net Assets" shall have the meaning given such term in Section 14.08 hereof.

14.38. "Non-Competition Agreements" shall have the meaning given such term in Section 8.08 hereof.

14.39. "Partners" shall mean Joe K. Roemisch, Michael Goebel and J.M. Pevehouse.

14.40. "Partners' Notes" shall be the form of note attached as Exhibit A and in the amounts set out in Section 1.03.

14.41. "Permitted Liens" shall mean (a) Liens securing or relating to liabilities or obligations that are to be assumed by the Buyer pursuant to this Agreement, (b) Liens for current taxes and assessments not yet due, (c) inchoate mechanic and materialmen liens for construction in progress, (d) inchoate workmen, repairmen, warehousemen, customer, employee and carriers liens arising in the ordinary course of business, (e) Liens created by the Buyer and (f) Liens and imperfections of title that, singly or in the aggregate, would not have a Material Adverse Effect.

14.42. "Person" shall mean a corporation, an association, a partnership, an organization, a business, an individual or a Governmental Entity.

14.43. "Pre-Closing Obligations" shall mean all obligations of the Seller (including indemnification and other contingent obligations) relating to (i) acts, events or omissions by any Person or circumstances existing at or prior to the Closing, (ii)  any pending or threatened litigation or claims made or threatened prior to the Closing, (iii) any of the matters listed on Schedule 1.05 hereto, and (iv) contracts, agreements and other commitments that were required to be scheduled in Schedule 3.05(a) of the Disclosure Statement but were not scheduled.

14.44. "Proprietary Information" shall mean collectively (a) Proprietary Rights and (b) any and all other information and material proprietary to the Seller, owned, possessed or used by the Seller, whether or not such information is embodied in writing or other physical form, and which is not generally known to the public, that (i) relates to financial information regarding the Seller or the Business, including, without limitation, (y) business plans and (z) sales, financing, pricing and marketing procedures or methods of the Seller or (ii) relates to specific business matters concerning the Seller, including, without limitation, the identity of or other information regarding sales personnel or customers of the Seller.

14.45. "Proprietary Rights" means all patents, inventions, shop rights, know how, trade secrets, designs, plans, manuals, computer software, specifications, confidentiality agreements, confidential information and other proprietary technology and similar information; all registered and unregistered trademarks, service marks, logos, partnership names, trade names and all other trademark rights; all registered and unregistered copyrights; and all registrations for, and applications for registration of, any of the foregoing, that are used in the conduct of the Business.

14.46. "Purchase Price" shall have the meaning given such term in Section 1.03 hereof.

14.47. "Retained Liabilities" shall have the meaning given such term in Section 1.05 hereof.

14.48. "Seller" shall mean Machine Tech Services, L.P., a Texas limited partnership.

14.49. "Subsidiary" shall mean, as to a Person, any corporation, Partnership, joint venture, association or other entity or organization in which such Person owns (directly or indirectly) any equity or other similar Partnership interest.

14.50. "Tax Consideration" shall have the meaning given such term in Section 1.08(a) hereof.

14.51. "Tax Returns" shall mean all returns, declarations, reports, statements and other documents of, relating to, or required to be filed in respect of, any and all Taxes, and the term "Tax Return" means any one of the foregoing Tax Returns.

14.52. "Taxes" shall mean all federal, state, local, foreign and other taxes, charges, fees, duties, levies, imposts, customs or other assessments, including, without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, profit share, license, lease, service, service use, value added, withholding, payroll, employment, excise, estimated, severance, stamp, occupation, premium, property, windfall profits, or other taxes, fees, assessments, customs, duties, levies, imposts, or charges of any kind whatsoever, together with any interests, penalties, additions to tax, fines or other additional amounts imposed thereon or related thereto, and the term "Tax" means any one of the foregoing Taxes.

14.53. "Third Party Claims" shall have the meaning given such term in Section 10.05(b) hereof.

14.54. "Total Liabilities" shall mean the amount of all liabilities shown on the Closing Date balance sheet of Seller.

14.55. "Trade Payables" shall mean those obligations of the Seller relating to the provision of goods and services to the Seller for the conduct of the Business in the ordinary course of business of the Seller that relate to the Transferred Assets and that are classified as Trade Payables in accordance with GAAP and are shown in the April 30, 2006 Financial Statements of the Seller.

14.56. "Transferred Assets" shall have the meaning given such term in Section 1.01 hereof.

14.57. "Transferred Employees" shall have the meaning given such term in Section 6.01 hereof.

15.01. Notices. All notices, requests, consents, directions and other instruments and communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person, by courier, by overnight delivery service with proof of delivery or by prepaid registered or certified United States first-class mail, return receipt requested, addressed to the respective party at the address set forth below, or if sent by facsimile or other similar form of communication (with receipt confirmed) to the respective party at the facsimile number set forth below:

If to the Buyer, to: PMI OPERATING COMPANY, LTD.

15.02. Bulk Transfer Laws. The Seller agrees with the Buyer that the bulk sales provisions of the Uniform Commercial Code as in effect in Texas and the provisions of any similar statute of any other state or jurisdiction regulating bulk sales or transfers do not apply to this Agreement.

15.03. Assignment. Prior to the Closing Date, no party to this Agreement may sell, transfer, assign, pledge or hypothecate its rights, interests or obligations under this Agreement, except that the Buyer may assign its rights to any affiliate of the Buyer. Subsequent to the Closing Date, the parties may, from time to time, without the consent of the other parties hereto assign any or all of their respective rights under this Agreement. Notwithstanding the foregoing, no assignment of this Agreement or any of the rights, interests or obligations hereof by the Buyer shall relieve the Buyer of its obligations under this Agreement and, upon any such assignment occurring prior to the Closing, the representations, warranties, covenants and agreements contained in this Agreement shall be deemed to have been made by the Buyer's assignee as well as by the Buyer. The Buyer and the Seller agree that in connection with any sale or other disposition or series of sales or dispositions of all or substantially all of such party's assets to an affiliate of such party or any merger or liquidation of such party, the acquiring Person or other recipient of substantially all of such party's assets, as the case may be, shall assume the obligations of such party under this Agreement but the Buyer or Seller, as applicable, shall not be released from the terms, conditions and provisions of this Agreement. Such obligation shall apply to successive sales, dispositions, mergers and liquidations.

15.04. Successors. This Agreement shall inure to the benefit of, be binding upon and be enforceable by the parties hereto and their respective successors and assigns.

15.05. Entire Agreement. This Agreement and the Exhibits and Schedules hereto and the Disclosure Schedule constitute the entire agreement and understanding between the parties relating to the subject matter hereof and thereof and supersedes all prior representations, endorsements, premises, agreements, memoranda communications, negotiations, discussions, understandings and arrangements, whether oral, written or inferred, between the parties relating to the subject matter hereof. This Agreement may not be modified, amended, rescinded, canceled, altered or supplemented, in whole or in part, except upon the execution and delivery of a written instrument executed by a duly authorized representative of each of the parties hereto.

15.06. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas without giving effect to choice of law principles. The parties submit to the non-exclusive jurisdiction of the courts of the State of Texas.

15.07. Waiver. The waiver of any breach of any term or condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition.

15.08. Severability. Any provision hereof that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

15.09. No Third Party Beneficiaries. Any agreement contained, expressed or implied in this Agreement shall be only for the benefit of the parties hereto and their respective legal representatives, successors and assigns, and such agreements shall not inure to the benefit of the obligees of any indebtedness of any party hereto, it being the intention of the parties hereto that no Person shall be deemed a third party beneficiary of this Agreement, except to the extent a third party is expressly given rights herein.

15.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

15.11. Headings. Each statement set forth in the Disclosure Schedule with respect to a particular section herein shall be deemed made solely with respect to such section and not with respect to any other section hereof unless specifically set forth in the Disclosure Schedule as also being made with respect to such other section. The headings of the Articles and sections of this Agreement have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or provisions hereof or affect in any way the meaning or interpretation of this Agreement.

15.12. Negotiated Transaction. The provisions of this Agreement were negotiated by the parties hereto, and this Agreement shall be deemed to have been drafted by all of the parties hereto.

(a) Subject to the terms and conditions of this Agreement and in consideration of the obligations of the Buyer as provided herein, and except as otherwise provided in Section 1.02 hereof, at the Closing, the Seller shall sell, assign, transfer, grant, bargain, deliver and convey to the Buyer, free and clear of all Liens, the Seller's entire right, title and interest in, to and under the Business, as a going concern, and all assets owned or used by the Seller in connection with or arising out of the Business of every type and description, tangible and intangible, wherever located and whether or not reflected on the books and records of the Seller (all of such assets, properties, rights and business being hereinafter sometimes collectively referred to as the "Transferred Assets"), including, but not limited to,

(b) The Seller shall use its best efforts to obtain such consents of third parties as are necessary for the assignment of the Transferred Assets. To the extent that any of the Transferred Assets are not assignable by the terms thereof or consents to the assignment thereof cannot be obtained as herein provided, the Transferred Assets shall be held by the Seller in trust for the Buyer and shall be performed by the Buyer in the name of the Seller and all benefits and obligations derived thereunder shall be for the account of the Buyer, provided, however, that where entitlement of the Buyer to such Transferred Assets hereunder is not recognized by any third party, the Seller shall, at the request of the Buyer, enforce in a reasonable manner, at the cost of and for the account of the Buyer, any and all rights of the Seller against such third party.

(c) Schedule 1.01 identifies the location of all of the scheduled Transferred Assets and the locations in which Transferred Assets that are not scheduled are located. The Seller shall for a reasonable period following the Closing Date provide the Buyer with access to all locations in which the Transferred Assets may be located so as to permit the Buyer to take physical possession of such Transferred Assets or to arrange for the storage or transfer of such Transferred Assets. The Seller shall also notify each Person which may have possession of the Transferred Assets at the Closing of the transfer of such Transferred Assets to the Buyer.

(a) In consideration of the transfer to the Buyer of the Transferred Assets, the Buyer shall (i) pay to the Seller an amount in cash equal to the Cash Purchase Price; (ii) deliver the Partners Notes in the form attached hereto in Exhibit A, to the following persons and in the following amounts:

Joe K. Roemisch $823,542.00

Michael Goebel $823,542.00

J.M. Pevehouse $823,541.00

(iii) an amount equal to twenty percent (20%) of the annual earnings before interest, taxes, depreciation and amortization of the business acquired by the Buyer pursuant to this Agreement for sixty (60) months from the Closing Date hereof (the "Contingent Purchase Price"). The Bonus will be paid to the Partners in equal amounts within ninety (90) days of the close of each calendar year included within said sixty (60) month period. In the event of the death or termination of employment with Purchaser of any Partner the Contingent Purchase Price will be paid to the remaining Partners in equal amounts. Notwithstanding anything herein to the contrary the maximum amount of Contingent Purchase Price to be paid for said sixty (60) month period shall not exceed One Million Four Hundred Forty-Three Thousand Six Hundred and No/100 Dollars ($1,443,600.00); and (iv) assume (x) the payment obligations of the Seller with respect to all Trade Payables and other liabilities specifically set out on the April 30, 2006 Financial Statement, (y) the obligations of the Seller under the express written terms of the Contracts and other Agreements to the extent and only to the extent such obligations are not Pre-Closing Obligations, and (z) the Assumed Loans listed in Schedule 1.03(a) ((x),(y) and (z) shall constitute the "Assumed Liabilities"). The Cash Purchase Price, the Partners Notes, the Contingent Purchase Price and the Assumed Liabilities are herein collectively referred to as the "Purchase Price". The Partner Notes shall be guaranteed by DXP Enterprises, Inc. in the form of guaranty attached hereto as Exhibit F. The Partner Notes shall be subordinated to all indebtedness of Buyer to Wells Fargo Bank, National Association as evidenced by the form of Subordination Agreement attached hereto as Exhibit G, which shall be executed by Seller, Buyer and the Partners.

(b) At the Closing, the Buyer shall pay to the Seller by wire transfer of same day funds an amount equal to the Cash Purchase Price.

(c) If the Net Assets on April 30, 2006 exceeds the Net Assets, as of October 31, 2005, the Cash Purchase Price will be increased by an amount equal to fifty percent (50%) of the amount of cash shown on the April 30, 2006 balance sheet of Seller, which shall be prepared in accordance with GAAP.

(a) any liability or obligation of the Seller arising out of or in connection with the negotiation and preparation of this Agreement and the consummation and performance of the transactions contemplated hereby, whether or not such transactions are consummated;

(b) any liability or obligation for any and all federal income taxes of, or pertaining or attributable to, (i) the Seller for any period that ends on or before, or includes, March 31, 2006, or (ii) the Business and/or the Transferred Assets for any period or portion thereof that ends on or before March 31, 2006 (including, but in no way limited to, any and all Taxes described in clauses (i) and (ii) of this Section 1.05(b) for which liability is or may be sought to be imposed on the Buyer under any successor liability, transferee liability or similar provision of any applicable federal, foreign, state or local law (including, without limitation, Section 111.020 of the Texas Tax Code));

(c) any liability (other than with respect to the Assumed Liabilities) to which any of the parties may become subject as a result of the fact that the transactions contemplated by this Agreement are being effected without compliance with the bulk sales provisions of the Uniform Commercial Code as in effect in any state or any similar statute as enacted in any jurisdiction; and

(d) except as provided in Section 7.09 hereof, the Pre-Closing Obligations and the specific liabilities, obligations or litigation listed on Schedule 1.05 hereto or in Schedules 3.04(e), 3.07, 3.08(b), 3.13 or 6.05 of the Disclosure Schedule.

(a) The Seller warrants that the Transferred Assets are not, and on the Closing Date will not be, subject to or liable for any special assessments or similar types of impositions.

(b) Except as otherwise provided in this Agreement, the Seller and the Buyer agree that amounts payable by Buyer with respect to utility charges and other items of expense attributable to the conduct of the Business shall be reasonable and ordinary expenses that are not past due and are reflected in the April 30, 2006 financial statements of Seller.

(c) The ad valorem taxes associated with the Transferred Assets shall be prorated between Seller and Buyer effective April 30, 2006.

(a) The Buyer and the Seller acknowledge and agree that the Purchase Price includes and is inclusive of any and all sales, use, transfer or other similar Taxes imposed as a result of the consummation of the transactions contemplated by this Agreement. The Seller and the Partners hereby agrees to indemnify the Buyer against, and agrees to protect, save and hold the Buyer harmless from, any loss, liability, obligation or claim (whether or not ultimately successful) for sales, use, transfer or other similar Taxes (and any interest, penalties, additions to tax and fines thereon or related thereto) imposed as a result of the consummation of the transactions contemplated by this Agreement.

(b) The Buyer shall pay any and all recording, filing or other fees relating to the conveyance or transfer of the Transferred Assets from the Seller to the Buyer.

(a) Seller, Buyer and the Partners have prepared a written statement setting forth the allocation of the consideration (including, without limitation, the Purchase Price and any adjustments thereto) deemed to have been paid for federal income tax purposes by the Buyer to the Seller and the Partners pursuant to this Agreement (the "Tax Consideration") among the Transferred Assets (the "Allocation") and a copy of such written statement is attached hereto as Exhibit H.

(b) For federal income tax purposes (including, without limitation, the Buyer's, the Seller's and the Partner's compliance with the reporting requirements of Section 1060 of the Code), each of the Seller, the Partners and the Buyer hereby agree to use the Allocation and to cooperate in good faith with each other in connection with the preparation and filing of any information required to be furnished to the Internal Revenue Service under Section 1060 of the Code (including, without limitation, Section 1060(b) and (e) of the Code) and any applicable regulations thereunder. Without limiting the generality of the preceding sentence, the Buyer, the Seller and the Partners agree to (i) report such allocations to the Internal Revenue Service on Form 8594 and, if required, supplemental Forms 8594, in accordance with the instructions to Form 8594 and the provisions of Section 1060 of the Code and the applicable regulations thereunder, and (ii) coordinate their respective preparation and filing of each such Form 8594 and any other forms or information statements or schedules required to be filed under Section 1060 of the Code and the applicable regulations thereunder so that the Allocation and information reflected on such forms, statements and schedules shall be consistent.

(a) The Seller is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Texas. The Seller is duly authorized, qualified and licensed and has all requisite power and authority under all applicable laws, ordinances and orders of public authorities to own, operate and lease its properties and assets and to carry on its business in the places and in the manner currently conducted. The Seller is qualified to transact business as a foreign corporation and is in good standing in the jurisdictions, if any, specified in Schedule 3.01(a) of the Disclosure Schedule, and there is no other jurisdiction in which the nature and extent of the Seller's business or the character of its assets makes such qualification necessary. The Seller has all requisite partnership power and authority to enter into this Agreement and to perform its obligations under this Agreement.

(b) The Seller has no Subsidiaries, except Production Pump Systems of Levelland, L.P.

(c) Attached as Schedule 3.01(c) of the Disclosure Schedule is a true, correct and complete copy of the Certificate of Limited Partnership certified by the Secretary of State of the State of Texas and the Partnership Agreement certified by the partnership secretary, of the Seller, in each case as amended and in full force and effect.

(d) The Seller does not do business in any state or commonwealth under any name other than the partnership name set forth in the first paragraph of this Agreement.

(e) Each Partner represents and warrants to the Buyer that each Partner holds of record and owns beneficially the amount of partnership interest of Seller set forth next to such Partner's name in Schedule 3.01(c), free and clear of any encumbrances. Such Partner is not a party to an option, warrant, purchase right, or other contract or commitment that could require such Partner to sell, transfer, or otherwise dispose of any partnership interest of the Seller (other than this Agreement). Such Partner is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any partnership interest of the Seller. To his knowledge, the partnership interest of such Partner have been duly authorized and validly issued.

(a) This Agreement has been duly authorized by the Partners of the Seller. No further partnership action is necessary on the part of the Seller to execute and deliver this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and the Partners and is a legal, valid and binding obligation of the Seller and the Partners enforceable against the Seller and the Partners in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors' rights generally and by legal and equitable limitations on the availability of specific remedies.

(b) The covenant not to compete set out in Section 7.10 hereof has necessary partnership action on the part of Seller and individually for the Partners and, when executed and delivered at the Closing as contemplated by this Agreement, shall be legal, valid and binding obligations of the Seller and the Partners, enforceable against the Seller and the Partners in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors' rights generally and by legal and equitable limitations on the availability of specific remedies.

(c) The execution, delivery and performance of this Agreement and the other agreements and documents to be delivered by the Seller and the Partners to the Buyer, the consummation of the transactions contemplated hereby or thereby, and the compliance with the provisions hereof or thereof, by the Seller and the Partners will not, with or without the passage of time or the giving of notice or both:

other than violations, defaults or conflicts that would not materially and adversely affect the ability of the Seller to consummate the transactions provided for in this Agreement.

(d) Attached as Schedule 3.02(d) of the Disclosure Schedule are true, correct and complete copies of the resolutions adopted by the Partners of the Seller approving this Agreement and the transactions contemplated hereby. Such resolutions were adopted at a meeting duly called and convened at which a quorum was present and acting throughout or by unanimous written consents. Such resolution is in full force and effect without amendment or modification.

(a) No order, license, consent, waiver, authorization or approval of, or exemption by, or the giving of notice to, or the registration with, or the taking of any other action in respect of, any Person not a party to this Agreement, including any Governmental Entity, and no filing, recording, publication or registration in any public office or any other place is now, or under existing law in the future will be, necessary on behalf of the Seller to authorize the execution, delivery and performance of this Agreement or any other agreement contemplated hereby to be executed and delivered by them and the consummation of the transactions contemplated hereby or thereby (including, but not limited to, assignment of the Transferred Assets), or to effect the legality, validity, binding effect or enforceability thereof.

(b) All licenses, permits, concessions, warrants, franchises and other governmental authorizations and approvals of all Governmental Entities required or necessary for the Seller to carry on its business in the places and in the manner currently conducted have been duly obtained, are in full force and effect and are set forth truly, correctly and completely in Schedule 3.03(b) of the Disclosure Schedule. No violations are in existence or have been recorded with respect to such licenses, permits or other authorizations and no proceeding is pending or, to the best knowledge of the Seller, threatened with respect to the revocation or limitation of any of such licenses, permits or other authorizations. The Seller has complied with all laws, rules, regulations and orders applicable to the Business, and all rules, regulations and orders respecting the provision of services by the Seller, except for violations that would not have a Material Adverse Effect.

(a) The Seller owns or leases each Facility and has all power, right and authority to grant, sell and convey each owned Facility and assign each leased Facility to the Buyer the right to use such Facility as provided in Section 7.08 hereof. Each Facility is in reasonable condition for the operation of the Transferred Assets and the Business as the same are currently being conducted by the Seller.

(b) All Equipment (excluding Equipment that did not have a cost basis of $10,000 or more at their respective dates of acquisition by the Seller) is set forth in Schedule 1.01 hereto. The Seller has good and marketable title to all Equipment other than those liens set forth in Schedule 3.04(d) of the Disclosure Schedule. All of the Equipment is in the Seller's possession and control.

(c) All Inventories are set forth in Schedule 1.01 hereto. The Seller has good and marketable title to all Inventories free and clear of all Liens other than those Liens set forth in Schedule 3.04(d) of the Disclosure Schedule.

(d) The Accounts Receivable are owned by the Seller free and clear of all Liens (other than those Liens set forth in Schedule 3.04(d) of the Disclosure Schedule). All Accounts Receivable were generated in the ordinary course of business. The Seller is unaware of any existing facts or circumstances that could reasonably be expected to result in the Accounts Receivable not being fully collected in accordance with their terms.

(e) The Seller owns or possesses licenses or other rights to use, and will at the Closing transfer to the Buyer, all rights to all Proprietary Rights necessary for the conduct of the Business as currently conducted. Set forth in Schedule 3.04(e) of the Disclosure Schedule is a complete and accurate list of all patents, trademarks and licenses the Seller owns or possesses or otherwise has rights to use and all patents, trademarks and licenses pertaining to the Business that Seller owns or possesses or otherwise has rights to use. No licenses, sublicenses, covenants or agreements have been granted or entered into by the Seller in respect of the items listed in Schedule 3.04(e) of the Disclosure Schedule except as noted thereon. The Seller has not received any notice of infringement, misappropriation or conflict from any other Person with respect to such Proprietary Rights except as noted in Schedule 3.04(e) of the Disclosure Schedule, and the conduct of the Business has not infringed, misappropriated or otherwise conflicted with any Proprietary Rights of any such Person. The Seller has not given indemnification for patent, trademark, service mark or copyright infringements except to licensees or customers in the ordinary course of business. All of the Proprietary Rights that are owned by the Seller are owned free and clear of all Liens except as set forth in Schedule 3.04(e) of the Disclosure Schedule. All Proprietary Rights that are licensed by the Seller to third parties are licensed pursuant to valid and existing license agreements and such interests are not subject to any Liens other than those under the applicable license agreements. The consummation of the transactions contemplated by this Agreement will not result in the loss of any Proprietary Rights.

(f) The Seller owns or has rights to use, and is transferring to the Buyer hereunder, all tangible assets necessary for the conduct of the Business in the ordinary course consistent with past practices. The conduct of the Business in the ordinary course is not dependent upon the right to use the property of others, except such property as is leased or licensed to the Seller pursuant to any of the Transferred Assets.

(a) None of the Transferred Assets is subject to, and, except as set forth in Schedule  3.05(a) of the Disclosure Schedule and for the Retained Liabilities, the Seller is not a party to or bound by:

(b) Seller is not in breach of any provision of, or is in default (or knows of any event or circumstance that with notice, or lapse of time or both, would constitute an event of default) under the terms of any of the Contracts and Other Agreements that constitute a part of the Transferred Assets. All of the Contracts and Other Agreements that constitute a part of the Transferred Assets are in full force and effect. The Seller is not aware of any pending or threatened disputes with respect to any of the Contracts and Other Agreements.

(c) Except as set forth in Schedule 3.05(a) of the Disclosure Schedule, the enforceability of the Contracts and Other Agreements that constitute a part of the Transferred Assets will not be affected in any manner by the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby and none of the Contracts and Other Agreements that constitute a part of the Transferred Assets require the receipt of the consent or waiver of any Person or Governmental Entity prior to the sale, assignment, transfer, conveyance or delivery thereof pursuant to this Agreement.

(a) Attached as Schedule 3.06 of the Disclosure Schedule are true, correct and complete copies of (i) the unaudited balance sheet and statement of income of the Business (including the Excluded Assets and Retained Liabilities) as of December 31, 2004, October 31, 2005, December 31, 2005 and March 31, 2006 (collectively, the "Financial Statements"). The Financial Statements:

(b) The values at which the Inventories and Accounts Receivable are carried on the Financial Statements are in accordance with GAAP and reflect normal and consistent inventory valuation policies of the Seller. The amounts shown for the Accounts Receivable on the Financial Statements are collectible or are net of adequate reserves.

(a) All Tax Returns that are required to be filed (taking into account all extensions) on or before the Closing Date for, by, on behalf of or with respect to the Seller, including, but not limited to, those relating to the Business, the Transferred Assets and the Assumed Liabilities, and those which include or should include the Seller, the Business, the Transferred Assets or the Assumed Liabilities, and with respect to which the failure to timely file could have a Material Adverse Effect, have been or will be timely filed with the appropriate foreign, federal, state and local authorities on or before the Closing Date, and all Taxes shown to be due and payable on such Tax Returns or related to such Tax Returns, the failure to make payment of which could have a Material Adverse Effect, have been or will be timely paid in full on or before the Closing Date;

(b) All such Tax Returns and the information and data contained therein have been or will be properly and accurately compiled and completed, fairly present or will fairly present the information purported to be shown therein, and reflect or will reflect all liabilities for Taxes for the periods covered by such Tax Returns;

(c) None of such Tax Returns are now under audit or examination by any foreign, federal, state or local authority and there are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessment or collection of any Tax or deficiency of any nature against the Seller, the Business or the Transferred Assets, or with respect to any such Tax Return, or any suits or other actions, proceedings, investigations or claims now pending or threatened against the Seller, the Business or the Transferred Assets with respect to any Tax, or any matters under discussion with any foreign, federal, state or local authority relating to any Tax, or any claims for any additional Tax asserted by any such authority which could have a Material Adverse Effect;

(d) All Taxes due and owing from the Seller or assessed and due and owing against the Business or the Transferred Assets on or before the Closing Date have been or will be timely paid in full on or before the Closing Date;

(e) All withholding Tax and Tax deposit requirements imposed on the Seller and applicable to the Business for any and all periods prior to and including the Closing Date have been or will be timely satisfied in full on or before the Closing Date; and

(f) The Seller has made adequate provision in the Financial Statements for the payment in full of any and all unpaid Taxes which in any way may affect the Transferred Assets or the Business for any and all periods or portions thereof ending on or before the respective dates thereof.

(a) Seller has not violated or is currently in violation of, and the consummation of the transactions contemplated hereby will not cause any violation of, any order of any Governmental Entity or any law, ordinance, regulation, order, requirement, statute, rule, permit, concession, grant, franchise, license or other governmental authorization relating or applicable to the Seller, the Business or to any of the Seller's properties, assets or operations, including without limitation, the Transferred Assets.

(b) Except as set forth in Schedule 3.08(b) of the Disclosure Schedule, there is no action, suit, claim, investigation or legal, administrative, arbitration or other proceeding, or governmental investigation or examination, or any change in any zoning or building ordinance pending or, to the Seller's knowledge, threatened against or affecting the Seller, the Business or any of the Transferred Assets, at law or in equity, before or by any Governmental Entity and no basis exists for any such action, suit, claim, investigation or proceeding.

(a) any adverse change in the financial condition, assets, liabilities (contingent or otherwise), results of operations, business or prospects of the Seller except for such changes that in the aggregate have not had a Material Adverse Effect, or any occurrence, circumstance or combination thereof that might reasonably be expected to have a Material Adverse Effect before or after the Closing Date;

(b) any damage, destruction or loss, whether or not covered by insurance, adversely affecting the Transferred Assets or the Business;

(c) any increase in the compensation or rate of compensation or commissions or Contingent Purchase Price payable or to become payable by the Seller to any Transferred Employee that is not consistent with past practice, any payment or accrual of, or commitment with respect to, any Contingent Purchase Price plan or severance arrangement that is not consistent with past practice or any change or modification to any severance arrangement;

(d) any debt, obligation or liability incurred by the Seller, any assumption, guarantee, endorsement or other responsibility by the Seller for the liability or obligation of any other Person (whether absolute, accrued, contingent or otherwise), or any engagement in any other transaction by the Seller that might have a Material Adverse Effect;

(e) any mortgage, pledge or creation of any Lien with respect to any of the Transferred Assets;

(f) any sale, assignment, transfer or other disposition or lapse of any Proprietary Rights or disclosure to any Person (other than employees of the Seller in the scope of their employment) of any Proprietary Rights material to the Business;

(g) any write up or write down in the value of any Equipment or Inventories;

(h) any cancellation or compromise of any material claims, or any waiver of any other material rights relating to the Business, or any sale, transfer or other disposition of any properties or assets, real, personal or mixed, tangible or intangible, material to the Business (other than sales of Inventory in the ordinary course of business);

(i) any change in the Seller's method of accounting for financial, Tax or other purposes;

(j) any material change in the customary methods used in operating the Business (including the pricing practices) or any material change in the sales operations; or

(k) any change in the data required to be set forth on any Exhibit or Schedule to this Agreement, including the Disclosure Schedule, or any other event or condition of any character whatsoever pertaining to the Seller that has had or reasonably may be expected to have a Material Adverse Effect.

(a) neither the Seller nor to Seller's and the Partners' knowledge any prior owner or operator of the Business or the Transferred Assets has caused or allowed the generation, use, treatment, storage, or disposal of Hazardous Materials at any site or facility owned, leased or operated by the Seller or used in the Business except in accordance with all applicable Environmental Laws or except to the extent set out in Schedule 3.10;

(b) the Seller does not own or lease any real property, improvements or related assets that form a part of the Transferred Assets or the Business and that have been subject to the release of any Hazardous Materials except to the extent set out in Schedule 3.10;

(c) the Seller has secured all Environmental Permits necessary to the conduct of its businesses and operations and the Seller is in compliance with such permits except to the extent set out in Schedule 3.10;

(d) the Seller has not received any notice, nor is it aware, of any proposal to amend, revoke or replace any Environmental Permit, or requiring the issuance of any additional Environmental Permit;

(e) the Seller has not received inquiry or notice nor does it have any reason to suspect or believe it will receive inquiry or notice of any actual or potential proceedings, claims, lawsuits or losses related to or arising under any Environmental Law;

(f) the Seller is not currently operating or required to be operating under any compliance order, schedule, decree or agreement, any consent decree, order or agreement, and/or corrective action decree, order or agreement issued or entered into under any federal, state or local statute, regulation or ordinance regarding the environment and/or health or safety in the work place;

(g) neither the Seller nor to Seller's and Partners' knowledge, any prior owner or operator of the Business has transported, arranged for the transportation of or disposed of any substance in a manner that may lead to claims against the Buyer for clean-up costs, remedial work, damages to natural resources or for personal injury claims except to the extent set out in Schedule 3.10;

(h) each of the Seller, the Transferred Assets and the Business is in compliance in all material respects with all applicable limitations, restrictions, conditions, standards, prohibitions, requirements and obligations established under Environmental Laws except to the extent set out in Schedule 3.10; and

(a) Except for (i) warranties implied by law and (ii) warranties disclosed on Schedule 3.13 of the Disclosure Schedule, the Seller has not given or made any warranties in connection with the sale or rental of goods or services, including, without limitation, warranties covering the customer's consequential damages. Except as disclosed on Schedule 3.13 of the Disclosure Schedule, the Seller is not aware of any state of facts or the occurrence of any event forming the basis of any present claim against the Seller with respect to warranties relating to products manufactured, sold or distributed by the Seller or services performed by or on behalf of the Seller except any claim that would not individually or in the aggregate exceed $7,218.00.

(b) Except as disclosed on Schedule 3.13 of the Disclosure Schedule, there is no state of facts or any event forming the basis of any present claim against the Seller not fully covered by insurance, except for deductibles and self-insurance retentions, for personal injury or property damage alleged to be caused by products shipped or services rendered by or on behalf of the Seller.

(a) There are no collective bargaining or other labor union agreements to which the Seller is a party or by which it is bound. To the best knowledge of the Seller, it has not encountered any labor union organizing activity or had any actual or threatened employee strikes, work stoppages, slowdowns or walkouts.

(b) The Seller does not contribute to or have an obligation to contribute to, and has not at any time within six years prior to the Closing Date contributed to or had an obligation to contribute to, a multi-employer plan within the meaning of Section 3(37) of ERISA.

(c) The Seller does not have any defined benefit plan or employee benefit plan. Seller does have plan(s) established pursuant to Article 401(k) of the Code.

(a) The Buyer shall not be liable or obligated under any employee benefit plan or for any other employee benefits that may have been established by the Seller for the Seller's employees prior to the Closing, and the Seller expressly acknowledges that it has sole liability for all employee benefit costs accrued as of the Closing whether or not any or all of such employees are subsequently hired by the Buyer. Without limiting the generality of the foregoing, the Seller acknowledges and agrees that the Buyer does not assume the sponsorship of, the responsibility of contributions to, or any liabilities in connection with any employee benefit plan maintained by the Seller for active employees, retirees, former employees, their beneficiaries or any other Person, including any employee pension benefit plan within the meaning of Section 3(2) of ERISA, employee welfare plan within the meaning of Section 3(1) of ERISA and any personnel policy, stock option plan, bonus plan or arrangement, incentive award plan or arrangement, vacation policy, severance pay plan, policy or agreement, deferred compensation agreement arrangement, executive compensation or supplemental income arrangement, consulting agreement, employment agreement and each other employee benefit plan, agreement, arrangement, program, practice or understanding, except for the accrued 401(k) liability shown on Schedule 6.02(a).

(b) With respect to employees who accept employment with the Buyer, the Seller will remain responsible to the extent covered under its plans for any medical expenses Seller is required to cover that are (i) actually incurred prior to the Closing Date or (ii) actually incurred with respect to any hospitalization that began prior to the Closing Date until such hospitalization ends (as required under such plans), and the Buyer will be responsible for all other medical expenses incurred on or after the Closing Date to the extent covered under its plans without the application of any waiting period for coverage generally applicable to newly hired employees. The Seller shall provide medical coverage to the Transferred Employees with respect to any pre-existing medical conditions to the extent required by applicable law. To the fullest extent permitted under its applicable policies of insurance, the Seller shall maintain health, hospitalization, life, travel and accident insurance coverage for the Transferred Employees in effect until the first day of the month next following the Closing Date. The cost of such insurance coverage from and after the Closing Date shall be borne by the Buyer. The Seller shall cooperate with the Buyer to provide continuity of such insurance coverage to such employees.

(a) operate the Business and the Transferred Assets only in the usual, regular and ordinary manner with a view to maintaining the goodwill that the Seller now enjoys and, to the extent consistent with such operation, will use all reasonable efforts to preserve intact its present business organization, keep available the services of its employees and preserve its relationship with its customers, suppliers, jobbers, distributors and other Persons having business relations with it;

(b) use all reasonable efforts to maintain the Transferred Assets in a state of repair, order and condition consistent with its usual practice in connection with the Business;

(c) maintain its books of account and records relating to the Business in the usual, regular and ordinary manner, in accordance with the Seller's usual accounting practices applied on a consistent basis;

(d) comply in all material respects with all statutes, laws, orders and regulations applicable to it and to the conduct of the Business;

(e) not sell, assign, transfer, lease or otherwise dispose of any Proprietary Rights, Equipment or any of the other Transferred Assets except for dispositions of Inventories for value in the usual and ordinary course of business;

(f) preserve and maintain all rights that it now enjoys in and to the Proprietary Rights and not sell, assign, transfer, lease or otherwise dispose of any Proprietary Rights other than to the Buyer pursuant to the terms of this Agreement;

(g) not mortgage, pledge or otherwise create a security interest in any of the Transferred Assets or permit there to be created or exist any Liens thereon that would not be released upon the transfer of the Transferred Assets to the Buyer pursuant to this Agreement;

(h) not enter into any contract, commitment or lease in relation to the Business that is out of the ordinary course of the Business or, if effective on the date hereof, would be required to be disclosed in Schedule 3.05(a) of the Disclosure Schedule;

(i) not amend or modify any of the Contracts and Other Agreements disclosed in Schedule 3.05(a) of the Disclosure Schedule or any other contract, commitment, lease or other agreement that would, if entered into on the date hereof, be required to be disclosed on any Schedule to this Agreement, including the Disclosure Schedule;

(j) not consent to the termination of any of the Contracts and Other Agreements disclosed in Schedule 3.05(a) of the Disclosure Schedule or waive any of the Seller's rights with respect thereto;

(k) not grant any increase in the compensation or rate of compensation or commissions or bonus payable to or severance obligations for any of the Transferred Employees or in any bonus plan and not transfer or otherwise change any of the terms or conditions of employment of any of the Transferred Employees;

(l) not permit any insurance policy naming it as a beneficiary or a loss payee relating to the Business or the Transferred Assets to be canceled or terminated or any of the coverage thereunder to lapse unless simultaneously with such termination or cancellation replacement policies providing substantially the same coverage are in full force and effect;

(m) pay when due all accounts payable, all payments required by any of the Contracts and Other Agreements, and all Taxes other than Taxes that are being contested in good faith and for which adequate reserves against the Transferred Assets exist and which would not result in a Lien being imposed on any of the Transferred Assets; and

(n) promptly notify the Buyer in writing if the Seller becomes aware of any change that shall have occurred or that shall have been threatened (or any development that shall have occurred or that shall have been threatened involving a prospective change) in the Transferred Assets or the Business that would reasonably be expected to have a Material Adverse Effect whether or not occurring in the ordinary course of business.

(a) The Seller and the Partners shall use their best efforts to:

(b) The Seller and the Partners shall cause all Liens on the Transferred Assets, except the Assumed Liabilities, to be released as of the Closing Date.

(a) The Seller, the Partners and the Buyer shall cooperate with each other after the Closing hereunder in clearing the title to any of the Transferred Assets to the Buyer pursuant hereto in the event that the Seller's title to any such property, as the case may be, as of the Closing Date, shall be defective, not marketable or nonassignable. In this connection, the Seller shall take all commercially reasonable action, including, but not limited to, the furnishing of documents and evidences of title and assistance in the preparation and trial of any necessary litigation, to clear title to any such property, all of which shall be at the expense of the Seller.

(b) For the greater of eight years from the Closing Date and such period as may be required by any statute, regulation or Governmental Entity or any then pending litigation, the Buyer shall permit the Seller and its representatives reasonable access to the business records and files of the Seller that are transferred to the Buyer in connection herewith in anticipation of, or preparation for, existing or future litigation or any Tax audit which the Seller or any of its affiliates is involved and which is related to the Business or the Transferred Assets, during regular business hours and upon reasonable notice at the Buyer's principal places of business or at any location where such records are stored; provided, however, that (i) any such access shall be had or done in such a manner so as to not interfere with the normal conduct of the Business, (ii) the Buyer shall not be required to provide access to any confidential record or records, the disclosure of which would violate any governmental statute or regulation or applicable confidentiality agreement with any Person, and (iii) the Buyer shall not be required to provide access to any confidential record or records, the disclosure of which would cause the Buyer or any of its Affiliates to waive its attorney-client privilege or attorney work product privilege, it being understood and agreed that the records delivered by the Seller to the Buyer shall not be deemed to be restricted from the Seller pursuant to either clause (ii) or (iii) above. The Buyer shall also provide the Seller with (i) reasonable access to each Facility for the purpose of complying with applicable Environmental Laws provided that such access does not interfere with the normal conduct of the Business and (ii) reasonable access to the accounting records and schedules necessary for the preparation of financial reports and tax returns for the year ended December 31, 2005, and for the 2006 accounting period ending on the Closing Date.

(c) For the greater of eight years from the Closing Date and such period as may be required by any statute, regulation or Governmental Entity or any then pending litigation, the Seller shall permit the Buyer and its representatives reasonable access to the general business records and files of the Seller in anticipation of, or preparation for, existing or future litigation or any Tax audit in which the Buyer or any of its affiliates is involved and which is related to the Business or the Transferred Assets, during regular business hours and upon reasonable notice at the Seller's principal places of business or at any location where such records are stored; provided, however, that (i) any such access shall be had or done in such a manner so as to not interfere with the normal conduct of the Seller's business, (ii) the Seller shall not be required to provide access to any confidential record or records, the disclosure of which would violate any governmental statute or regulation or applicable confidentiality agreement with any Person, and (iii) the Seller shall not be required to provide access to any confidential record or records, the disclosure of which would cause the Seller or any of its Affiliates to waive its attorney-client privilege or attorney work product privilege.

(d) The Seller, if requested by the Buyer, shall cause Peggy J. Dean to prepare and deliver to the Buyer and shall cooperate and assist in preparing such financial statements of the Business that the Buyer may reasonably require in order to permit Buyer to timely file a Current Report on Form 8-K with the Securities and Exchange Commission in accordance with the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder in connection with the transactions contemplated thereby and to comply with any other financial statement requirements with respect to the Business applicable to Buyer under the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as amended, and the rules and regulations thereunder. If requested, the Seller shall use its best efforts to cause Peggy J. Dean to deliver such financial statements to the Buyer within ten business days prior to the date that Buyer is required to file such financial statements with the Securities and Exchange Commission in connection with such obligations. The Seller shall cause Peggy J. Dean to provide the Buyer with access to such firm's work papers in support of the Business. The cost of such accounting work shall be borne by the Buyer, but the Seller shall use its best efforts to cause Peggy J. Dean to provide the Buyer with an estimate of such costs prior to the Closing. The Seller will also cooperate with and assist the Buyer in preparing, and, if requested, shall use reasonable efforts to cause Peggy J. Dean to cooperate, at Buyer's expense, in preparing, such other financial statements for the Business as may be specified by the Buyer.

(a) The Seller and the Partners agree that, from and after the Transfer Date, they and their affiliates shall:

(b) The Seller acknowledges that all documents and objects containing or reflecting any Proprietary Information, whether developed by the Seller or by someone else for it or any of its affiliates, will after the Closing Date become the exclusive property of the Buyer and be delivered to the Buyer.

(c) Because of the unique nature of the Proprietary Information, the Seller understands and agrees that the breach or anticipated breach of its or its affiliates obligations under this Section 7.07 will result in immediate and irreparable harm and injury to the Buyer and its affiliates, for which it will not have an adequate remedy at law, and that the Buyer and its affiliates and their successors and assigns shall be entitled to relief in equity to enjoin such breach or anticipated breach and to seek any and all other legal and equitable remedies to which they may be entitled.

(a) No preliminary or permanent injunction or other order of any court or other Governmental Entity shall be in effect nor shall there be in effect any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity that, in any such case, prevents the consummation of the transactions contemplated by this Agreement.

(b) No suit, action, claim, proceeding or investigation before any Governmental Entity shall have been commenced or threatened seeking to prevent the sale of the Transferred Assets or the Business or asserting that the sale of all or a portion of the Transferred Assets or the Business would be unlawful.

(a) All consents from third Persons shall have been received.

(b) The Seller shall have delivered to the Buyer releases of all Liens except the liens securing the Assumed Loans, on the Transferred Assets in form reasonably satisfactory to the Buyer.

(a) No preliminary or permanent injunction or other order of any Governmental Entity shall be in effect nor shall there be any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity that, in any such case, prevents the consummation of the transactions contemplated by this Agreement.

(b) No suit, action, claim, proceeding or investigation before any court or other Governmental Entity shall have been commenced or threatened seeking to prevent the sale of the Transferred Assets or the Business or asserting that the sale of all or a portion of the Transferred Assets or the Business would be unlawful.

(a) any misrepresentation (other than Section 3.10), breach of warranty or breach of any covenant or agreement made or undertaken by the Seller and/or the Partners in this Agreement or any misrepresentation in or omission from any other agreement, certificate, Schedule, Exhibit or writing delivered to the Buyer pursuant to this Agreement, including the Disclosure Schedule; or

(b) any Retained Liability.

(a) any misrepresentation, breach of warranty or breach of any covenant or agreement made or undertaken by the Buyer in this Agreement or any misrepresentation in or omission from any other agreement, certificate, Schedule, Exhibit or writing delivered to the Seller pursuant to this Agreement;

(b) any Assumed Liability;

(c) the obligations assumed by the Buyer pursuant to Section 7.09 hereof; or

(d) any losses, damages, costs and expenses incurred by any of them arising from the Buyer's operation of the Business or the Transferred Assets or the use of the Facility pursuant to the terms of the Lease after the Closing Date; provided, however, that the Buyer shall in no event be liable for or be required to provide indemnity pursuant to this Section 10.04 for the Buyer's failure to detect or remedy any Environmental Conditions or any Environmental Liabilities arising on or prior to the Closing Date.

(a) An Indemnitee shall promptly give the Indemnitor notice of any matter which an Indemnitee has determined has given or could give rise to a right of indemnification under this Agreement, stating the amount of the Loss, if known, and method of computation thereof, all with reasonable particularity, and stating with particularity the nature of such matter. Failure to provide such notice shall not affect the right of the Indemnitee to indemnification except to the extent such failure shall have resulted in liability to the Indemnitor that could have been actually avoided had such notice been provided within such required time period.

(b) The obligations and liabilities of an Indemnitor under this Article X with respect to Losses arising from claims of any third party that are subject to the indemnification provided for in this Article X ("Third Party Claims") shall be governed by and contingent upon the following additional terms and conditions: if an Indemnitee shall receive notice of any Third Party Claim, the Indemnitee shall give the Indemnitor prompt notice of such Third Party Claim and the Indemnitor may, at its option, assume and control the defense of such Third Party Claim at the Indemnitor's expense and through counsel of the Indemnitor's choice reasonably acceptable to Indemnitee. In the event the Indemnitor assumes the defense against any such Third Party Claim as provided above, the Indemnitee shall have the right to participate at its own expense in the defense of such asserted liability, shall cooperate with the Indemnitor in such defense and will attempt to make available on a reasonable basis to the Indemnitor all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitor. In the event the Indemnitor does not elect to conduct the defense against any such Third Party Claim, the Indemnitor shall pay all reasonable costs and expenses of such defense as incurred and shall cooperate with the Indemnitee (and be entitled to participate) in such defense and attempt to make available to it on a reasonable basis all such witnesses, records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitee. Except for the settlement of a Third Party Claim that involves the payment of money only and for which the Indemnitee is totally indemnified by the Indemnitor, no Third Party Claim may be settled without the written consent of the Indemnitee.

(a) mutual agreement of the Buyer and the Seller;

(b) the Buyer, if a material default shall be made in the observance or in the due and timely performance by the Seller of any agreements and covenants of the Seller herein contained, or if there shall have been a material breach by the Seller of any of the warranties and representations of the Seller herein contained, and such default or breach has not been cured or has not been waived;

(c) the Seller, if a material default shall be made by the Buyer in the observance or in the due and timely performance by the Buyer of any agreements and covenants of the Buyer herein contained, or if there shall have been a material breach by the Buyer of any of the warranties and representations of the Buyer herein contained, and such default or breach has not been cured or has not been waived; or

(d) the Buyer or the Seller (provided the terminating party has not materially breached any of its agreements, covenants or representations and warranties) if the Closing shall not have occurred on or before June 30, 2006.

14.01. "Account Receivables" shall have the meaning given such term in Section 1.01.

14.02. "Agreement" shall mean this Asset Purchase Agreement between the Seller, the Buyer and the Partners, as amended from time to time by the parties hereto.

14.03. "Assumed Liabilities" shall have the meaning given such term in Section 1.03 hereof.

14.04 "Assumed Loans" shall means the indebtedness of Seller to third parties that are specifically set out in the April 30, 2006 financial statements of the Seller and are listed in Schedule 1.03(a).

14.05. "Business" shall mean the businesses and operations of the Seller including, without limitation, pump remanufacturing, development of innovative pump solutions for capital pumps, fabrication of water flood systems and pump maintenance and repairs [Machine Tech: general machine shop services].

14.06. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Houston, Texas are authorized by law to close.

14.07. "Buyer" shall mean PMI OPERATING COMPANY, LTD., a Texas limited Partnership, or one or more of its designees.

14.08. "Cash Purchase Price" shall mean $1,645,614.00 and if the Net Assets of Seller as of the Closing Date exceeds the Net Assets as of October 31, 2005, then fifty percent (50%) of the Cash as of the Closing Date shall be added to the Cash Purchase Price. For purposes of this definition, Net Assets shall mean the book value of the Cash, Inventory, Accounts Receivable, Seller's prepaids, deposits, fixed assets and Trade Payables shall be determined under GAAP.

14.09. "Closing" shall mean the transfer by the Seller to the Buyer of the Transferred Assets, the assumption by the Buyer of the Assumed Liabilities and the transfer by the Buyer to the Seller of the other considerations set forth herein.

14.10. "Closing Date" shall mean the time and date of the Closing as specified in Article II hereof.

14.11. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or similar provisions of legislation replacing such law from time to time.

14.12. "Contracts and Other Agreements" shall mean all contracts, agreements, understandings, indentures, notes, bonds, loans, instruments, leases, mortgages, franchises, licenses, commitments or binding arrangements, whether express or implied, oral or written, to which the Seller is a party or bound or to which its properties or assets are subject.

14.13. "Damages" shall mean any and all liabilities, losses, damages, demands, assessments, claims, costs and expenses (including interest, awards, judgments, penalties, settlements, fines, costs of remediation, diminutions in value, costs and expenses incurred in connection with investigating and defending any claims or causes of action [including, without limitation, attorneys' fees and expenses and all fees and expenses of consultants and other professionals]).

14.14. "Disclosure Schedule" shall mean the disclosure schedule of even date delivered to the Buyer.

14.15. "Documents and Other Papers" shall mean and include any document, agreement, instrument, certificate, writing, notice, consent, affidavit, letter, telegram, telex, statement, file, computer disk, microfiche or other document in electronic format, schedule, exhibit or any other paper or record whatsoever.

14.16 "Employment Agreements" shall have the meaning given such term in Section 6.01 hereof.

14.17. "Environmental Laws" shall mean all federal, state, or municipal laws, rules, regulations, statutes, ordinances, or orders of any Governmental Entity relating to (a) the control of any potential pollutant or protection of the air, water, or land, (b) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation and (c) exposure to hazardous, toxic or other substances alleged to be harmful. "Environmental Laws" shall include, but not be limited to, the Clean Air Act, 42 U.S.C. Section  7401 et seq., the Clean Water Act, 33  U.S.C. Section  1251 et seq., the Resource Conservation Recovery Act ("RCRA"), 42 U.S.C. Section  6901 et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C. Section  11001, et seq., the Toxic Substances Control Act, 15 U.S.C. Section  2601 et seq., the Water Pollution Control Act, 33 U.S.C. Section  1251 et seq., the Safe Drinking Water Act, 42 U.S.C. Section  300f et seq. and the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section  9601 et seq. The term "Environmental Laws" shall also include all state, local and municipal laws, rules, regulations, statutes, ordinances and orders dealing with the same subject matter or promulgated by any governmental or quasi-governmental agency thereunder or to carry out the purposes of any federal, state, local and municipal law.

14.18. "Environmental Liabilities" shall mean any and all liabilities, responsibilities, claims, suits, losses, costs (including remedial, removal, response, abatement, clean-up, investigative, and/or monitoring costs and any other related costs and expenses), other causes of action recognized now or at any later time, damages, settlements, expenses, charges, assessments, liens, penalties, fines, pre-judgment and post-judgment interest, attorney's fees and other legal fees (a) pursuant to any agreement, order, notice, or responsibility, directive (including directives embodied in Environmental Laws), injunction, judgment, or similar documents (including settlements); or (b) pursuant to any claim by a Governmental Entity or other Person for personal injury, property damage, damage to natural resources, remediation, or payment or reimbursement of response costs incurred or expended by such Governmental Entity or Person pursuant to common law or statute.

14.19. "Environmental Losses" shall have the meaning given such term in Section 10.02 hereof.

14.20. "Environmental Permit" shall mean any permit, license, approval, registration, identification number or other authorization with respect to the Transferred Assets or the operations or businesses of the Seller under any applicable law, regulation or other requirement of the United States or any other country or of any state, municipality or other subdivision thereof relating to the control of any pollutant or protection of health or the environment, including laws, regulations or other requirements relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic materials or wastes into ambient air, surface water, groundwater or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of chemical substances, pollutants, contaminants or hazardous or toxic materials or wastes.

14.21. "Equipment" shall mean all machinery, transportation equipment, tools, equipment, furnishings and fixtures owned, leased or subject to a contract of purchase and sale, or lease commitment that is used in the Business as operated by the Seller.

14.22. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, and the related regulations, as amended from time to time.

14.23 "Facilities" shall mean the real properties that are owned or leased and are described in Exhibit B. Facilities shall include all fixtures and improvements erected or located on or affixed to the Facilities.

14.24. "Financial Statements" shall have the meaning given such term in Section 3.06 hereof.

14.25. "GAAP" shall have the meaning given such term in Section 3.06 hereof.

14.26. "General Buyer Losses" shall have the meaning given such term in Section 10.01 hereof.

14.27. "Governmental Entity" shall mean any arbitrator, court, administrative or regulatory agency, commission, department, board or bureau or body or other government or authority or instrumentality or any entity or Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

14.28. "Hazardous Materials" shall mean any (a) petroleum or petroleum products, (b) hazardous substances as defined by Section  101(14) of CERCLA and (c) any other chemical, substance or waste that is regulated by any Governmental Entity under any Environmental Law.

14.29. "Indemnitee" shall mean the Person or Persons indemnified, or entitled, or claiming to be entitled to be indemnified, pursuant to the provisions of Sections 10.01, 10.02 or 10.04 hereof, as the case may be.

14.30. "Indemnitor" shall mean the Person or Persons having the obligation to indemnify pursuant to the provisions of Sections 10.01, 10.02 or 10.04 hereof, as the case may be.

14.31. "Inventories" shall mean all inventories of finished goods, tooling inventory, work in progress, raw materials and other inventories relating to the Business, wherever situated.

14.32. "Lease Assignments" shall have the meaning given such term in Section 7.08 hereof.

14.33. "Letter of Intent" shall mean that certain letter of intent among Buyer and the Seller dated April 7, 2006.

14.34. "Lien" shall mean any lien, pledge, claim, charge, security interest or other encumbrance, option, defect or other rights of any third Person of any nature whatsoever.

14.35. "Losses" shall mean Seller Losses, General Buyer Losses or Environmental Losses, as the case may be.

14.36. "Material Adverse Effect" shall mean a single event, occurrence or fact that, together with all other events, occurrences and facts that could reasonably be expected to result in a loss to the Business, would have, or might reasonably be expected to have, a material adverse effect on the assets, business, operations, prospects or financial condition of the Transferred Assets or the Business that would result in a diminution in value of the Transferred Assets to an extent greater than three percent (3%) of the Purchase Price, or that would constitute a criminal violation of law involving a felony.

14.37. "Net Assets" shall have the meaning given such term in Section 14.08 hereof.

14.38. "Non-Competition Agreements" shall have the meaning given such term in Section 8.08 hereof.

14.39. "Partners" shall mean Joe K. Roemisch, Michael Goebel and J.M. Pevehouse.

14.40. "Partners' Notes" shall be the form of note attached as Exhibit A and in the amounts set out in Section 1.03.

14.41. "Permitted Liens" shall mean (a) Liens securing or relating to liabilities or obligations that are to be assumed by the Buyer pursuant to this Agreement, (b) Liens for current taxes and assessments not yet due, (c) inchoate mechanic and materialmen liens for construction in progress, (d) inchoate workmen, repairmen, warehousemen, customer, employee and carriers liens arising in the ordinary course of business, (e) Liens created by the Buyer and (f) Liens and imperfections of title that, singly or in the aggregate, would not have a Material Adverse Effect.

14.42. "Person" shall mean a corporation, an association, a partnership, an organization, a business, an individual or a Governmental Entity.

14.43. "Pre-Closing Obligations" shall mean all obligations of the Seller (including indemnification and other contingent obligations) relating to (i) acts, events or omissions by any Person or circumstances existing at or prior to the Closing, (ii)  any pending or threatened litigation or claims made or threatened prior to the Closing, (iii) any of the matters listed on Schedule 1.05 hereto, and (iv) contracts, agreements and other commitments that were required to be scheduled in Schedule 3.05(a) of the Disclosure Statement but were not scheduled.

14.44. "Proprietary Information" shall mean collectively (a) Proprietary Rights and (b) any and all other information and material proprietary to the Seller, owned, possessed or used by the Seller, whether or not such information is embodied in writing or other physical form, and which is not generally known to the public, that (i) relates to financial information regarding the Seller or the Business, including, without limitation, (y) business plans and (z) sales, financing, pricing and marketing procedures or methods of the Seller or (ii) relates to specific business matters concerning the Seller, including, without limitation, the identity of or other information regarding sales personnel or customers of the Seller.

14.45. "Proprietary Rights" means all patents, inventions, shop rights, know how, trade secrets, designs, plans, manuals, computer software, specifications, confidentiality agreements, confidential information and other proprietary technology and similar information; all registered and unregistered trademarks, service marks, logos, partnership names, trade names and all other trademark rights; all registered and unregistered copyrights; and all registrations for, and applications for registration of, any of the foregoing, that are used in the conduct of the Business.

14.46. "Purchase Price" shall have the meaning given such term in Section 1.03 hereof.

14.47. "Retained Liabilities" shall have the meaning given such term in Section 1.05 hereof.

14.48. "Seller" shall mean Production Pumps Systems, L.P., a Texas limited partnership.

14.49. "Subsidiary" shall mean, as to a Person, any corporation, Partnership, joint venture, association or other entity or organization in which such Person owns (directly or indirectly) any equity or other similar Partnership interest.

14.50. "Tax Consideration" shall have the meaning given such term in Section 1.08(a) hereof.

14.51. "Tax Returns" shall mean all returns, declarations, reports, statements and other documents of, relating to, or required to be filed in respect of, any and all Taxes, and the term "Tax Return" means any one of the foregoing Tax Returns.

14.52. "Taxes" shall mean all federal, state, local, foreign and other taxes, charges, fees, duties, levies, imposts, customs or other assessments, including, without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, profit share, license, lease, service, service use, value added, withholding, payroll, employment, excise, estimated, severance, stamp, occupation, premium, property, windfall profits, or other taxes, fees, assessments, customs, duties, levies, imposts, or charges of any kind whatsoever, together with any interests, penalties, additions to tax, fines or other additional amounts imposed thereon or related thereto, and the term "Tax" means any one of the foregoing Taxes.

14.53. "Third Party Claims" shall have the meaning given such term in Section 10.05(b) hereof.

14.54. "Total Liabilities" shall mean the amount of all liabilities shown on the Closing Date balance sheet of Seller.

14.55. "Trade Payables" shall mean those obligations of the Seller relating to the provision of goods and services to the Seller for the conduct of the Business in the ordinary course of business of the Seller that relate to the Transferred Assets and that are classified as Trade Payables in accordance with GAAP and are shown in the April 30, 2006 Financial Statements of the Seller.

14.56. "Transferred Assets" shall have the meaning given such term in Section 1.01 hereof.

14.57. "Transferred Employees" shall have the meaning given such term in Section 6.01 hereof.

15.01. Notices. All notices, requests, consents, directions and other instruments and communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person, by courier, by overnight delivery service with proof of delivery or by prepaid registered or certified United States first-class mail, return receipt requested, addressed to the respective party at the address set forth below, or if sent by facsimile or other similar form of communication (with receipt confirmed) to the respective party at the facsimile number set forth below:

If to the Buyer, to: PMI OPERATING COMPANY, LTD.

15.02. Bulk Transfer Laws. The Seller agrees with the Buyer that the bulk sales provisions of the Uniform Commercial Code as in effect in Texas and the provisions of any similar statute of any other state or jurisdiction regulating bulk sales or transfers do not apply to this Agreement.

15.03. Assignment. Prior to the Closing Date, no party to this Agreement may sell, transfer, assign, pledge or hypothecate its rights, interests or obligations under this Agreement, except that the Buyer may assign its rights to any affiliate of the Buyer. Subsequent to the Closing Date, the parties may, from time to time, without the consent of the other parties hereto assign any or all of their respective rights under this Agreement. Notwithstanding the foregoing, no assignment of this Agreement or any of the rights, interests or obligations hereof by the Buyer shall relieve the Buyer of its obligations under this Agreement and, upon any such assignment occurring prior to the Closing, the representations, warranties, covenants and agreements contained in this Agreement shall be deemed to have been made by the Buyer's assignee as well as by the Buyer. The Buyer and the Seller agree that in connection with any sale or other disposition or series of sales or dispositions of all or substantially all of such party's assets to an affiliate of such party or any merger or liquidation of such party, the acquiring Person or other recipient of substantially all of such party's assets, as the case may be, shall assume the obligations of such party under this Agreement but the Buyer or Seller, as applicable, shall not be released from the terms, conditions and provisions of this Agreement. Such obligation shall apply to successive sales, dispositions, mergers and liquidations.

15.04. Successors. This Agreement shall inure to the benefit of, be binding upon and be enforceable by the parties hereto and their respective successors and assigns.

15.05. Entire Agreement. This Agreement and the Exhibits and Schedules hereto and the Disclosure Schedule constitute the entire agreement and understanding between the parties relating to the subject matter hereof and thereof and supersedes all prior representations, endorsements, premises, agreements, memoranda communications, negotiations, discussions, understandings and arrangements, whether oral, written or inferred, between the parties relating to the subject matter hereof. This Agreement may not be modified, amended, rescinded, canceled, altered or supplemented, in whole or in part, except upon the execution and delivery of a written instrument executed by a duly authorized representative of each of the parties hereto.

15.06. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas without giving effect to choice of law principles. The parties submit to the non-exclusive jurisdiction of the courts of the State of Texas.

15.07. Waiver. The waiver of any breach of any term or condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition.

15.08. Severability. Any provision hereof that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

15.09. No Third Party Beneficiaries. Any agreement contained, expressed or implied in this Agreement shall be only for the benefit of the parties hereto and their respective legal representatives, successors and assigns, and such agreements shall not inure to the benefit of the obligees of any indebtedness of any party hereto, it being the intention of the parties hereto that no Person shall be deemed a third party beneficiary of this Agreement, except to the extent a third party is expressly given rights herein.

15.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

15.11. Headings. Each statement set forth in the Disclosure Schedule with respect to a particular section herein shall be deemed made solely with respect to such section and not with respect to any other section hereof unless specifically set forth in the Disclosure Schedule as also being made with respect to such other section. The headings of the Articles and sections of this Agreement have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or provisions hereof or affect in any way the meaning or interpretation of this Agreement.

15.12. Negotiated Transaction. The provisions of this Agreement were negotiated by the parties hereto, and this Agreement shall be deemed to have been drafted by all of the parties hereto.