EXECUTION
 
FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this
“Amendment”) is entered into as of October 13, 2009, among ALLIS-CHALMERS ENERGY
INC., a Delaware corporation, as borrower (the “Borrower”), the undersigned
Guarantors (collectively, the “Guarantors”), ROYAL BANK OF CANADA, as
Administrative Agent and Collateral Agent for the Lenders parties to the
hereinafter defined Credit Agreement (in such capacities, the “Administrative
Agent” and “Collateral Agent,” respectively) and the undersigned Required
Lenders.
 
Reference is made to the Second Amended and Restated Credit Agreement dated as
of April 26, 2007 among Borrower, the Administrative Agent, the Collateral Agent
and the Lenders parties thereto, as amended by a First Amendment to Second
Amended and Restated Credit Agreement dated as of December 3, 2007, a Second
Amendment to Second Amended and Restated Credit Agreement dated as of December
30, 2008, a Third Amendment to Second Amended and Restated Credit Agreement
dated as of April 9, 2009 and a Fourth Amendment to Second Amended and Restated
Credit Agreement dated as of May 20, 2009 (as amended, the “Credit
Agreement”).  Unless otherwise defined in this Amendment, capitalized terms used
herein shall have the meanings set forth in the Credit Agreement; all section,
exhibit and schedule references herein are to sections, exhibits and schedules
in the Credit Agreement; and all paragraph references herein are to paragraphs
in this Amendment.
 
RECITALS
 
A.           The Borrower has requested certain amendments to the Credit
Agreement and the Lenders are willing, on the terms and conditions set forth
herein, to amend the Credit Agreement as hereinafter set forth.
 
Accordingly, for adequate and sufficient consideration, the parties hereto
agree, as follows:
 
Paragraph 1.        Amendments. Effective as of the Fifth Amendment Effective
Date, the Credit Agreement is amended as follows:
 
1.1           Definitions. Section 1.01 of the Credit Agreement is amended as
follows:
 
(a)           The following definitions are amended in their entirety to read as
follows:
 
“Agreement means this Second Amended and Restated Credit Agreement as amended by
the First Amendment to Second Amended and Restated Credit Agreement, Second
Amendment to Second Amended and Restated Credit Agreement, Third Amendment to
Second Amended and Restated Credit Agreement, Fourth Amendment to Second Amended
and Restated Credit Agreement and Fifth Amendment to Second Amended and Restated
Credit Agreement.”
 
“Threshold Amount at any time means an amount equal to ten (10%) of the
Borrower's domestic consolidated assets measured as of the close of the then
most recent fiscal quarter end.”
 
Fifth Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

 
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(b)           The following definitions are inserted alphabetically into Section
1.01 of the Credit Agreement:
 
“Fifth Amendment Effective Date means the date the Fifth Amendment to Second
Amended and Restated Credit Agreement by its terms becomes effective among the
parties thereto.”
 
“Fifth Amendment to Second Amended and Restated Credit Agreement means that
certain Fifth Amendment to Second Amended and Restated Credit Agreement dated as
of October __, 2009, among the Borrower, the Guarantors, Royal Bank of Canada,
as Administrative Agent and Collateral Agent, and the Required Lenders.”
 
“Foreign Joint Venture means Rawabi Allis-Chalmers Ltd., a Saudi Arabia joint
venture 50% owned by Borrower and 50% owned by Rawabi Holding Limited, and each
other corporation, partnership, joint venture, limited liability company or
other business entity of which 50% or less of the Voting Stock is beneficially
owned by Borrower or any of its Subsidiaries.”
 
“Foreign Rental Arrangement means a lease or rental agreement (however
designated) between the Borrower or any of its Domestic Subsidiaries and a
Foreign Person relating to equipment or inventory to be leased to such Foreign
Person, which equipment or inventory was moved from the U.S. to a foreign
jurisdiction and “Foreign Rental Arrangements” means collectively all such lease
or rental agreements.”
 
1.2           Section 6.06(b).  Section 6.06(b) of the Credit Agreement is
amended in its entirety as follows:
 
“(b)  Keep all Collateral other than Collateral located outside the United
States on the Second Amended and Restated Closing Date within the United States
unless either (i) prior written notice is given to the Administrative Agent of
the intent to move such Collateral outside the United States and the
Administrative Agent consents in writing to the movement of such Collateral
outside the United States or (ii) such Collateral is moved outside the United
States in connection with an Investment permitted pursuant to Section 7.02(n).”

1.3           Section 6.14(c).  Section 6.14(c) of the Credit Agreement is
hereby amended by deleting the first sentence thereof and substituting therefore
the following:
 
“(c)           The Liens required by this Section 6.14 shall be first priority
perfected Liens in favor of the Administrative Agent or Collateral Agent for the
benefit of the Lenders, subject to no other Liens except Permitted Liens of the
type described in Section 7.01; provided with respect to any equipment or
inventory invested in Foreign Subsidiaries or Foreign Joint Ventures pursuant to
Section 7.02(n) or leased pursuant to a Foreign Rental Arrangement pursuant to
Section 7.07(f), the Lien on such equipment or inventory is not required to be
maintained as a first priority perfected Lien under the law of the jurisdiction
where such equipment or inventory is located.”
 
Fifth Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

 
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1.4           Section 7.02.  Section 7.02 of the Credit Agreement is amended by
deleting the word “and” at the end of Section 7.02(l), deleting the period at
the end of Section 7.02(m) and inserting a semicolon therefor and adding a new
Subsection 7.02(n) to read in its entirety as follows:
 
“(n)           Investments, including the Investments set forth on Schedule
7.02, of up to $30,000,000 in the aggregate at any one time (less the amount of
any Dispositions associated with Foreign Rental Arrangements permitted pursuant
to Section 7.07(f)) in Foreign Subsidiaries and Foreign Joint Ventures, of which
no more than $5,000,000 in the aggregate at any one time shall consist of cash
Investments and the remainder of which will consist of the transfer (by sale,
lease, contribution or any other form of Disposition) of equipment and
inventory; provided, any such equipment and inventory shall continue to be
subject to a Lien in favor of the Administrative Agent and/or Collateral Agent
for the benefit of the Lenders (although such Lien shall not be required to be
perfected under the local law of the jurisdiction where such equipment and
inventory is located); provided further if there is a breach of the Fixed Asset
Coverage Ratio in Section 7.19(b) which has not been cured or waived, the
Required Lenders may require that Borrower cause equipment and/or inventory held
by Foreign Subsidiaries outside the U.S. to be moved to the U.S. and subjected
to a first priority, perfected Lien (subject to Permitted Liens) in favor of the
Administrative Agent or Collateral Agent for the benefit of the Lenders in an
amount sufficient to cure such breach.”
 
1.5           Section 7.07.  Section 7.07 of the Credit Agreement is amended by
deleting the word “or” at the end of Section 7.07(d), deleting the period at the
end of Section 7.07(e) and inserting “; or” therefor and adding a new Section
7.07(f) to read in its entirety as follows:
 
“(f)           Dispositions of equipment and inventory to Foreign Subsidiaries
and Foreign Joint Ventures as permitted by Section 7.02(n) and Dispositions
pursuant to Foreign Rental Arrangements not to exceed in the aggregate the
dollar limitation set forth in Section 7.02(n).”
 
1.6           Section 8.01(m).  Section 8.01(m) of the Credit Agreement is
amended in its entirety as follows:
 
“(m)           Collateral; Impairment of Security, etc.  (i) Any provision of
any Loan Document shall for any reason cease to be valid and binding on or
enforceable against a Loan Party or any Loan Party shall so state in writing or
bring an action to limit its obligations or liabilities thereunder; or (ii) any
Collateral Document shall for any reason (other than pursuant to the terms
thereof) cease to create a valid security interest in the Collateral purported
to be covered thereby or such security interest shall for any reason cease to be
a perfected and first priority security interest subject to Permitted Liens;
provided with respect to the security interest in any Collateral consisting of
equipment or inventory invested in Foreign Subsidiaries or Foreign Joint
Ventures pursuant to Section 7.02(n) or leased pursuant to a Foreign Rental
Arrangement pursuant to Section 7.02(n), the security interest in such
Collateral is not required to be maintained as a perfected and first priority
security interest under the law of the foreign jurisdiction where such
Collateral is located; or”
 
1.7           Schedule 7.02.  Schedule 7.02 (Investments in Foreign Subsidiaries
and Foreign Joint Ventures) is hereby added to the Credit Agreement by Schedule
7.02 attached to this Amendment.
 
Fifth Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

 
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Paragraph 2.        Effective Date. This Amendment shall not become effective
until the date (such date, the “Fifth Amendment Effective Date”) the
Administrative Agent receives all of the agreements, documents, certificates,
instruments, and other items described below:
 
(a)           this Amendment, executed by the Borrower, the Guarantors, and the
Required Lenders;
 
(b)           an executed copy of the Joint Venture Agreement (in English)
between Rawabi Holding Company Ltd. and Borrower dated January 28, 2009;
 
(c)           fees and expenses required to be paid pursuant to Paragraph 6 of
this Amendment, to the extent invoiced prior to the Fifth Amendment Effective
Date;  and
 
(d)           such other assurances, certificates, documents and consents as the
Administrative Agent may require.
 
Paragraph 3.        Waivers.

(a)           The Lenders hereby waive any non-compliance for all periods ending
prior to the Fifth Amendment Effective Date with the following affirmative
covenants and agree that the Borrower shall not be deemed in Default solely by
reason of such non-compliance:

(i)           Section 6.06(c) – Maintenance of Assets and Business; Movement of
Collateral — insofar as a result of or related to the movement of up to
$3,408,025 of Collateral identified on Schedule 7.02 consisting of equipment and
inventory from within the United States to Rawabi Allis-Chalmers Ltd., a Saudi
Arabia joint venture 50% owned by Borrower and 50% owned by Rawabi Holding
Limited, such Collateral was not kept within the United States; and

(ii)           Section 6.14(c) – Further Assurances; Additional Collateral —
insofar as a result of or related to the movement of up to $3,408,025 of
Collateral identified on Schedule 7.02 consisting of equipment and inventory
from within the United States to Rawabi Allis-Chalmers  Ltd., a Saudi Arabia
joint venture 50% owned by Borrower and 50% owned by Rawabi Holding Limited, the
Lien in favor of the Administrative Agent or Collateral Agent for the benefit of
the Lenders would not be maintained as a first priority perfected Lien under the
law of the jurisdiction where such equipment or inventory is located.

(b)           The Lenders hereby waive any non-compliance with the following
negative covenants and agree that the Borrower shall not be deemed in Default
solely by reason of such non-compliance:

(i)           Section 7.02 — Investments — insofar as a result of the cash
investment of $531,915 in Rawabi Allis-Chalmers  Ltd., a Saudi Arabia joint
venture 50% owned by Borrower and 50% owned by Rawabi Holding Limited, or
related to the movement of up to $3,408,025 of Collateral identified on Schedule
7.02 consisting of equipment and inventory from within the United States to
Rawabi Allis-Chalmers  Ltd., an Investment was made; and

(ii)           Section 7.07 — Dispositions — insofar as a result of or related
to the movement of up to $3,408,025 of Collateral identified on Schedule 7.02
consisting of equipment and inventory from within the United States to Rawabi
Allis-Chalmers  Ltd., a Saudi Arabia joint venture 50% owned by Borrower and 50%
owned by Rawabi Holding Limited, a Disposition occurred.
 
Fifth Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

 
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(c)           For the avoidance of doubt, the Lenders confirm that if the
Borrower’s representations are as set out in Article V of the Credit Agreement,
as amended and waived herein, and the Borrower complies with the requirements of
Section 4.03, Article VI and Article VII of the Credit Agreement, as amended and
waived herein, the Borrower may borrow under the Credit Agreement on the terms
and subject to the limitations set forth in the Credit Agreement.

(d)           The foregoing waivers shall not be deemed to be a waiver by the
Lenders of any other covenant, condition or obligation on the part of the
Borrower under the Credit Agreement or any other Loan Document, except as set
forth in Paragraph 3 of this Fifth Amendment.  In addition, the foregoing
waivers shall in no respect evidence any commitment by the Lenders to grant any
future consents or waivers of any covenant, condition or obligation on the part
of the Borrower under the Credit Agreement or any other Loan Document whether
related to or arising out of the movement of certain Collateral identified on
Schedule 7.02 consisting of equipment and inventory from within the United
States to outside the United States or otherwise.  Any further waivers or
consents must be specifically agreed to in writing in accordance with Section
10.01 of the Credit Agreement.
 
Paragraph 4.        Acknowledgment and Ratification. As a material inducement to
the Administrative Agent and the Lenders to execute and deliver this Amendment,
each of the Borrower and the Guarantors (i) consents to the agreements in this
Amendment, (ii) agrees and acknowledges that the execution, delivery, and
performance of this Amendment shall in no way release, diminish, impair, reduce,
or otherwise affect the respective obligations of the Borrower or any Guarantor
under the Loan Documents to which it is a party, which Loan Documents shall
remain in full force and effect, and all rights thereunder are hereby ratified
and confirmed.
 
Paragraph 5.        Representations. As a material inducement to the
Administrative Agent and the Lenders to execute and deliver this Amendment, each
of the Borrower and the Guarantors represents and warrants to the Administrative
Agent and the Lenders that as of the Fifth Amendment Effective Date and as of
the date of execution of this Amendment, (a) all representations and warranties
in the Loan Documents are true and correct in all material respects as though
made on the date hereof, except to the extent that any of them speak to a
different specific date, (b) no Default or Event of Default exists and no
Borrowing Base Deficiency exists.
 
Paragraph 6.        Expenses, Funding Losses.  The Borrower shall pay on demand
all reasonable costs, fees, and expenses paid or incurred by the Administrative
Agent incident to this Amendment, including, without limitation, Attorney Costs
in connection with the negotiation, preparation, delivery, and execution of this
Amendment and any related documents, filing and recording costs, and the costs
of title insurance endorsements, if any.
 
Paragraph 7.        Miscellaneous.  This Amendment is a “Loan Document” referred
to in the Credit Agreement.  The provisions relating to Loan Documents in
Article X of the Credit Agreement are incorporated in this Amendment by
reference.  Unless stated otherwise (a) the singular number includes the plural
and vice versa and words of any gender include each other gender, in each case,
as appropriate, (b) headings and captions may not be construed in interpreting
provisions, (c) this Amendment must be construed, and its performance enforced,
under Texas law and applicable federal law, (d) if any part of this Amendment is
for any reason found to be unenforceable, all other portions of it nevertheless
remain enforceable.
 
Paragraph 8.        Entire Agreement. This amendment represents the final
agreement between the parties about the subject matter of this amendment and may
not be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties.
 
Fifth Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

 
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Paragraph 9.        Parties. This Amendment binds and inures to the benefit of
the Borrower, the Guarantors, the Administrative Agent, the Collateral Agent,
the other Lenders, and their respective successors and assigns.
 
Paragraph 10.      Further Assurances. The parties hereto each agree to execute
from time to time such further documents as may be necessary to implement the
terms of this Amendment.
 
Paragraph 11.      Release.  As additional consideration for the execution,
delivery and performance of this Amendment by the parties hereto and to induce
the Administrative Agent, the Collateral Agent and the Lenders to enter into
this Amendment, the Borrower warrants and represents to the Administrative
Agent, the Collateral Agent and the Lenders that to the best of its knowledge no
facts, events, statuses or conditions exist or have existed which, either now or
with the passage of time or giving of notice, or both, constitute or will
constitute a basis for any claim or cause of action against the Administrative
Agent, the Collateral Agent or any Lender or any defense to (i) the payment of
Obligations under the Revolver Notes and/or the Loan Documents, or (ii) the
performance of any of its obligations with respect to the Revolver Notes and/or
the Loan Documents.  In the event any such facts, events, statuses or conditions
exist or have existed, Borrower unconditionally and irrevocably hereby RELEASES,
RELINQUISHES and forever DISCHARGES Administrative Agent, the Collateral Agent
and the Lenders, as well as their predecessors, successors, assigns, agents,
officers, directors, shareholders, employees and representatives, of and from
any and all claims, demands, actions and causes of action of any and every kind
or character, past or present, which Borrower may have against any of them or
their predecessors, successors, assigns, agents, officers, directors,
shareholders, employees and representatives arising out of or with respect to
(a) any right or power to bring any claim for usury or to pursue any cause of
action based on any claim of usury, and (b) any and all transactions relating to
the Loan Documents occurring prior to the date hereof, including any loss, cost
or damage, of any kind or character, arising out of or in any way connected with
or in any way resulting from the acts, actions or omissions of any of them, and
their predecessors, successors, assigns, agents, officers, directors,
shareholders, employees and representatives, including any breach of fiduciary
duty, breach of any duty of fair dealing, breach of confidence, breach of
funding commitment, undue influence, duress, economic coercion, conflict of
interest, negligence, bad faith, malpractice, intentional or negligent
infliction of mental distress, tortious interference with contractual relations,
tortious interference with corporate governance or prospective business
advantage, breach of contract, deceptive trade practices, libel, slander or
conspiracy, but in each case only to the extent permitted by applicable Law.
 
Paragraph 12.      Execution in Counterparts. This Amendment may be executed in
any number of counterparts (and by different parties hereto in different
counterparts), each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page of this
Amendment by telecopier or other electronic means shall be effective as delivery
of a manually executed counterpart of this Amendment.
 
 The parties hereto have executed this Amendment in multiple counterparts to be
effective as of the Fifth Amendment Effective Date.
 
Remainder of Page Intentionally Blank
Signature Pages to Follow.
 
Fifth Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

 
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
 
BORROWER:
   
ALLIS-CHALMERS ENERGY INC.,
a Delaware corporation, as Borrower
   
By:
/s/ Victor M. Perez
 
Victor M. Perez
 
Chief Financial Officer

 
Fifth Amendment to Allis-Chalmers
Energy Credit Agreement
 
 
Signature Page- Page 1

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GUARANTORS:

AirComp LLC   Allis-Chalmers Drilling LLC          
By:
/s/ Victor M. Perez
 
By:
/s/ Victor M. Perez
 
Victor M. Perez
   
Victor M. Perez
 
Chief Financial Officer
   
Chief Financial Officer
          Allis-Chalmers Holdings Inc.   Allis-Chalmers Management LLC          
By:
/s/ Victor M. Perez
 
By:
/s/ Victor M. Perez
 
Victor M. Perez
   
Victor M. Perez
 
Chief Financial Officer
   
Chief Financial Officer
       
 
Allis-Chalmers Production Services LLC   Allis-Chalmers Rental Services LLC    
     
By:
/s/ Victor M. Perez
 
By:
/s/ Victor M. Perez
 
Victor M. Perez
   
Victor M. Perez
 
Chief Financial Officer
   
Chief Financial Officer
 
 
      Allis-Chalmers Tubular Services LLC   Rebel Rentals LLC          
By:
/s/ Victor M. Perez
 
By:
/s/ Victor M. Perez
 
Victor M. Perez
   
Victor M. Perez
 
Chief Financial Officer
   
Chief Financial Officer
          Petro-Rentals LLC   Strata Directional Technology LLC          
By:
/s/ Victor M. Perez
       
Victor M. Perez
 
By:
/s/ Victor M. Perez
 
Chief Financial Officer
   
Victor M. Perez
       
Chief Financial Officer

 
Fifth Amendment to Allis-Chalmers
Energy Credit Agreement
 
 
Signature Page- Page 2

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ADMINISTRATIVE AGENT:
 
ROYAL BANK OF CANADA,
as Administrative Agent and Collateral Agent
   
By:
/s/ Ann Hurley
Name:  Ann Hurley
Title:  Manager, Agency

 
Fifth Amendment to Allis-Chalmers
Energy Credit Agreement
 
 
Signature Page- Page 3

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L/C ISSUER AND LENDER:
 
ROYAL BANK OF CANADA, as a Lender
and L/C Issuer
   
By:
/s/ Jason York
Name:  Jason York
Title:  Authorized Signatory

 
Fifth Amendment to Allis-Chalmers
Energy Credit Agreement
 
 
Signature Page- Page 4

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LENDER:
 
CATERPILLAR FINANCIAL
SERVICES CORPORATION, as Lender
       
By:
/s/ Michael M. Ward
Name:  Michael M. Ward
Title:  Credit & Operations Manager

 
Fifth Amendment to Allis-Chalmers
Energy Credit Agreement
 
 
Signature Page- Page 5

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LENDER:
   
JPMORGAN CHASE BANK, N.A.
as a Lender
   
By:
 
Name:
Title:

 
Fifth Amendment to Allis-Chalmers
Energy Credit Agreement
 
 
Signature Page- Page 6

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LENDER:
   
WELLS FARGO BANK, N.A.
as a Lender
 
By:
/s/ Donald W. Herrick
Name:  Donald W. Herrick
Title:  Vice President and Senior Portfolio Manager

 
Fifth Amendment to Allis-Chalmers
Energy Credit Agreement
 
 
Signature Page- Page 7

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LENDER:
   
NATIXIS,
as a Lender
 
By:
/s/ Carlos Quinteros
Name:  Carlos Quinteros
Title:  Director
   
By:
/s/ Timothy L. Polvado
Name:  Timothy L. Polvado
Title:  Senior Managing Director

 
Fifth Amendment to Allis-Chalmers
Energy Credit Agreement
 
 
Signature Page- Page 8

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LENDER:
   
WHITNEY NATIONAL BANK,
as a Lender
 
By:
  /s/ Mark McCullough
Name:  Mark McCullough
Title:  Vice President

 
Fifth Amendment to Allis-Chalmers
Energy Credit Agreement
 
 
Signature Page- Page 9

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Schedule 7.02

INVESTMENTS IN FOREIGN SUBSIDIARIES AND FOREIGN JOINT VENTURES

Allis Chalmers – International Asset Transfers/Investments
(in US$)

Rawabi JV
                     
Pipe Orders & Other (Allis’ share)
    1,759,754      
Pipe from Allis inventory
    1,648,271      
Cash contribution
    531,915      
Sub-total
    3,939,940                    
Other potential Rewabi JV Capex (5 ½ ” drill pipe)
 
1,467,000
  (50% share)  
Other anticipated equipment
    365,000                    
Rawabi-Allis JV - 2009
    5,771,940      
Estimated 2010 Capex (various drill pipe and misc equipment)
 
3,315,000
  (50% share)                
Total Rawabi-Allis (2009 & 2010)
    9,086,940                    
DLS Bolivia
                         
Intercompany sale of 5 ½ ” pipe
 
1,178,765
  (Allis to receive promissory note   
(For TOTAL drilling contact)
                         
BCH Brazil
                         
Contribution of BOPs to BCH
    490,000      
(For Petrobras contracts)
                         
Contribution of misc. casing & tubing assets to BCH
    477,038      
(For Petrobras contracts)
                                11,232,743      

 
Allis-Chalmers Energy Compiled
Second Amended and Restated Credit Agreement
 
 
Schedule 7.02

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