EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
     This Stock Purchase Agreement (“Agreement”) is made effective as of
October 17, 2006, between Allis-Chalmers Production Services, Inc., a Texas
corporation (“Buyer”) and Randolph J. Hebert, an individual resident in
Lafayette, Louisiana (“Seller”).
RECITALS
     Seller desires to sell, and Buyer desires to purchase one-hundred percent
(100%) of the issued and outstanding shares (“Shares”) of capital stock of
Petro-Rentals, Incorporated, a Louisiana corporation (“Petro”) and one hundred
percent (100%) of the membership interests (“Interests”) of Petro Rentals of
Texas L.L.C., a Texas limited liability company (“Petro LLC”) (Petro and Petro
LLC are collectively hereinafter referred to as the “Company”), for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
     The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
     For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
“AC Stock”—the common stock, $.01 par value of Allis-Chalmers Energy Inc., the
parent of Buyer.
“Acquired Companies”—the Company and its Subsidiaries, collectively.
“Allis-Chalmers”—Allis-Chalmers Energy Inc., a Delaware corporation and parent
of Buyer.
“Applicable Contract”—any Contract:
(a) under which any Acquird Company has or may acquire any rights;
(b) under which any Acquired Company has or may become subject to any obligation
or liability; or
(c) by which any Acquired Company or any of the assets owned or used by it is or
may become bound.
“Balance Sheet”—as defined in Section 3.4.

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“Best Efforts”—the efforts that a prudent Person desirous of achieving a result
would use in similar circumstances to ensure that such result is achieved as
expeditiously as possible.
“Breach”—a “Breach” of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been any inaccuracy
in or breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision.
“Buyer”—as defined in the first paragraph of this Agreement.
“Closing”—as defined in Section 2.3.
“Closing Date”—the date and time as of which the Closing actually takes place.
“Closing Statement”—as define in Section 2.4(b)(i).
“Company”—as defined in the Recitals of this Agreement.
“Consent”—any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
“Contemplated Transactions”—all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the execution, delivery, and performance of the Employment Agreement,
Non-Competition Agreement and the Seller’s Release;
(c) the performance by Buyer and Seller of their respective covenants and
obligations under this Agreement; and
(d) Buyer’s acquisition and ownership of the Shares and exercise of control over
the Acquired Companies.
“Contract”—any agreement, contract, obligation, promise, or undertaking (whether
written or oral and whether express or implied) that is legally binding.
“Damages”—as defined in Section 5.2.
“Disclosure Letter”—the disclosure letter delivered by Seller to Buyer
concurrently with the execution and delivery of this Agreement.

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“Encumbrance”—any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
“Environment”—soil, land surface or subsurface strata, surface waters (including
navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands),
groundwaters, drinking water supply, stream sediments, ambient air (including
indoor air), plant and animal life, and any other environmental medium or
natural resource.
“Environmental, Health, and Safety Liabilities”—any cost, damages, expense,
liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or administrative
proceedings, damages, losses, claims, demands and response, investigative,
remedial, or inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational Safety and
Health Law for cleanup costs or corrective action, including any investigation,
cleanup, removal, containment, or other remediation or response actions
(“Cleanup”) required by applicable Environmental Law or Occupational Safety and
Health Law (whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms “removal,” “remedial,” and “response action,” include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
(“CERCLA”).

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“Environmental Law”—any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of intended or
actual releases of pollutants or hazardous substances or materials, violations
of discharge limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants or
hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so that
they do not present unreasonable risks to human health or the Environment when
used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the threat of
release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
“ERISA”—the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
“Facilities”—any real property, leaseholds, or other interests currently or
formerly owned or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by any Acquired Company.
“GAAP”—generally accepted United States accounting principles, applied on a
basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
“Governmental Authorization”—any approval, consent, license, permit, waiver, or
other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.

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“Governmental Body”—any:
(a) nation, state, county, city, town, village, district, or other jurisdiction
of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or
other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of any
nature.
“Hazardous Activity”—the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
“Hazardous Materials”—any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
“HSR Act”—the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
“Intellectual Property Assets”—as defined in Section 3.22.
“Interests”—as defined in the Recitals of this Agreement.
“Interim Balance Sheet”—as defined in Section 3.4.
“IRC”—the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.

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“IRS”—the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
“Knowledge”—an individual will be deemed to have “Knowledge” of a particular
fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual would be expected to have knowledge of such fact or
matter in the course of conducting such person’s affairs in a reasonable
fashion.
A Person (other than an individual) will be deemed to have “Knowledge” of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, member, manager, partner, executor, or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
“Lease Agreement”—as defined in Section 2.4(a)(vii).
“Legal Requirement”—any federal, state, local, municipal, or other
administrative order, constitution, law, ordinance, principle of common law,
regulation or statute.
“Non-Competition Agreement”—as defined in Section 2.4(a)(vi).
“Occupational Safety and Health Law”—any Legal Requirement designed to provide
safe and healthful working conditions and to reduce occupational safety and
health hazards.
“Order”—any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
“Ordinary Course of Business”—an action taken by a Person will be deemed to have
been taken in the “Ordinary Course of Business” only if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the board of directors of
such Person (or by any Person or group of Persons exercising similar authority);
and
(c) such action is similar in nature and magnitude to actions customarily taken,
without specific authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are similar in size and in
the same line of business as such Person.

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“Organizational Documents”—(a) the articles or certificate of incorporation and
the bylaws of a corporation or the articles of organization, charter,
regulations or operating agreement of a limited liability company; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and
(e) any amendment to any of the foregoing.
“Person”—any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
“Plan”—as defined in Section 3.13.
“Proceeding”—any action, arbitration, audit, hearing, investigation, litigation,
or suit (whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.
“Related Person”—with respect to a particular individual:
(a) each other member of such individual’s Family;
(b) any Person that is directly or indirectly controlled by such individual or
one or more members of such individual’s Family;
(c) any Person in which such individual or members of such individual’s Family
hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more members of
such individual’s Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);

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(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a general
partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (1) the “Family” of an individual includes
(i) the individual, (ii) the individual’s spouse and former spouses, (iii) any
other natural person who is related to the individual or the individual’s spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (2) “Material Interest” means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
“Release”—any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
“Representative”—with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
“Securities Act”—the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
“Seller”—as defined in the first paragraph of this Agreement.
“Seller’s Release”—as defined in Section 2.4.
“Shares”—as defined in the Recitals of this Agreement.
“Subsidiary”—with respect to any Person (the “Owner”), any corporation or other
Person of which securities or other interests having the power to elect a
majority of that corporation’s or other Person’s board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, “Subsidiary” means a Subsidiary
of the Company.
“Tax Return”—any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection

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with the determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.
“Threat of Release”—a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
“Threatened”—a claim, Proceeding, dispute, action, or other matter will be
deemed to have been “Threatened” if any written demand or written statement has
been made or any notice has been given, or if any other event has occurred or
any other circumstances exist, that would lead a prudent Person to conclude that
such a claim, Proceeding, dispute, action, or other matter is likely to be
asserted, commenced, taken, or otherwise pursued in the future.
2. SALE AND TRANSFER OF SHARES AND INTERESTS; CLOSING
     2.1 SHARES
     Subject to the terms and conditions of this Agreement, at the Closing, but
effective as of October 1, 2006, Seller will sell and transfer the Shares and
Interests to Buyer, and Buyer will purchase the Shares and Interests from
Seller.
     2.2 PURCHASE PRICE
     The purchase price (the “Purchase Price”) for the Shares and Interests will
be (i) $20,196,193.50 in immediately available funds, (ii) a total of 246,761
shares of AC Stock, (iii) the Buyer will pay the debt of the Company to Regions
Bank at Closing in immediately available funds in an amount not to exceed
$9,587,617.40, and (iv) Buyer will assume the obligations of the Company to
Stewart & Stevenson on the coil tubing unit currently on order.
     2.3 CLOSING
     The purchase and sale (the “Closing”) provided for in this Agreement will
take place at the offices of Buyer at 5075 Westheimer, Suite 890, Houston, Texas
77056 at 10:00 a.m. (local time) on October 17, 2006, or at such other time and
place as the parties may agree.
     2.4 CLOSING OBLIGATIONS
     At the Closing:
     (a) Seller will deliver to Buyer:
     (i) a certificate representing the Shares, duly endorsed (or accompanied by
duly executed stock powers), for transfer to Buyer;

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     (ii) release in the form of Exhibit 2.4(a)(ii) executed by Seller
(“Seller’s Release”);
     (iii) employment agreement in the form of Exhibit 2.4(a)(iii), executed by
Seller (“Employment Agreement”);
     (iv) a certificate executed by Seller representing and warranting to Buyer
that each of Seller’s representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement;
     (v) any evidence satisfactory to Buyer from the Company’s lenders and any
other lenders that all long term and secured debt of the Acquired Companies has
been paid in full, that all the assets of the Acquired Companies are free and
clear from all;
     (vi) non-competition agreement in the form of Exhibit 2.4(a)(vi) executed
by Seller (“Non-Competition Agreement”);
     (vii) an opinion of the Onebane Law Firm in the form of
Exhibit 2.4(a)(viii); and
     (viii) an Act of Sale evidencing the sale of the Interests to Buyer.
     (b) Buyer will deliver to Seller:
     (i) the amount of $20,196,193.50 by wire transfer to the account specified
by Seller;
     (ii) evidence of payment to Regions Bank as of the date hereof of the
Acquired Company’s line of credit not to exceed $9,587,617.40;
     (iii) a total of 246,761 shares of common stock, $.01 par value of AC
Stock. At Closing, Buyer will provide Seller with copies of the Allis-Chalmers’
instruction letter to its transfer agent in connection with the issuance of AC
Stock. The AC Stock issued to Seller will be “restricted securities” as defined
under the Securities Act;
     (iv) a certificate executed by Buyer and Allis-Chalmers to the effect that,
except as otherwise stated in such certificate, each of Buyer’s and
Allis-Chalmers’ representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement;
     (v) the Employment Agreement, executed by Buyer; and
     (vi) the Non-Competition Agreement.

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3. REPRESENTATIONS AND WARRANTIES OF SELLER
     Seller represents and warrants to Buyer as follows:
     3.1 ORGANIZATION AND GOOD STANDING
     (a) Part 3.1 of the Disclosure Letter contains a complete and accurate list
for each Acquired Company of its name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder, the number of shares held by each,
each member and the amount of membership interests held by each). Petro is a
corporation duly organized, validly existing, and in good standing under the
laws of Louisiana, and Petro LLC is a limited liability company duly organized,
validly existing, and in good standing under the laws of the State of Texas, and
both Petro and Petro LLC have full corporate power and authority to conduct
their business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its obligations under
Applicable Contracts.
     (b) Seller has delivered to Buyer copies of the Organizational Documents of
each Acquired Company, as currently in effect.
     3.2 AUTHORITY; NO CONFLICT
     (a) This Agreement constitutes the legal, valid, and binding obligation of
Seller, enforceable against Seller in accordance with its terms. Upon the
execution and delivery by Seller of the Employment Agreement, the
Non-Competition Agreement and the Seller’s Release (collectively, the “Seller’s
Closing Documents”), the Seller’s Closing Documents will constitute the legal,
valid, and binding obligations of Seller, enforceable against Seller in
accordance with their respective terms. Seller has the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this Agreement and
the Seller’s Closing Documents and to perform his obligations under this
Agreement and the Seller’s Closing Documents.
     (b) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
     (i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Acquired Companies, or (B) any
resolution adopted by the board of directors, the stockholders, managers or
members of any Acquired Company;
     (ii) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which any Acquired Company or Seller, or any of the
assets owned or used by any Acquired Company, may be subject;

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     (iii) contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by any Acquired Company or that otherwise relates to the business
of, or any of the assets owned or used by, any Acquired Company;
     (iv) cause Buyer or any Acquired Company to become subject to, or to become
liable for the payment of, any Tax;
     (v) cause any of the assets owned by any Acquired Company to be reassessed
or revalued by any taxing authority or other Governmental Body;
     (vi) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
     (vii) result in the imposition or creation of any Encumbrance upon or with
respect to any of the assets owned or used by any Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, neither Seller or any
Acquired Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
     (c) Seller is an “accredited investor” as such term is defined in Rule
501(a) under the Securities Act. Seller is acquiring the shares of Buyer Stock
for his own account and not with a view to the distribution thereof within the
meaning of Section 2(11) of the Securities Act. Seller further understands that
the shares of Buyer Stock will not be registered under the Securities Act, or
any state securities laws, and that no resales of such shares may be effected
unless such resale is registered under the Securities Act or an exemption from
registration is available.
     3.3 CAPITALIZATION
     (a) The authorized equity securities of Petro consist of 300 shares of
common stock, without par value per share, of which 300 shares are issued and
outstanding and constitute the Shares. Seller is and will be on the Closing Date
the record and beneficial owner and holder of the Shares, free and clear of all
Encumbrances.
     (b) The authorized membership interests of Petro LLC all of which are owned
of record and beneficially by Seller as of the date hereof and on the Closing
Date, and all of the outstanding equity securities and other securities of each
Acquired Company are owned of record and beneficially by Seller free and clear
of all Encumbrances. No legend or other reference to any purported Encumbrance
appears upon any certificate representing equity securities of any Acquired
Company. All of the outstanding equity securities of each Acquired Company have
been duly authorized and validly issued and are fully paid and nonassessable.
There are no Contracts relating

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to the issuance, sale, or transfer of any equity securities or other securities
of any Acquired Company. None of the outstanding equity securities or other
securities of any Acquired Company was issued in violation of the Securities Act
or any other Legal Requirement. No Acquired Company owns, or has any Contract to
acquire, any equity securities or other securities of any Person (other than
Acquired Companies) or any direct or indirect equity or ownership interest in
any other business.
     3.4 FINANCIAL STATEMENTS
     Seller has delivered to Buyer:
          (a) audited consolidated balance sheets of the Acquired Companies as
at December 31 in each of the years 2002 through 2004, and the related
consolidated statements of income, changes in stockholders’ equity, and cash
flow for each of the fiscal years then ended, together with the report thereon
of Broussard, Poché, Lewis & Breaux, L.L.P., independent certified public
accountants;
          (b) audited consolidated balance sheet of the Acquired Companies as at
December 31, 2005 (including the notes thereto, the “Balance Sheet”), and the
related consolidated statements of income, changes in stockholders’ equity, and
cash flow for the fiscal year then ended, together with the report thereon of
Broussard, Poché, Lewis & Breaux, L.L.P., independent certified public
accountants; and
          (c) an unaudited consolidated balance sheet of the Acquired Companies
as at September 30, 2006 (the “Interim Balance Sheet”) and the related unaudited
consolidated statements of income, changes in stockholders’ equity, and cash
flow for the eight (8) months then ended, including in each case the notes
thereto. Such financial statements and notes fairly present the financial
condition and the results of operations, changes in stockholders’ equity, and
cash flow of the Acquired Companies as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP,
subject, in the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse); the financial statements referred to in this
Section 3.4 reflect the consistent application of such accounting principles
throughout the periods involved. No financial statements of any Person other
than the Acquired Companies are required by GAAP to be included in the
consolidated financial statements of the Company.
     3.5 BOOKS AND RECORDS
     The books of account, minute books, stock record books, and other records
of the Acquired Companies, all of which have been made available to Buyer, are
complete and correct and have been maintained in accordance with business
practices that are customarily employed by closely held non-public companies in
the Company’s industry, including the maintenance of an adequate system of
internal controls. The minute books of the Acquired Companies contain accurate
records of all meetings held of, and corporate action taken by, the
stockholders, the members, the managers and the Boards of Directors of the
Acquired Companies. At the Closing, all of those books and records will be in
the possession of the Acquired Companies.

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     3.6 TITLE TO PROPERTIES; ENCUMBRANCES
     Part 3.6 of the Disclosure Letter contains a complete and accurate list of
all real property, leaseholds, or other interests therein owned by any Acquired
Company. Seller has delivered or made available to Buyer copies of the deeds and
other instruments (as recorded) by which the Acquired Companies acquired such
real property and interests, and copies of all title insurance policies,
opinions, abstracts, and surveys in the possession of Seller or the Acquired
Companies and relating to such property or interests. The Acquired Companies own
(with good and marketable title in the case of real property, subject only to
the matters permitted by the following sentence) all the properties and assets
(whether real, personal, or mixed and whether tangible or intangible) that they
purport to own located in the facilities owned or operated by the Acquired
Companies or reflected as owned in the books and records of the Acquired
Companies, including all of the properties and assets reflected in the Balance
Sheet and the Interim Balance Sheet (except for assets held under capitalized
leases disclosed or not required to be disclosed in Part 3.6 of the Disclosure
Letter and personal property sold since the date of the Balance Sheet and the
Interim Balance Sheet, as the case may be, in the Ordinary Course of Business),
and all of the properties and assets purchased or otherwise acquired by the
Acquired Companies since the date of the Balance Sheet (except for personal
property acquired and sold since the date of the Balance Sheet in the Ordinary
Course of Business and consistent with past practice). All material properties
and assets reflected in the Balance Sheet and the Interim Balance Sheet are free
and clear of all Encumbrances and are not, in the case of real property, subject
to any rights of way, building use restrictions, exceptions, variances, utility
easements, reservations, or limitations of any nature except, with respect to
all such properties and assets, (a) liens for current taxes not yet due, and
(b) with respect to real property, (i) minor imperfections of title, if any,
none of which is substantial in amount, materially detracts from the value or
impairs the use of the property subject thereto, or impairs the operations of
any Acquired Company, (ii) utility easements serving the property, and
(iii) zoning laws and other land use restrictions that do not impair the present
or anticipated use of the property subject thereto. All buildings, plants, and
structures owned by the Acquired Companies lie wholly within the boundaries of
the real property owned by the Acquired Companies and to Seller’s Knowledge do
not encroach upon the property of, or otherwise conflict with the property
rights of, any other Person.
     3.7 CONDITION AND SUFFICIENCY OF ASSETS
     To the Seller’s Knowledge the plants, structures and equipment of the
Acquired Companies is structurally sound, are in good operating condition and
repair, and are adequate for the uses to which they are being put, and none of
such plants, structures and equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of the Acquired
Companies are sufficient for the continued conduct of the Acquired Companies’
businesses after the Closing in substantially the same manner as conducted prior
to the Closing.

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     3.8 ACCOUNTS RECEIVABLE
     All accounts receivable of the Acquired Companies that are reflected on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date (collectively, the “Accounts
Receivable”) represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the respective reserves shown
on the Balance Sheet or the Interim Balance Sheet or on the accounting records
of the Acquired Companies as of the Closing Date (which reserves are adequate
and calculated consistent with past practice and, in the case of the reserve, as
of the Closing Date, will not represent a greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the Interim
Balance Sheet represented of the Accounts Receivable reflected therein and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within ninety days after the day on which it first becomes due and payable.
There is no contest, claim, or right of set-off, other than returns in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Part 3.8 of the Disclosure Letter contains a complete and accurate list of all
Accounts Receivable as of the date of the Interim Balance Sheet, which list sets
forth the aging of such Accounts Receivable. In the event that Buyer makes a
claim for indemnification under Section 5.2 with respect to an account
receivable for which indemnity is paid in full by Buyer, then Buyer will assign
all rights to such account receivable to Seller.
     3.9 INVENTORY
     All inventory of the Acquired Companies, whether or not reflected in the
Balance Sheet or the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, all of which have been written off or
written down to net realizable value in the Balance Sheet or the Interim Balance
Sheet or on the accounting records of the Acquired Companies as of the Closing
Date, as the case may be. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
     3.10 NO UNDISCLOSED LIABILITIES
     Except as set forth in Part 3.10 of the Disclosure Letter, the Acquired
Companies have no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the Interim Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.

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     3.11 TAXES
     (a) The Acquired Companies have filed or caused to be filed (on a timely
basis since 1996) all Tax Returns that are or were required to be filed by or
with respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. Seller has delivered to
Buyer copies of, and Part 3.11 of the Disclosure Letter contains a complete and
accurate list of, all such Tax Returns relating to income or franchise taxes
filed since 2002. The Acquired Companies have paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by Seller or any
Acquired Company, except such Taxes, if any, as are listed in Part 3.11 of the
Disclosure Letter and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the Balance
Sheet and the Interim Balance Sheet.
     (b) The United States federal and state income Tax Returns of each Acquired
Company subject to such Taxes have been audited by the IRS or relevant state tax
authorities or are closed by the applicable statute of limitations for all
taxable years through 2001. Part 3.11 of the Disclosure Letter contains a
complete and accurate list of all audits of all such Tax Returns, including a
reasonably detailed description of the nature and outcome of each audit. All
deficiencies proposed as a result of such audits have been paid, reserved
against, settled, or, as described in Part 3.11 of the Disclosure Letter, are
being contested in good faith by appropriate proceedings. Part 3.11 of the
Disclosure Letter describes all adjustments to the United States federal income
Tax Returns filed by any Acquired Company or any group of corporations including
any Acquired Company for all taxable years since 2002, and the resulting
deficiencies proposed by the IRS. Except as described in Part 3.11 of the
Disclosure Letter, no Seller or Acquired Company has given or been requested to
give waivers or extensions (or is or would be subject to a waiver or extension
given by any other Person) of any statute of limitations relating to the payment
of Taxes of any Acquired Company or for which any Acquired Company may be
liable.
     (c) The charges, accruals, and reserves with respect to Taxes on the
respective books of each Acquired Company are adequate (determined in accordance
with GAAP) and are at least equal to that Acquired Company’s liability for
Taxes. There exists no proposed tax assessment against any Acquired Company
except as disclosed in the Balance Sheet or in Part 3.11 of the Disclosure
Letter. No consent to the application of Section 341(f)(2) of the IRC has been
filed with respect to any property or assets held, acquired, or to be acquired
by any Acquired Company. All Taxes that any Acquired Company is or was required
by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Body or other Person.
     (d) All Tax Returns filed by (or that include on a consolidated basis) any
Acquired Company are true, correct, and complete. There is no tax sharing
agreement that will require any payment by any Acquired Company after the date
of this Agreement. No Acquired Company is, or within the five-year period
preceding the Closing Date has been, an “S” corporation. During the consistency
period (as defined in Section 338(h)(4) of the IRC with respect to the sale of
the Shares to Buyer), no Acquired Company or target affiliate (as defined in
Section 338(h)(6) of the IRC with respect to the sale of the Shares to Buyer)
has sold or will sell any property or assets to Buyer or to

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any member of the affiliated group (as defined in Section 338(h)(5) of the IRC)
that includes Buyer. Part 3.11 of the Disclosure Letter lists all such target
affiliates.
     (e) Part 3.11(e) of the Disclosure Letter lists all the states and
localities with respect to which the Company is required to file any corporate
income or franchise tax returns. The Company has properly filed Tax Returns with
and paid and discharged any liabilities for Taxes in any state or localities in
which it is subject to Tax.
     (f) Seller and the Company have disclosed on their federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
     (g) The disallowance of a deduction under Code Section 162(m) for employee
remuneration will not apply to any amount paid or payable by Seller under any
contractual arrangement currently in effect.
     3.12 NO MATERIAL ADVERSE CHANGE
     Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of any Acquired Company, and no event has occurred or circumstance
exists that may result in such a material adverse change.
     3.13 EMPLOYEE BENEFITS
          The Seller has delivered to the Buyer a true, correct and complete
list (which is set forth on Part 3.13 of the Disclosure Letter) of all employee
benefit plans of the Company, including all written employment agreements and
all other agreements or arrangements that could obligate the Company or any
affiliate of the Company to make any severance, change-of-control or other,
similar payments and all deferred compensation agreements, together with true,
correct and complete copies of such plans, agreements and any trusts related
thereto, and classifications of employees covered thereby. Except for the
employee benefit plans, if any, described on Part 3.13 of the Disclosure Letter,
the Company does not sponsor, maintain or contribute to any plan program, fund
or arrangement that constitutes an “employee pension benefit plan,” and the
Company does not have any obligation to contribute to or accrue or pay any
benefits under any deferred compensation or retirement funding arrangement on
behalf of any employee or employees (such as, for example, and without
limitation, any individual retirement account or annuity, any “excess benefit
plan” (within the meaning of Section 3(36) of the Employee Retirement Income
Security Act of 1974, as amended “ERISA”) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
“employee pension benefit plan” shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan, nor is the Company required to
contribute to any retirement plan pursuant to the provisions of any collective
bargaining agreement establishing the terms and conditions of employment of any
of the Company’s employees, other than the plans set forth on Part 3.13 of the
Disclosure Letter. The Company is not now, nor as a result of its past
activities can it reasonably be expected to become, liable to the Pension
Benefit Guaranty Corporation (other than for premium payments) or to any multi
employer employee pension benefit plan under the

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provisions of Title IV of ERISA. All employee benefit plans listed in Part 3.13
of the Disclosure Letter and the administration thereof are in substantial
compliance with their terms and all applicable provisions of ERISA and the
regulations issued thereunder, as well as with all other applicable federal,
state and local statutes, ordinances and regulations. All accrued contribution
obligations of the Company or any subsidiary with respect to any plan listed in
Part 3.13 of the Disclosure Letter have either been fulfilled in their entirety
or are fully reflected on the Unaudited Balance Sheets of the Company.
          Compliance with the Code and ERISA . All employee benefit plans listed
in Part 3.13 of the Disclosure Letter that are intended to qualify under Section
401(a) of the Code (the “Qualified Plans”) are, and have been so qualified and
have been determined by the Internal Revenue Service to be so qualified, and
copies of such determination letters are included as part of Part 3.13 of the
Disclosure Letter. To the Seller’s Knowledge, except as disclosed in Part 3.13
of the Disclosure Letter, all reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports, audits or
Returns) have been timely filed or distributed, and copies thereof are included
as part of Part 3.13 of the Disclosure Letter. No plan listed in Part 3.13 of
the Disclosure Letter, or the Company has engaged in any transaction prohibited
under the provisions of Section 4975 of the Code or Section 406 of ERISA. To the
Sellers’ Knowledge, no employee benefit plan listed in Part 3.13 of the
Disclosure Letter has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(1) of ERISA; and the Company has not
incurred (i) any liability for excise tax or penalty payable to the Internal
Revenue Service, or (ii) any liability to the Pension Benefit Guaranty
Corporation (other than for premium payments). In addition:
     (i) there have been no terminations or discontinuance of contributions to
any Qualified Plan without notice to and approval by the Internal Revenue
Service;
     (ii) no plan listed in Part 3.13 of the Disclosure Letter that is subject
to the provisions of Title IV of ERISA has been terminated;
     (iii) there have been no “reportable events” (as that phrase is defined in
Section 4043 of ERISA) with respect to employee benefit plans listed in
Part 3.13 to the Disclosure Letter;
     (v) the Company has not incurred liability under Section 4062 of ERISA; and
     (vi) no circumstances exist pursuant to which the Company could reasonably
be expected to have any direct or indirect liability whatsoever (including, but
not limited to, any liability to any multi employer plan or the Pension Benefit
Guaranty Corporation under Title IV of ERISA or to the Internal Revenue Service
for any excise tax or penalty, or being subject to any statutory Lien to secure
payment of any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that is, or at
any time was, a member of a “controlled group” (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company (“Controlled
Group”).

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The transactions contemplated by this Agreement together with any amounts paid
or payable by the Company or any member of the Controlled Group have not
resulted in and will not result in payments to “disqualified individuals” (as
defined in Section 280G(c) of the Code) of the Company or any member of the
Controlled Group which, individually or in the aggregate will constitute “excess
parachute payments” (as defined in Section 280G(b) of the Code) resulting in the
imposition of the excise tax under Section 4999 of the Code or the disallowance
of deductions under Section 280G of the Code.

  3.14   COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS     (a)
  Except as set forth in Part 3.14 of the Disclosure Letter:

     (i) each Acquired Company is, and at all times since January 1, 2005 has
been, in full compliance with each Legal Requirement that is or was applicable
to it or to the conduct or operation of its business or the ownership or use of
any of its assets, except where the failure to be in compliance would not have a
material adverse effect on the operations or assets of the Company;
     (ii) no event has occurred or circumstance exists that (with or without
notice or lapse of time) (A) may constitute or result in a violation by any
Acquired Company of, or a failure on the part of any Acquired Company to comply
with, any Legal Requirement, or (B) may give rise to any obligation on the part
of any Acquired Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature; and
     (iii) no Acquired Company has received, at any time since January 1, 2005,
any written notice or other written communication from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on the part of any Acquired
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
     (b) Part 3.14 of the Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by any Acquired Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, any Acquired Company. Each Governmental Authorization listed or required to
be listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect. Except as set forth in Part 3.14 of the Disclosure Letter:
     (i) each Acquired Company is, and at all times since January 1, 2005, has
been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Part 3.14
of the Disclosure Letter, except where the failure to be in compliance would not
have a material adverse effect on the operations or assets of the Company;

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     (ii) to Seller’s Knowledge no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter;
     (iii) no Acquired Company has received, at any time since January, 2005,
any written notice or other written communication from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
     (iv) all applications required to have been filed for the renewal of the
Governmental Authorizations listed or required to be listed in Part 3.14 of the
Disclosure Letter have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made with
respect to such Governmental Authorizations have been duly made on a timely
basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure Letter
collectively constitute all of the Governmental Authorizations necessary to
permit the Acquired Companies to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.
     3.15 LEGAL PROCEEDINGS; ORDERS
     (a) Except as set forth in Part 3.15 of the Disclosure Letter, there is no
pending Proceeding:
     (i) that has been commenced by or against any Acquired Company or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, any Acquired Company; or
     (ii) that challenges, or that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
To the Knowledge of Seller and the Acquired Companies, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding. Seller has delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in
Part 3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the
Disclosure Letter will not have a

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material adverse effect on the business, operations, assets, condition, or
prospects of any Acquired Company.
     (b) Except as set forth in Part 3.15 of the Disclosure Letter:
     (i) there is no Order to which any of the Acquired Companies, or any of the
assets owned or used by any Acquired Company, is subject;
     (ii) Seller is not subject to any Order that relates to the business of, or
any of the assets owned or used by, any Acquired Company; and
     (iii) to Seller’s Knowledge no officer, director, agent, or employee of any
Acquired Company is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct, activity, or
practice relating to the business of any Acquired Company.
     (c) Except as set forth in Part 3.15 of the Disclosure Letter:
     (i) each Acquired Company is, and at all times since January 1, 2005, has
been, in full compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been subject;
     (ii) to Seller’s Knowledge no event has occurred or circumstance exists
that may constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any Order to
which any Acquired Company, or any of the assets owned or used by any Acquired
Company, is subject; and
     (iii) no Acquired Company has received, at any time since January 1, 2005,
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which any Acquired Company, or any of the assets owned or used by
any Acquired Company, is or has been subject.
     3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
     Except as set forth in Part 3.16 of the Disclosure Letter, since the date
of the Balance Sheet, the Acquired Companies have conducted their businesses
only in the Ordinary Course of Business and there has not been any:
     (a) change in any Acquired Company’s authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of any
Acquired Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or other
acquisition by any Acquired Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;

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     (b) amendment to the Organizational Documents of any Acquired Company;
     (c) payment or increase by the Company of any bonuses, salaries (except in
the Ordinary Course of Business), or other compensation to any stockholder,
director, officer, or employee or entry into any employment, severance, or
similar Contract with any director, officer, or employee;
     (d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company;
     (e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Acquired Companies, taken as a whole;
     (f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to any Acquired Company of at least $50,000;
     (g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of any Acquired
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of any Acquired Company, including the sale,
lease, or other disposition of any of the Intellectual Property Assets;
     (h) cancellation or waiver of any claims or rights with a value to any
Acquired Company in excess of $50,000;
     (i) material change in the accounting methods used by any Acquired Company;
or
     (j) agreement, whether oral or written, by any Acquired Company to do any
of the foregoing.
     3.17 CONTRACTS; NO DEFAULTS
     (a) Part 3.17(a) of the Disclosure Letter contains a complete and accurate
list, and Seller has delivered to Buyer true and complete copies, of:
     (i) each Applicable Contract that involves performance of services or
delivery of goods or materials by one or more Acquired Companies of an amount or
value in excess of $50,000;
     (ii) each Applicable Contract that involves performance of services or
delivery of goods or materials to one or more Acquired Companies of an amount or
value in excess of $50,000;

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     (iii) each Applicable Contract that was not entered into in the Ordinary
Course of Business and that involves expenditures or receipts of one or more
Acquired Companies in excess of $50,000;
     (iv) each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and other Applicable Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $50,000 and with terms of less than one year);
     (v) each licensing agreement or other Applicable Contract with respect to
patents, trademarks, copyrights, or other intellectual property, including
agreements with current or former employees, consultants, or contractors
regarding the appropriation or the non-disclosure of any of the Intellectual
Property Assets;
     (vi) each collective bargaining agreement and other Applicable Contract to
or with any labor union or other employee representative of a group of
employees;
     (vii) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
any Acquired Company with any other Person;
     (viii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of any Acquired Company or any
Affiliate of an Acquired Company or limit the freedom of any Acquired Company or
any Affiliate of an Acquired Company to engage in any line of business or to
compete with any Person;
     (ix) each Applicable Contract providing for payments to or by any Person
based on sales, purchases, or profits, other than direct payments for goods;
     (x) each power of attorney that is currently effective and outstanding;
     (xi) each Applicable Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express undertaking by any
Acquired Company to be responsible for consequential damages;
     (xii) each Applicable Contract for capital expenditures in excess of
$50,000;
     (xiii) each written warranty, guaranty, and or other similar undertaking
with respect to contractual performance extended by any Acquired Company other
than in the Ordinary Course of Business; and
     (xiv) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.

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Part 3.17(a) of the Disclosure Letter sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of the Acquired Companies under the Contracts, and the
Acquired Companies’ office where details relating to the Contracts are located.
     (b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
     (i) neither Seller (and no Related Person of either Seller) has or may
acquire any rights under, and neither Seller has or may become subject to any
obligation or liability under, any Contract that relates to the business of, or
any of the assets owned or used by, any Acquired Company; and
     (ii) to Seller’s Knowledge no officer, director, agent, employee,
consultant, or contractor of any Acquired Company is bound by any Contract that
purports to limit the ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any conduct, activity, or
practice relating to the business of any Acquired Company, or (B) assign to any
Acquired Company or to any other Person any rights to any invention,
improvement, or discovery.
     (c) Except as set forth in Part 3.17(c) of the Disclosure Letter, to
Seller’s Knowledge each Contract identified or required to be identified in
Part 3.17(a) of the Disclosure Letter is in full force and effect and is valid
and enforceable in accordance with its terms.
     (d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
     (i) each Acquired Company is, and at all times since January 1, 2005 has
been, in full compliance with all applicable terms and requirements of each
Contract under which such Acquired Company has or had any obligation or
liability or by which such Acquired Company or any of the assets owned or used
by such Acquired Company is or was bound, except where the failure to be in
compliance would not have a material adverse effect on the operation or assets
of the Company;
     (ii) to Seller’s Knowledge each other Person that has or had any obligation
or liability under any Contract under which an Acquired Company has or had any
rights is, and at all times since January 1, 2005 has been, in full compliance
with all applicable terms and requirements of such Contract;
     (iii) to Seller’s Knowledge, no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give any Acquired Company or other Person
the right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
     (iv) no Acquired Company has given to or received from any other Person, at
any time since January 1, 2005, any notice or other communication (whether oral
or written)

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regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Contract.
     (e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to any Acquired
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
     (f) The Contracts relating to the sale, design, manufacture, or provision
of products or services by the Acquired Companies have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
     3.18 INSURANCE
     (a) Seller has delivered to Buyer:
     (i) true and complete copies of all policies of insurance to which any
Acquired Company is a party or under which any Acquired Company is or has been
covered at any time within the last year preceding the date of this Agreement;
     (ii) true and complete copies of all pending applications for policies of
insurance; and
     (iii) any statement by the auditor of any Acquired Company’s financial
statements with regard to the adequacy of such entity’s coverage or of the
reserves for claims.
     (b) Part 3.18(b) of the Disclosure Letter describes:
     (i) any self-insurance arrangement by or affecting any Acquired Company,
including any reserves established thereunder;
     (ii) any contract or arrangement, other than a policy of insurance, for the
transfer or sharing of any risk by any Acquired Company; and
     (iii) all obligations of the Acquired Companies to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
     (c) Except as set forth on Part 3.18(c) of the Disclosure Letter:
     (i) All policies to which any Acquired Company is a party or that provide
coverage to any Acquired Company, or any director or officer of an Acquired
Company:
(A) to Seller’s Knowledge are valid, outstanding, and enforceable;

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(B) are issued by an insurer that is to Seller’s Knowledge financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for the assets and the
operations of the Acquired Companies for all risks normally insured against by a
Person carrying on the same business or businesses as the Acquired Companies in
a closely held private company of similar size to the Company;
(D) are sufficient for compliance with all Legal Requirements and Contracts to
which any Acquired Company is a party or by which any of them is bound;
(E) will continue in full force and effect following the consummation of the
Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of any Acquired Company.
     (ii) No Seller or Acquired Company has received (A) any refusal of coverage
or any notice that a defense will be afforded with reservation of rights, or
(B) any notice of cancellation or any other indication that any insurance policy
is no longer in full force or effect or will not be renewed or that the issuer
of any policy is not willing or able to perform its obligations thereunder.
     (iii) The Acquired Companies have paid all premiums due, and have otherwise
performed all of their respective obligations, under each policy to which any
Acquired Company is a party or that provides coverage to any Acquired Company or
director thereof.
     (iv) The Acquired Companies have given notice to the insurer of all claims
that may be insured thereby.
     3.19 ENVIRONMENTAL MATTERS
     Except as set forth in part 3.19 of the Disclosure Letter:

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     (a) Each Acquired Company is, and at all times has been, in full compliance
with, and has not been and is not in violation of or liable under, any
Environmental Law. The Seller or Acquired Company does not have any basis to
expect, nor has any of them received, any actual or Threatened order, notice, or
other communication from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Seller or any Acquired Company has had an interest,
or with respect to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used, or processed
by Seller, any Acquired Company, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
     (b) There are no pending or, to the Knowledge of Seller and the Acquired
Companies, Threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting any of
the Facilities or any other properties and assets (whether real, personal, or
mixed) in which Seller or any Acquired Company has or had an interest.
     (c) The Seller or Acquired Companies do not have any basis to expect, nor
has any of them, or to Seller’s Knowledge, any other Person for whose conduct
they are or may be held responsible received any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Seller or any Acquired Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by Seller, any Acquired
Company have been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
     (d) To Seller’s Knowledge, neither Seller nor Acquired Companies or any
other Person for whose conduct they are or may be held responsible, have any
Environmental, Health, and Safety Liabilities with respect to the Facilities or
with respect to any other properties and assets (whether real, personal, or
mixed) in which Seller or any Acquired Company (or any predecessor), has or had
an interest.
     (e) There are no Hazardous Materials present on or in the Environment at
the Facilities or, to Seller’s Knowledge, at any adjoining property, including
any Hazardous Materials contained in barrels, above or underground storage
tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or
other containers, either temporary or permanent, and deposited or located in
land, water, sumps, or any other part of the Facilities, or incorporated into
any structure therein or thereon. No Seller, any Acquired Company, or to the
Knowledge of Seller and the Acquired Companies, any other Person for whose
conduct they are or may be held responsible, has permitted or conducted, or is
aware of, any Hazardous Activity conducted with respect to the Facilities or any

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other properties or assets (whether real, personal, or mixed) in which Seller or
any Acquired Company has or had an interest.
     (f) There has been no Release or to the Knowledge of Seller and the
Acquired Companies, Threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which Seller or any Acquired
Company has or had an interest, or to the Knowledge of Seller and the Acquired
Companies any adjoining property, whether by Seller, any Acquired Company, or
any other Person.
     (g) Seller has delivered to Buyer true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or initiated by
Seller or any Acquired Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by Seller,
any Acquired Company.
     3.20 EMPLOYEES
     (a) Part 3.20 of the Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of the Acquired
Companies, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since January 1, 2006; vacation accrued; and service credited
for purposes of vesting and eligibility to participate under any Acquired
Company’s pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee Pension Benefit
Plan or Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
     (b) To the Seller’s Knowledge, no employee or director of any Acquired
Company is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition, or proprietary rights agreement,
between such employee or director and any other Person (“Proprietary Rights
Agreement”) that in any way adversely affects or will affect (i) the performance
of his duties as an employee or director of the Acquired Companies, or (ii) the
ability of any Acquired Company to conduct its business, including any
Proprietary Rights Agreement with Seller or the Acquired Companies by any such
employee or director. To Seller’s Knowledge, no director, officer, or other key
employee of any Acquired Company intends to terminate his employment with such
Acquired Company.
     (c) Part 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or director
of the Acquired Companies, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
and other benefits.

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     3.21 LABOR RELATIONS; COMPLIANCE
     Since January 1, 2005, no Acquired Company has been or is a party to any
collective bargaining or other labor Contract. Since January 1, 2005, there has
not been, there is not presently pending or existing, and to Seller’s Knowledge
there is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting any Acquired
Company relating to the alleged violation of any Legal Requirement pertaining to
labor relations or employment matters, including any charge or complaint filed
by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting any of the Acquired Companies or their premises, or (c) any
application for certification of a collective bargaining agent. No event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by any
Acquired Company, and no such action is contemplated by any Acquired Company.
Each Acquired Company has complied in all respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing. No Acquired Company is liable for the payment of any compensation,
damages, taxes, fines, penalties, or other amounts, however designated, for
failure to comply with any of the foregoing Legal Requirements.
     3.22 INTELLECTUAL PROPERTY
     (a) Intellectual Property Assets—The term “Intellectual Property Assets”
includes:
     (i) the name, (“Petro-Rentals”), all fictional business names, trading
names, registered and unregistered trademarks, service marks, and applications
(collectively, “Marks”);
     (ii) all know-how, trade secrets, confidential information, customer lists,
software, technical information, data, process technology, plans, drawings, and
blue prints (collectively, “Trade Secrets”); owned, used, or licensed by any
Acquired Company as licensee or licensor.
     (b) Agreements—Part 3.22(b) of the Disclosure Letter contains a complete
and accurate list and summary description, including any royalties paid or
received by the Acquired Companies, of all Contracts relating to the
Intellectual Property Assets to which any Acquired Company is a party or by
which any Acquired Company is bound, except for any license implied by the sale
of a product and perpetual, paid-up licenses for commonly available software
programs with a value of less than $10,000 under which an Acquired Company is
the licensee. There are no outstanding and, to Seller’s Knowledge, no Threatened
disputes or disagreements with respect to any such agreement.
     (c) Know-How Necessary for the Business—The Intellectual Property Assets
are all those necessary for the operation of the Acquired Companies’ businesses
as they are currently conducted. One or more of the Acquired Companies is the
owner of all right, title, and interest in and to each of the Intellectual
Property Assets, free and clear of all liens, security interests, charges,
encumbrances,

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equities, and other adverse claims, and has the right to use without payment to
a third party all of the Intellectual Property Assets.
     To Seller’s Knowledge, no employee of any Acquired Company has entered into
any Contract that restricts or limits in any way the scope or type of work in
which the employee may be engaged or requires the employee to transfer, assign,
or disclose information concerning his work to anyone other than one or more of
the Acquired Companies.
     (d) Trade Secrets:
     (i) Seller and the Acquired Companies have taken reasonable precautions to
protect the secrecy, confidentiality, and value of their Trade Secrets.
     (ii) One or more of the Acquired Companies has good title and an absolute
(but not necessarily exclusive) right to use the Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature, and, to Seller’s
Knowledge, have not been used, divulged, or appropriated either for the benefit
of any Person (other than one or more of the Acquired Companies) or to the
detriment of the Acquired Companies. To Seller’s Knowledge, no Trade Secret is
subject to any adverse claim or has been challenged or threatened in any way.
     3.23 CERTAIN PAYMENTS
     Since January 1, 2005, no Acquired Company or director, officer, or to
Seller’s Knowledge, any agent, or employee of any Acquired Company, or any other
Person associated with or acting for or on behalf of any Acquired Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Acquired Company or any
Affiliate of an Acquired Company, or (iv) in violation of any Legal Requirement,
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Acquired Companies. The Company has engaged in
customary business entertainment of customers through meals, sporting events and
trips in amounts not unusual or extravagant.
     3.24 DISCLOSURE
     (a) No representation or warranty of Seller in this Agreement and no
statement in the Disclosure Letter omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
     (b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
     (c) There is no fact known to either Seller that has specific application
to either Seller or any Acquired Company (other than general economic or
industry conditions) and that materially

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adversely affects the assets, business, prospects, financial condition, or
results of operations of the Acquired Companies (on a consolidated basis) that
has not been set forth in this Agreement or the Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS; PAYMENT OF INDEBTEDNESS BY RELATED
PERSONS
     (a) Except for the real property leases in Alvin, Texas and Lafayette,
Louisiana between the Company and R J Hebert Investments, LLC, neither Seller or
any Related Person of Seller or of any Acquired Company has, or since the first
day of the next to last completed fiscal year of the Acquired Companies has had,
any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Acquired Companies’
businesses. Neither Seller or any Related Person of Seller or of any Acquired
Company is, or has owned (of record or as a beneficial owner) an equity interest
or any other financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with any Acquired
Company other than business dealings or transactions conducted in the Ordinary
Course of Business with the Acquired Companies at substantially prevailing
market prices and on substantially prevailing market terms, or (ii) engaged in
competition with any Acquired Company with respect to any line of the products
or services of such Acquired Company (a “Competing Business”) in any market
presently served by such Acquired Company. Except as set forth in Part 3.25 of
the Disclosure Letter, neither Seller or any Related Person of Seller or of any
Acquired Company is a party to any Contract with, or has any claim or right
against, any Acquired Company.
     (b) Seller will cause all indebtedness owed to an Acquired Company by
Seller or any Related Person of Seller to be paid in full prior to Closing.
     3.26 BROKERS OR FINDERS
     Seller and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders’ fees or agents’ commissions
or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
     Buyer and Allis-Chalmers, jointly and severally, represent and warrant to
Seller as follows:
     4.1 ORGANIZATION AND GOOD STANDING
     Allis-Chalmers is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Texas.

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     4.2 AUTHORITY; NO CONFLICT
     (a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the Employment Agreement, Non-Competition
Agreement and Lease Agreements (the “Buyer’s Closing Document”), the Buyer’s
Closing Document will constitute the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement and the Buyer’s Closing Document and to perform its
obligations under this Agreement and the Buyer’s Closing Document.
     (b) Except as set forth in Schedule 4.2, neither the execution and delivery
of this Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions pursuant
to:

  (i)   any provision of Buyer’s Organizational Documents;     (ii)   any
resolution adopted by the board of directors or the stockholders of Buyer;    
(iii)   any Legal Requirement or Order to which Buyer may be subject; or    
(iv)   any Contract to which Buyer is a party or by which Buyer may be bound.

Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
     4.3 INVESTMENT INTENT
     Buyer is acquiring the Shares for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
     4.4 CERTAIN PROCEEDINGS
     There is no pending Proceeding that has been commenced against Buyer or
Allis-Chalmers and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To Buyer’s Knowledge, no such Proceeding has been Threatened.
     4.5 BROKERS OR FINDERS
     Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders’ fees or agents’ commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Seller harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.

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     4.6 CAPITALIZATION
     The authorized equity securities of Allis-Chalmers consist of
(i) 100,000,000 shares of common stock, $.01 par value (“Common Stock”), of
which 24,578,927 shares of Common Stock are issued and outstanding as of
September 15, 2006, and (ii) 25,000,000 shares of preferred stock, $.01 par
value of which none are outstanding. All of the Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. None of the
outstanding equity securities or other securities of Allis-Chalmers was issued
in violation of the Securities Act or any other Legal Requirement.
     4.7 FINANCIAL STATEMENTS
     Buyer has delivered to Seller a copy of Allis-Chalmers’ most recent Form
10-K filed with the Securities and Exchange Commission and its Form 10-Q for the
second quarter of 2006.
     4.8 DISCLOSURE
     No representation or warranty of Buyer or Allis-Chalmers in this Agreement
omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
5. INDEMNIFICATION; REMEDIES

  5.1   SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE

     All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the certificate delivered pursuant to
Section 2.4(a)(v), and any other certificate or document delivered pursuant to
this Agreement will survive the Closing. The right to indemnification, payment
of Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages or other remedy based on such
representation, warranties, covenants and obligations.
     5.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
     Seller will indemnify and hold harmless Buyer, the Acquired Companies, and
their respective Representatives, stockholders, controlling persons, and
affiliates (collectively, the “Indemnified Persons”) for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage, expense
(including costs of investigation and defense and reasonable

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attorneys’ fees) or diminution of value, whether or not involving a third-party
claim (collectively, “Damages”), arising, directly or indirectly, from or in
connection with:
     (a) any Breach of any representation or warranty made by Seller in this
Agreement, the Disclosure Letter, or any other certificate or document delivered
by Seller pursuant to this Agreement;
     (b) any Breach by Seller of any covenant or obligation of such Seller in
this Agreement; or
     (c) any claim by any Person for brokerage or finder’s fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with either Seller or any Acquired Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 5.2 will not be exclusive of or limit any
other remedies that may be available to Buyer or the other Indemnified Persons.

  5.3   INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER — ENVIRONMENTAL MATTERS

     In addition to the provisions of Section 5.2, Seller will indemnify and
hold harmless Buyer, the Acquired Companies, and the other Indemnified Persons
for, and will pay to Buyer, the Acquired Companies, and the other Indemnified
Persons the amount of, any Damages (including costs of cleanup, containment, or
other remediation) arising, directly or indirectly, from or in connection with:
     (a) any Environmental, Health, and Safety Liabilities arising out of or
relating to: (i) (A) the ownership, operation, or condition at any time on or
prior to the Closing Date of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
Seller or any Acquired Company has or had an interest, or (B) any Hazardous
Materials or other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the Closing Date; or (ii)
(A) any Hazardous Materials or other contaminants, wherever located, that were,
or were allegedly, generated, transported, stored, treated, Released, or
otherwise handled by Seller or any Acquired Company or by any other Person for
whose conduct they are or may be held responsible at any time on or prior to the
Closing Date, or (B) any Hazardous Activities that were, or were allegedly,
conducted by Seller or any Acquired Company or by any other Person for whose
conduct they are or may be held responsible; or
     (b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property), or other damage
of or to any Person, including any employee or former employee of Seller or any
Acquired Company or any other Person for whose conduct they are or may be held
responsible, in any way arising from or allegedly arising from any Hazardous
Activity conducted or allegedly conducted with respect to the Facilities or the
operation of the Acquired Companies prior to the

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Closing Date, or from Hazardous Material that was (i) present or suspected to be
present on or before the Closing Date on or at the Facilities (or present or
suspected to be present on any other property, if such Hazardous Material
emanated or allegedly emanated from any of the Facilities and was present or
suspected to be present on any of the Facilities on or prior to the Closing
Date) or (ii) Released or allegedly Released by Seller or any Acquired Company
or any other Person for whose conduct they are or may be held responsible, at
any time on or prior to the Closing Date.
Buyer will be entitled to control any Cleanup, any related Proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 5.3. The procedure described
in Section 5.8 will apply to any claim solely for monetary damages relating to a
matter covered by this Section 5.3.
     5.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
     Buyer will indemnify and hold harmless Seller, and will pay to Seller the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement, or (c) any claim by any Person for brokerage or finder’s fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
     5.5 TIME LIMITATIONS
     If the Closing occurs, Seller will have no liability (for indemnification
or otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other
than those in Sections 3.3, 3.11, 3.13, and 3.19, unless on or before two years
from the Closing Date, Buyer notifies Seller of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Buyer; a
claim with respect to Section 3.3, 3.11, 3.13 and 3.19, or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to Closing
Date shall survive for a period of 90 days after the expiration of the
applicable statute of limitations period. If the Closing occurs, Buyer will have
no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless on or before two (2) years from
the Closing Date, Seller notifies Buyer of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Seller.

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     5.6 LIMITATIONS ON AMOUNT—SELLER
     Seller will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a), clause (b), or, to the extent
relating to any failure to perform or comply prior to the Closing Date, clause
(c) of Section 5.2 until the total of all Damages with respect to such matters
exceeds $100,000.00, but then for all Damages. However, this Section 5.6 will
not apply to any claims under Section 5.2(d), (e) or (f) or to matters arising
in respect of Sections 3.2, 3.3, 3.11 or 3.19 or to any Breach of any of
Seller’s representations and warranties of which Seller had Knowledge at any
time prior to the date on which such representation and warranty is made or any
intentional Breach by Seller of any covenant or obligation. In no event shall
the aggregate indemnification to be provided by Seller pursuant to this
Article 5 exceed $7,500,000.
     5.7 LIMITATIONS ON AMOUNT—BUYER
     Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in Section 5.4 until the total of all Damages
with respect to such matters exceeds $100,000.00, but then for all Damages.
However, this Section 5.7 will not apply to any Breach of any of Buyer’s
representations and warranties of which Buyer had Knowledge at any time prior to
the date on which such representation and warranty is made or any intentional
Breach by Buyer of any covenant or obligation, and Buyer will be liable for all
Damages with respect to such Breaches. In no event shall the aggregate
indemnification to be provided by Buyer pursuant to this Article 5 exceed
$5,000,000.
     5.8 PROCEDURE FOR INDEMNIFICATION—THIRD PARTY CLAIMS
     (a) Promptly after receipt by an indemnified party under Section 5.2, 5.4,
or (to the extent provided in the last sentence of Section 5.3) Section 5.3 of
notice of the commencement of any Proceeding against it, such indemnified party
will, if a claim is to be made against an indemnifying party under such Section,
give notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party’s failure to give such notice.
     (b) If any Proceeding referred to in Section 5.8(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 5 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case

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subsequently incurred by the indemnified party in connection with the defense of
such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party’s consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party’s notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
     (c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
     (d) Seller hereby consent to the non-exclusive jurisdiction of any court in
which a Proceeding is brought against any Indemnified Person for purposes of any
claim that an Indemnified Person may have under this Agreement with respect to
such Proceeding or the matters alleged therein, and agree that process may be
served on Seller with respect to such a claim anywhere in the world.
     5.9 PROCEDURE FOR INDEMNIFICATION—OTHER CLAIMS
     A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
6. GENERAL PROVISIONS
     6.1 EXPENSES
     Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. In the event of any HSR Act filing fee applicable,
Buyer will pay such fee. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.

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     6.2 PUBLIC ANNOUNCEMENTS
     Any public announcement or similar publicity with respect to this Agreement
or the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Buyer determines. Unless consented to by Buyer in advance or
required by Legal Requirements, prior to the Closing Seller shall, and shall
cause the Acquired Companies to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. Seller and Buyer
will consult with each other concerning the means by which the Acquired
Companies’ employees, customers, and suppliers and others having dealings with
the Acquired Companies will be informed of the Contemplated Transactions, and
Buyer will have the right to be present for any such communication.
     6.3 CONFIDENTIALITY
     Between the date of this Agreement and the Closing Date, Buyer and Seller
will maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Acquired Companies to maintain in
confidence, and not use to the detriment of another party or an Acquired Company
any written information stamped “confidential” when originally furnished by
another party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
     If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Seller waives, and
will upon Buyer’s request cause the Acquired Companies to waive, any cause of
action, right, or claim arising out of the access of Buyer or its
representatives to any trade secrets or other confidential information of the
Acquired Companies except for the intentional competitive misuse by Buyer of
such trade secrets or confidential information.
     6.4 NOTICES
     All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):

         
 
  Seller:   Randolph J. Hebert
 
      212-A Brickell Way

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      Lafayette, Louisiana 70508
 
      Telephone: (337)504-2773
 
      Email: rjhebert@bellsouth.net
 
       
 
  With Copy to:   Onebane Law Firm
 
      1200 Camellia Boulevard, Suite 300
 
      Lafayette, Louisiana 70508
 
      Attn: Lawrence L. Lewis, III
 
      Telephone: (337) 237-2660
 
      Facsimile: (337) 266-1232
 
      Email: lewisl@onebane.com
 
       
 
  Buyer:   Allis-Chalmers Production Services, Inc.
 
      5075 Westheimer, Suite 890
 
      Houston, Texas 77056
 
      Attn: Theodore F. Pound III, Vice President and Secretary
 
      Telephone: (713) 369-0550
 
      Facsimile: (713) 369-0555
 
      Email: tpound@alchenergy.com

     6.5 FURTHER ASSURANCES
     The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
     6.6 WAIVER
     The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
     6.7 ENTIRE AGREEMENT AND MODIFICATION

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     This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Buyer and
Seller dated September 13, 2005, and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
     6.8 DISCLOSURE LETTER
     (a) The disclosures in the Disclosure Letter, and those in any Supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
     (b) In the event of any inconsistency between the statements in the body of
this Agreement and those in the Disclosure Letter (other than an exception
expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
     6.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
     Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, which will not be unreasonably withheld,
except that Buyer may assign any of its rights under this Agreement to any
Subsidiary of Buyer, but Buyer will continue to be liable for payment and
performance hereunder. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
     6.10 SEVERABILITY
     If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
     6.11 SECTION HEADINGS, CONSTRUCTION
     The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
“Section” or “Sections” refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word “including” does not limit the preceding words or terms.

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     6.12 TIME OF ESSENCE
     With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
     6.13 GOVERNING LAW
     This Agreement will be governed by the laws of the State of Texas without
regard to conflicts of laws principles.
     6.14 COUNTERPARTS
     This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.

              BUYER:   ALLIS-CHALMERS PRODUCTION SERVICES,
INC., a Texas corporation    
 
           
 
  By:   /s/ Steve Collins
 
   
 
      Steve Collins    
 
      President    
 
            SELLER:   /s/ Randolph J. Hebert              
 
      Randolph J. Hebert, Individually    

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