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EXHIBIT 10.62

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                              AMENDED AND RESTATED
                          CREDIT AND SECURITY AGREEMENT

                                 BY AND BETWEEN

                           ALLIS-CHALMERS CORPORATION

                       STRATA DIRECTIONAL TECHNOLOGY, INC.

                       JENS' OIL FIELD SERVICE, INC., AND


                         SAFCO-OIL FIELD PRODUCTS, INC.

                                       AND

                            WELLS FARGO CREDIT, INC.


                                DECEMBER 7, 2004


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                              AMENDED AND RESTATED
                          CREDIT AND SECURITY AGREEMENT

                          Dated as of December 7, 2004


         ALLIS-CHALMERS CORPORATION, a Delaware corporation ("Allis-Chalmers"),
STRATA DIRECTIONAL TECHNOLOGY, INC., a Texas corporation ("Strata"), JENS' OIL
FIELD SERVICE, INC., a Texas corporation ("Jens"), and SAFCO-OIL FIELD PRODUCTS,
INC., a Texas corporation ("Safco" and together with Allis Chalmers, Strata, and
Jens, the "Borrowers"), and Wells Fargo Credit, Inc., a Minnesota corporation
(the "Lender"), hereby agree as follows:

         WHEREAS, Strata and the Lender are parties to an Amended and Restated
Credit and Security Agreement dated as of February 1, 2002, as amended (the
"Strata Credit Agreement"); and

         WHEREAS, Jens and the Lender are parties to a Credit and Security
Agreement dated as of February 1, 2002, as amended (the "Jens Credit
Agreement"); and

         WHEREAS, this Agreement amends and restates the Strata Credit Agreement
and the Jens Credit Agreement in their entirety; and

         WHEREAS, Strata's obligation to repay advances under the Strata Credit
Agreement was evidenced by a Third Amended and Restated Revolving Note dated as
of April 2, 2004, in the original principal amount of $4,000,000 (the "Strata
Revolving Note"); and

         WHEREAS, Jens' obligation to repay revolving advances under the Jens
Credit Agreement was evidenced by a Revolving Note dated as of February 1, 2002,
in the original principal amount of $1,000,000 (the "Jens Revolving Note"); and

         WHEREAS, Jens' obligation to repay term advances under the Jens Credit
Agreement was evidenced by a Term Note dated as of February 1, 2002, in the
original principal amount of $4,042,396, and by a Real Estate Note dated as of
February 1, 2002, in the original principal amount of $532,000 (collectively,
the "Jens Term Notes"); and

         WHEREAS, the parties hereto have agreed, among other things, that (a)
the Strata Credit Agreement, the Jens Credit Agreement, the Strata Revolving
Note, the Jens Revolving Note, and the Jens Term Notes will be amended and
restated in their entireties by this Credit Agreement, the Revolving Note, and
the Term A Note, and (b) Allis Chalmers and Safco will become Borrowers under
this Credit Agreement, and that the Lender will commit to advance funds to Allis
Chalmers and Safco, all on the terms and conditions set forth herein.

         NOW, THEREFORE, incorporating the Recitals, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

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                                    ARTICLE I

                                   DEFINITIONS

         Section 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided, the following terms shall have the meanings
assigned to them in this Section or in the Section referenced after such term:

         "Accounts" means all of the Borrowers' accounts, as such term is
defined in the UCC, including each and every right of each Borrower to the
payment of money, whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease or other disposition
of goods or other property, out of a rendering of services, out of a loan, out
of the overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by any Borrower or by some other person who subsequently transfers such
person's interest to any Borrower, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all Liens)
that any Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against any
property of such account debtor or other obligor; all including but not limited
to all present and future accounts, contract rights, loans and obligations
receivable, chattel papers, bonds, notes and other debt instruments, tax refunds
and rights to payment in the nature of general intangibles.

         "Accounts Advance Rate" means up to eighty-five percent (85%), or such
lesser rate as the Lender in its sole discretion may deem appropriate from time
to time.

         "Advance" means a Revolving Advance, the Term A Advance or a Term B
Advance.

         "Affiliate" or "Affiliates" means any Person controlled by, controlling
or under common control with any Borrower, including any Subsidiary of any
Borrower. For purposes of this definition, "control," when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.

         "Aggregate Face Amount" has the meaning given in SECTION 2.8(d).

         "Agreement" means this Amended and Restated Credit and Security
Agreement together with all exhibits and schedules hereto, as each may be
amended from time to time.

         "AirComp" means AirComp L.L.C., a Delaware limited liability company.

         "Allis Chalmers" has the meaning given in the introductory paragraph.

         "Applicable Law" has the meaning given to it in SECTION 2.7(f)(i).

         "Availability" means the amount, if any, by which the Borrowing Base
exceeds the SUM of (i) the outstanding principal balance of the Revolving Note
and (ii) the L/C Amount.

                                      -2-
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         "Book Net Worth" means the aggregate of the common and preferred
shareholders' equity in the Borrowers, determined in accordance with GAAP.

         "Borrowing Base" means at any time the LESSER of:

                  (a) The Maximum Line Amount; or

                  (b) Subject to change from time to time in the Lender's sole
         discretion, the SUM of:

                           (i) the product of the Accounts Advance Rate times
                  Eligible Accounts, LESS

                           (ii) the Borrowing Base Reserve, LESS

                           (iii) the Wells Fargo Bank Obligations Reserve.

         "Borrowing Base Reserve" means, as of any date of determination, such
amounts (expressed as either a specified amount or as a percentage of a
specified category or item) as the Lender may from time to time establish and
adjust in reducing Availability (a) to reflect events, conditions, contingencies
or risks which, as determined by the Lender, do or may affect (i) the Collateral
or its value, (ii) the assets or business of any Borrower, or (iii) the security
interests and other rights of the Lender in the Collateral (including the
enforceability, perfection and priority thereof), or (b) to reflect the Lender's
judgment that any collateral report or financial information furnished by or on
behalf of any Borrower to the Lender is or may have been incomplete, inaccurate
or misleading in any material respect, or (c) in respect of any state of facts
that the Lender determines constitutes a Default or an Event of Default.

         "Business Day" means day on which the Federal Reserve Bank of New York
is open for business.

         "Capital Expenditures" means for a period, any expenditure of money
during such period for the capital lease, purchase or other acquisition of any
capital asset, whether payable currently or in the future.

         "Cash Flow From Operations" means for a given period, the SUM of (i)
Net Income, (ii) depreciation and amortization, (iii) deferred income taxes, and
(iv) other non-cash items, each as determined for such period in accordance with
GAAP.

         "Change of Control" means the occurrence of any of the following events
from and after the date of this Credit Agreement:

                  (a) Any Person or "group" (as such term is used in Sections
         13(d) and 14(d) of the Securities Exchange Act of 1934) is or becomes
         the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
         Securities Exchange Act of 1934, except that a Person will be deemed to
         have "beneficial ownership" of all securities that such Person has the
         right to acquire, whether such right is exercisable immediately or only
         after the passage of time), directly or indirectly, of more than
         twenty-five percent (25%) of the voting power of all classes of capital
         stock of Allis Chalmers.

                                      -3-
<PAGE>

                  (b) Any Person or group other than Allis Chalmers is or
         becomes the beneficial owner, directly or indirectly, of any common
         stock or voting power of any Borrower other than Allis Chalmers.

                  (c) During any consecutive two (2) year period, individuals
         who at the beginning of such period constituted the board of Directors
         of any Borrower (together with any new Directors whose election to such
         board of Directors, or whose nomination for election by the Owners of
         such Borrower, was approved by a vote of two thirds (2/3) of the
         Directors then still in office who were either Directors at the
         beginning of such period or whose election or nomination for election
         was previously so approved) cease for any reason to constitute a
         majority of the board of Directors of such Borrower then in office.

         "Collateral" means all of the Borrowers' Accounts, chattel paper and
electronic chattel paper, deposit accounts, documents, Equipment, General
Intangibles, goods, instruments, Inventory, Investment Property,
letter-of-credit rights, letters of credit, all sums on deposit in any
Collateral Account, and any items in any Lockbox; together with (i) all
substitutions and replacements for and products of any of the foregoing; (ii) in
the case of all goods, all accessions; (iii) all accessories, attachments,
parts, equipment and repairs now or hereafter attached or affixed to or used in
connection with any goods; (iv) all warehouse receipts, bills of lading and
other documents of title now or hereafter covering such goods; (v) all
collateral subject to the Lien of any Security Document; (vi) any money, or
other assets of any Borrower that now or hereafter come into the possession,
custody, or control of the Lender; (vii) all sums on deposit in the Special
Account; (viii) the Real Estate; (ix) proceeds of any and all of the foregoing;
(x) books and records of any Borrower, including all mail or electronic mail
addressed to any Borrower; and (xi) all of the foregoing, whether now owned or
existing or hereafter acquired or arising or in which any Borrower now has or
hereafter acquires any rights.

         "Collateral Account" means the "Lender Account" as defined in any
Wholesale Lockbox and Collection Account Agreement.

         "Commitment" means the Lender's commitment to make Advances to, and to
cause Wells Fargo Bank to issue Letters of Credit for the account of, any
Borrower pursuant to ARTICLE II.

         "Constituent Documents" means with respect to any Person, as
applicable, such Person's certificate of incorporation, articles of
incorporation, by-laws, certificate of formation, articles of organization,
limited liability company agreement, management agreement, operating agreement,
shareholder agreement, partnership agreement or similar document or agreement
governing such Person's existence, organization or management or concerning
disposition of ownership interests of such Person or voting rights among such
Person's owners.

         "Credit Facility" means the credit facility under which Revolving
Advances may be made available to any Borrower by the Lender under ARTICLE II.

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         "Current Maturities of Long Term Debt" means as of a given date, the
amount of all of the Borrowers' long-term debt and capitalized leases which
became due during the fiscal year-to-date period ending on the designated date.

         "Cut-off Time" means 11:00 a.m., Minneapolis, Minnesota time.

         "Debt" means of a Person as of a given date, all items of indebtedness
or liability which in accordance with GAAP would be included in determining
total liabilities as shown on the liabilities side of a balance sheet for such
Person and shall also include the aggregate payments required to be made by such
Person at any time under any lease that is considered a capitalized lease under
GAAP.

         "Debt Service Coverage Ratio" means (i) the SUM of (A) Cash Flow from
Operations and (B) Interest Expense MINUS (C) the SUM of Unfinanced Capital
Expenditures, DIVIDED by (ii) the SUM of (A) Current Maturities of Long Term
Debt (including Term A Scoops and Term B Scoops) and (B) Interest Expense.

         "Deed of Trust" means the Combined Trust Deed, Security Agreement,
Assignment of Rents and Fixture financing Statement, dated as of February 1,
2002, executed by Jens for the benefit of the Lender as security for the
Obligations.

         "Default" means an event that, with giving of notice or passage of time
or both, would constitute an Event of Default.

         "Default Period" means any period of time beginning on the day a
Default or Event of Default occurs and ending on the date identified by the
Lender in writing as the date that such Default or Event of Default has been
cured or waived.

         "Default Rate" means an annual interest rate equal to three percent
(3%) over the otherwise-applicable Floating Rate, as such rate may change from
time to time.

         "Director" of any Borrower means a director if such Borrower is a
corporation, a governor, manager, or managing member if such Borrower is a
limited liability company, or a partner if such Borrower is a partnership.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

         "ERISA Affiliate" of a Borrower means any trade or business (whether or
not incorporated) that is a member of a group which includes such Borrower and
which is treated as a single employer under Section 414 of the IRC.

         "Eligible Accounts" means all unpaid Accounts arising from the sale or
lease of goods or the performance of services, net of any credits, but excluding
any such Accounts having any of the following characteristics:

                  (i) That portion of Accounts unpaid more than ninety (90) days
         past the invoice date;

                                      -5-
<PAGE>

                  (ii) That portion of Accounts that is (A) disputed or (B)
         subject to a claim of offset or a contra account;

                  (iii) That portion of Accounts not yet earned by the final
         delivery of goods or rendition of services, as applicable, to the
         customer, including progress billings, and that portion of Accounts for
         which an invoice has not been sent to the applicable account debtor;

                  (iv) Accounts constituting (A) proceeds of copyrightable
         material unless such copyrightable material shall have been registered
         with the United States Copyright Office, or (B) proceeds of patentable
         inventions unless an application has been filed with, or a patent has
         been issued by, the United States Patent and Trademark Office,
         containing claims covering such patentable inventions;

                  (v) Accounts owed by any unit of government, whether foreign
         or domestic (PROVIDED, HOWEVER, that there shall be included in
         Eligible Accounts that portion of Accounts owed by such units of
         government for which the applicable Borrower has provided evidence
         satisfactory to the Lender that (A) the Lender has a first priority
         perfected security interest and (B) such Accounts may be enforced by
         the Lender directly against such unit of government under all
         applicable laws);

                  (vi) Accounts owed by an account debtor located outside the
         United States or Canada which are not (A) backed by a bank letter of
         credit naming the Lender as beneficiary or assigned to the Lender, in
         the Lender's possession or control, and with respect to which a control
         agreement concerning the letter-of-credit rights is in effect, and
         acceptable to the Lender in all respects, in its sole discretion, or
         (B) covered by a foreign receivables insurance policy acceptable to the
         Lender in its sole discretion;

                  (vii) Accounts owed by an account debtor that is insolvent,
         the subject of bankruptcy proceedings or has gone out of business;

                  (viii) Accounts owed by an Owner, Subsidiary, Affiliate,
         Officer or employee of the applicable Borrower;

                  (ix) Accounts not subject to a duly perfected security
         interest in the Lender's favor or which are subject to any Lien in
         favor of any Person other than the Lender;

                  (x) That portion of Accounts that has been restructured,
         extended, amended or modified;

                  (xi) That portion of Accounts that constitutes advertising,
         finance charges, service charges or sales or excise taxes;

                  (xii) Accounts owed by an account debtor, regardless of
         whether otherwise eligible, to the extent that the aggregate balance of
         such Accounts exceeds fifteen percent (15%) of the aggregate amount of
         all Accounts of the applicable Borrower;

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<PAGE>

                  (xiii) Accounts owed by an account debtor, regardless of
         whether otherwise eligible, if ten percent (10%) or more of the total
         amount of Accounts of the applicable Borrower due from such debtor is
         ineligible under clauses (i), (ii)(A), or (x) above; and

                  (xiv) Accounts, or portions thereof, otherwise deemed
         ineligible by the Lender in its sole discretion.

         "Eligible Equipment" means all equipment of the Borrowers, at the lower
of cost or market value as determined in accordance with GAAP; but EXCLUDING any
Equipment that is encumbered by Liens other than the Security Interest or a
Permitted Lien that is subordinated to the Security Interest, and any other
Equipment otherwise deemed unacceptable to the Lender in its sole discretion.

         "Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the protection
of human health and the environment.

         "Equipment" means all of the Borrowers' equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but not
limited to all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping equipment,
parts, tools, supplies, and including specifically the goods described in any
equipment schedule or list herewith or hereafter furnished to the Lender by any
Borrower.

         "Event of Default" has the meaning set forth in SECTION 7.1.

         "Financial Covenants" means the covenants set forth in SECTION 6.2.

         "Floating Rate" means an annual interest rate equal to the sum of the
Prime Rate plus one percent (1.00%), which interest rate shall change when and
as the Prime Rate changes.

         "Funding Date" has the meaning set forth in SECTION 2.1.

         "GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in SECTION 5.6.

         "General Intangibles" means all of the Borrowers' general intangibles,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including all present and future Intellectual Property Rights, customer or
supplier lists and contracts, manuals, operating instructions, permits,
franchises, the right to use any Borrower's name, and the goodwill of each
Borrower's business.

         "Guarantor" means OilQuip, MCA and any other Person now or hereafter
guarantying the Obligations.

         "Hazardous Substances" means pollutants, contaminants, hazardous
substances, hazardous wastes, petroleum and fractions thereof, and all other
chemicals, wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.

         "IRC" means the Internal Revenue Code of 1986, as amended from time to
time.

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         "Indemnified Liabilities" has the meaning given in SECTION 8.6.

         "Indemnitees" has the meaning given in SECTION 8.6.

         "Infringement" or "Infringing" when used with respect to Intellectual
Property Rights means any infringement or other violation of Intellectual
Property Rights.

         "Intellectual Property Rights" means all actual or prospective rights
arising in connection with any intellectual property or other proprietary
rights, including all rights arising in connection with copyrights, patents,
service marks, trade dress, trade secrets, trademarks, trade names or mask
works.

         "Interest Expense" means for a fiscal year-to-date period, the
Borrowers' total gross interest expense during such period (excluding interest
income), and shall in any event include (i) interest expensed (whether or not
paid) on all Debt, (ii) the amortization of debt discounts, (iii) the
amortization of all fees payable in connection with the incurrence of Debt to
the extent included in interest expense, and (iv) the portion of any capitalized
lease obligation allocable to interest expense.

         "Interest Payment Date" has the meaning set forth in SECTION 2.9(a).

         "Inventory" means all of the Borrowers' inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether consisting
of whole goods, spare or maintenance parts or components, supplies or materials,
whether acquired, held or furnished for sale, for lease or under service
contracts or for manufacture or processing, and wherever located.

         "Investment Property" means all of the Borrowers' investment property,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all securities, security entitlements, securities
accounts, commodity contracts, commodity accounts, stocks, bonds, mutual fund
shares, money market shares and U.S. Government securities.

         "Jens Credit Agreement" has the meaning given in the recitals of this
Agreement.

         "Jens Term Advances" has the meaning given in 0.

         "Jens Term Notes" has the meaning given in the recitals of this
Agreement.

         "L/C Amount" means the sum of (i) the aggregate face amount of any
issued and outstanding Letters of Credit and (ii) the unpaid amount of the
Obligation of Reimbursement.

         "L/C Application" means an application for the issuance of standby
letters of credit pursuant to the terms of a Standby Letter of Credit Agreement,
in form acceptable to both Wells Fargo Bank and the Lender.

         "Letter of Credit" has the meaning set forth in SECTION 2.3(a).

         "Licensed Intellectual Property" has the meaning set forth in SECTION
5.11(c).

                                      -8-
<PAGE>

         "Lien" means any security interest, mortgage, deed of trust, pledge,
lien, charge, encumbrance, title retention agreement or analogous instrument or
device, including the interest of each lessor under any capitalized lease and
the interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or hereafter acquired
and whether arising by agreement or operation of law.

         "Liquidity" means the sum of Availability plus cash of the Borrowers.

         "Loan Documents" means this Agreement, the Notes, any L/C Application,
and the Security Documents.

         "Lockbox" means "Lockbox" as defined in any Wholesale Lockbox and
Collection Account Agreement.

         "Material Adverse Effect" means any of the following:

                  (a) A material adverse effect on the business, operations,
         results of operations, prospects, assets, liabilities or financial
         condition of any Borrower;

                  (b) A material adverse effect on the ability of any Borrower
         to perform its obligations under the Loan Documents;

                  (c) A material adverse effect on the ability of the Lender to
         enforce the Obligations or to realize the intended benefits of the
         Security Documents, including a material adverse effect on the validity
         or enforceability of any Loan Document or of any rights against any
         Guarantor, or on the status, existence, perfection, priority (subject
         to Permitted Liens) or enforceability of any Lien securing payment or
         performance of the Obligations; or

                  (d) Any claim against any Borrower or written threat of
         litigation which if determined adversely to any Borrower would cause
         any Borrower to be liable to pay an amount exceeding $1,000,000 or
         would be an event described in clauses (a), (b) and (c) above.

         "Maturity Date" means December 31, 2007.

         "MATYEP Payments" means all payments of any kind or nature received by
any Borrower from Materiales Y Equipo Petrolero, S.A. DE C.V., a Mexican
corporation.

         "Maximum Line Amount" means $10,000,000 unless said amount is reduced
pursuant to SECTION 2.11, in which event it means such lower amount.

         "Maximum Rate" has the meaning given to it in SECTION 2.7(f)(i).

         "MCA" means Mountain Compressed Air, Inc., a Texas corporation.

         "Mexican Capital Expenditures" means Capital Expenditures for purchases
of Equipment to be used in Mexico.

                                      -9-
<PAGE>

         "Minimum Interest Charge" has the meaning given in SECTION 2.7(b).

         "Multiemployer Plan" means a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) to which any Borrower or any ERISA Affiliate contributes or
is obligated to contribute.

         "Net Income" means fiscal year-to-date after-tax net income excluding
extraordinary losses and extraordinary gains, all as determined in accordance
with GAAP.

         "Note" means the Revolving Note, the Term A Note or the Term B Note,
and "Notes" means the Revolving Note, the Term A Note and the Term B Note.

         "Obligation of Reimbursement" means the obligation of any Borrower to
reimburse Wells Fargo Bank or the Lender pursuant to the terms of the Standby
Letter of Credit Agreement and any applicable L/C Application.

         "Obligations" means each Note, the Obligation of Reimbursement and each
and every other debt, liability and obligation of every type and description
which any Borrower may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created or
incurred, whether it arises in a transaction involving the Lender alone or in a
transaction involving other creditors of any Borrower, and whether it is direct
or indirect, due or to become due, absolute or contingent, primary or secondary,
liquidated or unliquidated, or sole, joint, several or joint and several, and
including all indebtedness of any Borrower arising under any Loan Document
between any Borrower and the Lender, whether now in effect or hereafter entered
into, and all Wells Fargo Bank Obligations.

         "OFAC" has the meaning given in SECTION 6.2(c).

         "Off-the-shelf Software" has the meaning given in SECTION 5.11(c).

         "Officer" means with respect to any Borrower, an officer if such
Borrower is a corporation, a manager if such Borrower is a limited liability
company, or a partner if such Borrower is a partnership.

         "OilQuip" means OilQuip Rentals, Inc., a Delaware corporation.

         "Overadvance" means or refers to any period of time during which
outstanding Revolving Advances are in excess of then-existing Availability.

         "Owned Intellectual Property" has the meaning set forth in SECTION
5.11(a).

         "Owner" means with respect to any Borrower, each Person having legal or
beneficial title to an ownership interest in such Borrower or a right to acquire
such an interest.

         "Pension Plan" of a Borrower means a pension plan (as defined in
Section 3(2) of ERISA) maintained for employees of such Borrower or any ERISA
Affiliate and covered by Title IV of ERISA.

         "Permitted Acquisition" has the meaning given in SECTION 6.18.

                                      -10-
<PAGE>

         "Permitted Lien" and "Permitted Liens" have the meanings set forth in
SECTION 6.3(a).

         "Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

         "Plan" of a Borrower means an employee benefit plan (as defined in
Section 3(3) of ERISA) maintained for employees of such Borrower or any ERISA
Affiliate.

         "Pledge Agreements" mean (i) the Pledge Agreement dated the same date
as this Agreement, executed by OilQuip in the Lender's favor and (ii) the Pledge
Agreement dated the same date as this Agreement, executed by Allis Chalmers in
the Lender's favor.

         "Premises" of any Borrower means all locations where such Borrower
conducts its business or has any rights of possession, including but not limited
to the locations legally described in EXHIBIT E hereto.

         "Prime Rate" means at any time the rate of interest most recently
announced by Wells Fargo Bank at its principal office as its Prime Rate, with
the understanding that the Prime Rate is one of Wells Fargo Bank's base rates,
and serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto, and is evidenced by the recording
thereof in such internal publication or publications as Wells Fargo Bank may
designate. Each change in the rate of interest shall become effective on the
date each Prime Rate change is announced by Wells Fargo Bank.

         "Real Estate" means the real property of Jens located at 5205 West
Highway 107, Edinburgh, Texas 78539, as more fully described in the Deed of
Trust.

         "Reportable Event" means a reportable event (as defined in Section 4043
of ERISA), other than an event for which the thirty (30) day notice requirement
under ERISA has been waived in regulations issued by the Pension Benefit
Guaranty Corporation.

         "Revolving Advance" has the meaning set forth in SECTION 2.1.

         "Revolving Note" means the Borrowers' revolving promissory note,
payable to the order of the Lender in substantially the form of EXHIBIT A
hereto, as same may be renewed and amended from time to time, and all
replacements thereto.

         "Security Documents" means this Agreement, the Wholesale Lockbox and
Collection Account Agreements, the Deed of Trust, and any other document
delivered to the Lender from time to time to secure the Obligations.

         "Security Interest" has the meaning set forth in SECTION 3.1.

         "Special Account" means a specified cash collateral account maintained
by a financial institution acceptable to the Lender in connection with Letters
of Credit, as contemplated by SECTION 2.4.

                                      -11-
<PAGE>

         "Standby Letter of Credit Agreement" means an agreement governing the
issuance of standby letters of credit by Wells Fargo Bank entered into between
any Borrower and Lender as co-applicants and Wells Fargo Bank as issuer.

         "Strata Credit Agreement" has the meaning given in the recitals of this
Agreement.

         "Subordination Agreements" means (i) the Subordination Agreement dated
the same date as this Agreement, executed by Wells Fargo Bank in the Lender's
favor and acknowledged by the Borrowers, (ii) the Subordination Agreement dated
the same date as this Agreement, executed by Jens H. Mortensen, Jr. in the
Lender's favor and acknowledged by the Borrowers and (iii) any other
subordination agreement accepted by the Lender from time to time.

         "Subordinated Debt" means Debt that is subject to any Subordination
Agreement.

         "Subsidiary" of a Borrower means any entity of which more than fifty
percent (50%) of the outstanding ownership interests having general voting power
under ordinary circumstances to elect a majority of the Directors of such
entity, irrespective of whether or not at the time ownership interests of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency, is at the time directly or indirectly owned by
such Borrower, by such Borrower and one or more other Subsidiaries, or by one or
more other Subsidiaries.

         "Term A Advance" has the meaning set forth in 0.

         "Term B Advance" has the meaning set forth in 0.

         "Term A Scoops" has the meaning set forth in 0.

         "Term B Scoops" has the meaning set forth in 0.

         "Term A Note" means the Borrowers' promissory note, payable to the
order of the Lender in substantially the form of EXHIBIT B hereto, as same may
be renewed and amended from time to time, and all replacements thereto.

         "Term B Note" means the Borrowers' promissory note, payable to the
order of the Lender in substantially the form of EXHIBIT C hereto, as same may
be renewed and amended from time to time, and all replacements thereto.

         "Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date any Borrower terminates the Credit Facility, or (iii) the date the
Lender demands payment of the Obligations, following an Event of Default,
pursuant to SECTION 7.2.

         "UCC" means the Uniform Commercial Code as in effect in the state
designated in SECTION 8.13 as the state whose laws shall govern this Agreement,
or in any other state whose laws are held to govern this Agreement or any
portion hereof.

         "Unfinanced Capital Expenditures" means all Capital Expenditures EXCEPT
to the extent (i) those Capital Expenditures are leased from, or otherwise
financed through, a third-party leasing company or lender or (ii) to the extent
funded with proceeds of the issuance of common equity of Allis Chalmers.

                                      -12-
<PAGE>

         "Unused Amount" has the meaning set forth in SECTION 2.8(b).

         "Unused Line Fee" has the meaning given in SECTION 2.8(b).

         "Wells Fargo Bank Obligations" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by any Borrower
or its Subsidiaries to Wells Fargo Bank with respect to Wells Fargo Bank
Products, whether for the payment of money, whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter arising, whether
or not such Borrower is obligated to reimburse said amounts to the Lender as a
result of the Lender purchasing participations from or agreeing to indemnify or
reimburse Wells Fargo Bank for any loss or indebtedness arising with respect to
Wells Fargo Bank Products provided to any Borrower or its Subsidiaries.

         "Wells Fargo Bank Obligations Reserve" means, as of any date of
determination, the dollar amount that the Lender then determines is a reasonable
determination of the credit exposure with respect to Wells Fargo Bank
Obligations of the Borrowers and which is available for payment of Wells Fargo
Bank Obligations.

         "Wells Fargo Bank Products" means any service or facility extended to a
Borrower or its Subsidiaries by Wells Fargo Bank including but not limited to:
(a) credit cards, (b) credit card processing services, (c) debit cards, (d)
purchase cards, (e) cash management or related services including the Automated
Clearing House processing of electronic funds transfers, (f) controlled
disbursement accounts or services, and (g) any agreement which provides for an
interest rate, credit, commodity or equity swap, cap, floor, collar, forward
foreign exchange transaction, currency swap, cross currency rate swap, currency
option, or any combination of, or option with respect to, these or similar
transactions, for the purpose of hedging a Borrower's or its Subsidiaries'
exposure to fluctuations in interest or exchange rates, loan, credit exchange,
security or currency valuations or commodity prices.

         "Wells Fargo Bank" means Wells Fargo Bank, National Association.

         "Wholesale Lockbox and Collection Account Agreement" means each of the
separate Wholesale Lockbox and Collection Account Agreement by and among each
Borrower, Wells Fargo Bank and Lender, dated the same date as this Agreement.

         Section 1.2 OTHER DEFINITIONAL TERMS; RULES OF INTERPRETATION. The
words "hereof," "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with GAAP. All
terms defined in the UCC and not otherwise defined herein have the meanings
assigned to them in the UCC. References to Articles, Sections, subsections,
Exhibits, Schedules and the like, are to Articles, Sections and subsections of,
or Exhibits or Schedules attached to, this Agreement unless otherwise expressly
provided. The words "include," "includes" and "including" shall be deemed to be
followed by the phrase "without limitation." Unless the context in which used
herein otherwise clearly requires, "or" has the inclusive meaning represented by
the phrase "and/or." Defined terms include in the singular number the plural and
in the plural number the singular. Reference to any agreement (including the


                                      -13-
<PAGE>

Loan Documents), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance
with the terms thereof (and, if applicable, in accordance with the terms hereof
and the other Loan Documents), EXCEPT where otherwise explicitly provided, and
reference to any promissory note includes any promissory note which is an
extension or renewal thereof or a substitute or replacement therefor. Reference
to any law, rule, regulation, order, decree, requirement, policy, guideline,
directive or interpretation means as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect on the determination date,
including rules and regulations promulgated thereunder.

                                   ARTICLE II

                     AMOUNT AND TERMS OF THE CREDIT FACILITY

         Section 2.1 REVOLVING ADVANCES. The Lender agrees, subject to the terms
and conditions of this Agreement, to make advances ("Revolving Advances") to
each Borrower from time to time from the date that all of the conditions set
forth in SECTION 4.1 are satisfied (the "Funding Date") to and until the
Maturity Date in an amount not in excess of the Maximum Line Amount. The Lender
shall have no obligation to make a Revolving Advance to the extent that the
amount of the requested Revolving Advance exceeds Availability. The Borrowers'
obligation to pay the Revolving Advances shall be evidenced by the Revolving
Note, shall be joint and several and shall be secured by the Collateral. Within
the limits set forth in this SECTION 2.1, the Borrowers may borrow, prepay
pursuant to SECTION 2.11, and reborrow.

         Section 2.2 PROCEDURES FOR REQUESTING ADVANCES. Each Borrower shall
comply with the following procedures in requesting Revolving Advances:

                  (a) TIME FOR REQUESTS. Such Borrower shall request each
         Advance not later than the Cut-off Time on the Business Day the Advance
         is to be made. Each request that conforms to the terms of this
         Agreement shall be effective upon receipt by the Lender, shall be in
         writing or by telephone or telecopy transmission, and shall be
         confirmed in writing by such Borrower if so requested by the Lender, by
         (i) an Officer of Allis Chalmers; or (ii) a person designated as such
         Borrower's agent by an Officer of Allis Chalmers in a writing delivered
         to the Lender; or (iii) a person whom the Lender reasonably believes to
         be an Officer of Allis Chalmers or such a designated agent. The
         Borrowers shall repay all Advances even if the Lender does not receive
         such confirmation and even if the person requesting an Advance was not
         in fact authorized to do so. Any request for an Advance, whether
         written or telephonic, shall be deemed to be a representation by the
         Borrowers that the conditions set forth in SECTION 4.2 have been
         satisfied as of the time of the request.

                  (b) DISBURSEMENT. Upon fulfillment of the applicable
         conditions set forth in ARTICLE IV, the Lender shall disburse the
         proceeds of the requested Advance by crediting the same to requesting
         Borrower's demand deposit account maintained with Wells Fargo Bank
         unless the Lender and such Borrower shall agree in writing to another
         manner of disbursement.

                                      -14-
<PAGE>

         Section 2.3 LETTERS OF CREDIT.

                  (a) The Lender agrees, subject to the terms and conditions of
         this Agreement, to cause Wells Fargo Bank to issue, at any time after
         the Funding Date and prior to the Termination Date, one or more
         irrevocable standby or documentary letters of credit (each, a "Letter
         of Credit") for a Borrower's account by acting as such Borrower's
         co-applicant to Wells Fargo Bank as issuer. The Lender shall have no
         obligation to cause Wells Fargo Bank to issue any Letter of Credit if
         the face amount of the Letter of Credit to be issued would exceed the
         lesser of:

                           (i) $3,000,000 less the L/C Amount, or

                           (ii) Availability.

         Each Letter of Credit, if any, shall be issued pursuant to a separate
         L/C Application made by the requesting Borrower and the Lender as
         co-applicants to Wells Fargo Bank, which must be completed in a manner
         satisfactory to the Lender and Wells Fargo Bank. The terms and
         conditions set forth in each such L/C Application shall supplement the
         terms and conditions of the Standby Letter of Credit Agreement.

                  (b) No Letter of Credit shall be issued with an expiry date
         later than the Termination Date in effect as of the date of issuance.

                  (c) Any request for issuance of a Letter of Credit shall be
         deemed to be a representation by the requesting Borrower that the
         conditions set forth in SECTION 4.2 have been satisfied as of the date
         of the request.

                  (d) If a draft is submitted under a Letter of Credit when the
         Borrowers are unable, because a Default Period exists or for any other
         reason, to obtain a Revolving Advance to pay the Obligation of
         Reimbursement, the Borrowers shall pay to the Lender on demand and in
         immediately available funds, the amount of the Obligation of
         Reimbursement together with interest, accrued from the date of the
         draft until payment in full at the Default Rate. Notwithstanding the
         Borrowers inability to obtain a Revolving Advance for any reason, the
         Lender is irrevocably authorized, in its sole discretion, to make a
         Revolving Advance in an amount sufficient to discharge the Obligation
         of Reimbursement and all accrued but unpaid interest thereon.

         Section 2.4 SPECIAL ACCOUNT. If the Credit Facility is terminated for
any reason while any Letter of Credit is outstanding, the Borrowers shall
thereupon pay the Lender in immediately available funds for deposit in the
Special Account an amount equal to the L/C Amount PLUS any anticipated fees and
costs. If the Borrowers fail to promptly make any such payment in the amount
required hereunder, then Lender may make a Revolving Advance against the Credit
Facility in an amount sufficient to fulfill this obligation and deposit the
proceeds to the Special Account. The Special Account shall be an interest
bearing account maintained for the Lender by any financial institution
acceptable to the Lender. Any interest earned on amounts deposited in the
Special Account shall be credited to the Special Account. The Lender may apply
amounts on deposit in the Special Account at any time or from time to time to
the Obligations in the Lender's sole discretion. No Borrower may withdraw any
amounts on deposit in the Special Account as long as the Lender maintains a
security interest therein. The Lender agrees to transfer any balance in the
Special Account to Borrowers when the Lender is required to release its security
interest in the Special Account under applicable law.

                                      -15-
<PAGE>

         Section 2.5 TERM ADVANCES.

                  (a) TERM A ADVANCES.

                           On February 1, 2002, the Lender made a term advance
                  to Jens in the principal amount of $4,092,396, and a real
                  estate advance to Jens in the principal amount of $532,000
                  (collectively, the "Jens Term Advances"), which advances were
                  evidenced by the Jens Term Notes. The combined outstanding
                  principal balance of the Jens Term Notes as of November 12,
                  2004, was $2,838,704.54. The Lender agrees, subject to the
                  terms and conditions of this Agreement, to make a single
                  advance to the Borrowers on the Funding Date in the amount of
                  $3,496,295.46 (collectively, together with the Jens Term
                  Advances, the "Term A Advances"). The Borrowers' obligation to
                  pay the Term A Advances shall be evidenced by the Term A Note,
                  shall be joint and several and shall be secured by the
                  Collateral as provided in ARTICLE III.

                      TERM B ADVANCES.

                           The Lender agrees, subject to the terms and
                  conditions of this Agreement, to make advances to the
                  Borrowers from time to time from the Funding Date to December
                  31, 2005 (each a "Term B Advance"). The Lender will have no
                  obligation to make a Term B Advance if, after giving effect to
                  such requested Term B Advance, the outstanding principal
                  balance of the Term B Advances would exceed the lesser of the
                  following amount reduced by the aggregate amount of the
                  scheduled principal payments described in SECTION 2.6: (A)
                  $6,000,000 and (B) the SUM of (Y) eighty percent (80%) of the
                  purchase price (excluding tax, freight, and installation
                  charges) of new Eligible Equipment purchased with proceeds of
                  Term B Advances, AND (Z) the LESSER of (1) eighty percent
                  (80%) of the orderly liquidation value and (2) ninety percent
                  (90%) of the forced liquidation value of used Eligible
                  Equipment purchased with proceeds of Term B Advances and
                  acquired individually or in connection with asset acquisitions
                  consented to in writing by the Lender. The Borrowers'
                  obligation to pay the Term B Advances shall be evidenced by
                  the Term B Note, shall be joint and several and shall be
                  secured by the Collateral as provided in ARTICLE III.

                                    The Borrowers shall comply with the
                  following procedures in requesting Term B Advances:

                                    The requesting Borrower shall make each
                           request for a Term B Advance to the Lender no later
                           than the Cut-off Time on the Business Day on which
                           any Borrower wishes to receive a Term B Advance.
                           Requests may be made in writing or by telephone,
                           specifying the date of the requested Term B Advance
                           and the amount thereof.

                                      -16-
<PAGE>

                                            The amount of each Term B Advance
                           shall be shall be an integral multiple of $100,000,
                           with a minimum amount of at least $200,000.

                                            Each request shall be by an
                           individual authorized pursuant to SECTION 2.2(a).

                                    Upon fulfillment of the applicable
                  conditions set forth in ARTICLE IV, the Lender shall deposit
                  the proceeds of the requested Term B Advance by crediting the
                  same to the requesting Borrower's demand deposit account
                  specified in SECTION 2.2(B) unless the Lender and the
                  Borrowers shall agree in writing to another manner of
                  disbursement. Upon the Lender's request, the requesting
                  Borrower shall promptly confirm each telephonic request for a
                  Term B Advance by executing and delivering an appropriate
                  confirmation certificate to the Lender. The Borrowers shall be
                  obligated to repay all Term B Advances notwithstanding the
                  Lender's failure to receive such confirmation and
                  notwithstanding the fact that the person requesting the same
                  was not in fact authorized to do so. Any request for a Term B
                  Advance, whether written or telephonic, shall be deemed to be
                  a representation by the Borrowers, upon which the Lender may
                  rely, that the Borrowers are in compliance with the conditions
                  set forth in SECTION 4.2 as of the time of the request.

         Section 2.6 PAYMENT OF TERM NOTES.

                  (a) PAYMENT OF TERM A NOTE. The outstanding principal balance
         of the Term A Note shall be due and payable as follows:

                           Beginning on January 1, 2005, and on the first day of
                  each month thereafter, in substantially equal monthly
                  installments of $105,583.33.

                                    In addition, within seven (7) days after any
                  Borrower receives a MATYEP Payment, in an amount equal to
                  twenty percent (20%) of such MATYEP Payment ("Term A Scoops"),
                  which Term A Scoops shall not exceed $1,000,000 in any twelve
                  (12) month period commencing on December 1 of any year.

                                    In addition, if the Lender at any time
                  obtains an appraisal of the Equipment as permitted under
                  SECTION 6.9(d) herein, and the appraisal shows the aggregate
                  outstanding principal balance of the Term A Note to exceed the
                  LESSER of eighty percent (80%) of the orderly liquidation
                  value of Eligible Equipment (other than Equipment purchased
                  with proceeds of Term B Advances) and ninety percent (90%) of
                  the forced sale liquidation value of the Eligible Equipment of
                  the Borrowers (other than Equipment purchased with proceeds of
                  Term B Advances), then the Borrowers, within thirty (30) days
                  of notice and demand by the Lender, shall prepay the Term A
                  Note in the amount of such excess.

                                      -17-
<PAGE>

                                    All prepayments of principal with respect to
                  the Term A Note shall be applied to the most remote principal
                  installment or installments then unpaid.

                                    On the Termination Date, the entire unpaid
                  principal balance of the Term A Note, and all unpaid interest
                  accrued thereon, will in any event be due and payable.

                  (b) PAYMENT OF TERM B NOTE. The outstanding principal balance
         of the Term B Note shall be due and payable as follows:

                           Beginning on January 1, 2006, in substantially equal
                  monthly installments in an amount equal to one forty-eighth
                  (1/48) of the outstanding principal balance of the Term B Note
                  on December 31, 2005.

                                    In addition, after all of the Term A
                  Advances have been paid in full, within seven (7) days after
                  any Borrower receives a MATYEP Payment, in an amount equal to
                  twenty percent (20%) of such MATYEP Payment ("Term B Scoops"),
                  which Term B Scoops, together with any Term A Scoops paid
                  during such fiscal year, shall not exceed $1,000,000 in any
                  twelve (12) month period commencing on December 1 of any year.

                                    In addition, if the Lender at any time
                  obtains an appraisal of the Equipment as permitted under
                  SECTION 6.9(d) herein, and the appraisal shows the aggregate
                  outstanding principal balance of the Term B Note to exceed the
                  LESSER of eighty percent (80%) of the orderly liquidation
                  value of Eligible Equipment purchased with Term B Advances and
                  ninety percent (90%) of the forced sale liquidation value of
                  the Eligible Equipment purchased with Term B Advances, then
                  the Borrowers, within thirty (30) days of notice and demand by
                  the Lender, shall prepay the Term B Note in the amount of such
                  excess.

                                    All prepayments of principal with respect to
                  the Term B Note shall be applied to the most remote principal
                  installment or installments then unpaid.

                                    On the Termination Date, the entire unpaid
                  principal balance of the Term B Note, and all unpaid interest
                  accrued thereon, will in any event be due and payable.

         Section 2.7 INTEREST; MINIMUM INTEREST CHARGE; DEFAULT INTEREST RATE;
APPLICATION OF PAYMENTS; PARTICIPATIONS; USURY.

                  (a) INTEREST. Except as provided in SECTION 2.7(c) and SECTION
         2.7(f), the principal amount of each Advance shall bear interest at the
         Floating Rate.

                  (b) MINIMUM INTEREST CHARGE. Notwithstanding the interest
         payable pursuant to Subsection (a), the Borrowers shall pay to the
         Lender interest and Unused Line Fees of not less than $20,000 per month
         (the "Minimum Interest Charge") during the term of this Agreement, and
         the Borrowers shall pay any deficiency between the Minimum Interest
         Charge and the sum of (i) the amount of interest otherwise calculated
         under SECTION 2.7(a) plus (ii) the amount of the Unused Line Fee, on
         the first day of each month and on the Termination Date. When
         calculating the deficiency due hereunder, if any, between the Minimum
         Interest Charge and the amount of interest otherwise payable under
         SECTION 2.7(a), the Default Rate, if applicable, shall be disregarded.

                                      -18-
<PAGE>

                  (c) DEFAULT INTEREST RATE. At any time during any Default
         Period or following the Termination Date, in the Lender's sole
         discretion and without waiving any of its other rights or remedies, the
         principal of the Notes shall bear interest at the Default Rate or such
         lesser rate as the Lender may determine, effective as of the first day
         of the month in which any Default Period begins through the last day of
         such Default Period, or any shorter time period that the Lender may
         determine. The decision of the Lender to impose a rate that is less
         than the Default Rate or to not impose the Default Rate for the entire
         duration of the Default Period shall be made by Lender in its sole
         discretion and shall not be a waiver of any of its other rights and
         remedies, including its right to retroactively impose the full Default
         Rate for the entirety of any such Default Period or following the
         Termination Date.

                  (d) APPLICATION OF PAYMENTS. Payments shall be applied to the
         Obligations on the Business Day of receipt by the Lender, but the
         amount of principal paid shall continue to accrue interest at the
         interest rate applicable under the terms of this Agreement from the
         calendar day the Lender receives the payment, and continuing through
         the end of the first Business Day following receipt of the payment.

                  (e) PARTICIPATIONS. If any Person shall acquire a
         participation in the Advances or the Obligation of Reimbursement, each
         Borrower shall be obligated to the Lender to pay the full amount of all
         interest calculated under this SECTION 2.7 along with all other fees,
         charges and other amounts due under this Agreement, regardless if such
         Person elects to accept interest with respect to its participation at a
         lower rate than that calculated under this SECTION 2.7, or otherwise
         elects to accept less than its prorata share of such fees, charges and
         other amounts due under this Agreement.

                  (f) MAXIMUM RATE.

                           (i) Notwithstanding the other provisions of this
                  Agreement or of any Note regarding interest and rates of
                  interest, it is the intent of the Lender and the Borrowers
                  that the execution, delivery and performance of all Loan
                  Documents, the transactions provided for therein and
                  contemplated thereby, and all matters incidental and related
                  thereto and arising therefrom, will comply and conform
                  strictly with any governing law from time to time in effect,
                  including usury laws. In furtherance thereof, the Lender and
                  the Borrowers stipulate and agree that none of the terms and
                  provisions contained in, or pertaining to, the Loan Documents
                  will ever be construed to create a contract to pay for the use
                  or forbearance or detention of money with interest at a rate
                  or in an amount in excess of the maximum amount of interest
                  permitted or allowed to be contracted for, charged, received,
                  taken or reserved under said laws (the "Maximum Rate"). For
                  purposes of each Loan Document, (x) "interest" will include
                  the aggregate of all amounts which constitute or are deemed to
                  constitute interest under Applicable Law, that are contracted
                  for, chargeable, receivable (whether received or deemed to
                  have been received), taken or reserved under each such


                                      -19-
<PAGE>

                  document, and (y) all computations of the Maximum Rate will be
                  made on the basis of the actual number of days elapsed over a
                  three hundred sixty five (365) or three hundred sixty six
                  (366) day year, whichever is applicable. Neither the Borrowers
                  nor any other Person will ever be required to pay unearned
                  interest on, or with respect to any of, the Loan Documents and
                  will never be required to pay interest on, or with respect to
                  any of, the Loan Documents at a rate or in an amount in excess
                  of the Maximum Rate, AND THE PROVISIONS OF THIS PARAGRAPH WILL
                  CONTROL OVER ALL OTHER PROVISIONS OF THE LOAN DOCUMENTS.
                  "Applicable Law" means the law of the state designated in
                  SECTION 8.13 hereof as the state whose laws will
                  govern this Agreement, or, if a court of competent
                  jurisdiction determines that the law of any other jurisdiction
                  applies to the determination of whether the rate of interest
                  payable under this Agreement and the Notes is usurious, the
                  law of such jurisdiction. If the effective rate or amount of
                  interest that would otherwise be payable under the Loan
                  Documents would exceed the Maximum Rate, or in the event the
                  Lender or any holder of any Note or other Obligation will
                  charge, contract for, take, reserve or receive monies that are
                  deemed to constitute interest that would, in the absence of
                  this provision, increase the effective rate or amount of
                  interest payable under the Loan Documents to a rate or amount
                  in excess of the Maximum Rate, then the principal amount of
                  such Note or other Obligation or the amount of interest that
                  would otherwise be payable thereunder will be payable at, or
                  reduced to, as applicable, the Maximum Rate, and all such
                  monies so charged, contracted for, received, taken or reserved
                  that are deemed to constitute interest in excess of the
                  Maximum Rate will be immediately credited to such Note or
                  Obligation or, if such Note or Obligation has been paid in
                  full, returned or credited to the account of the Borrowers
                  upon such determination, and, in any event, the Lender will
                  not be subject to any penalties provided by any laws for
                  contracting for, charging, taking, reserving or receiving
                  interest in excess of the Maximum Rate. All amounts paid or
                  agreed to be paid in connection with any Note or other
                  Obligation which would under Applicable Law be deemed
                  "interest" or if not so deemed, would be deemed an amount that
                  would be included in the calculation of the Maximum Rate will,
                  to the extent necessary to prevent such amount from exceeding
                  the Maximum Rate and to the maximum extent not prohibited by
                  Applicable Law, be amortized, prorated, allocated and spread
                  through the full term of this Agreement or such Note or other
                  Obligation, as the case may be.

                           (ii) Notwithstanding the other provisions of this
                  Agreement or of any Note regarding interest and rates of
                  interest, if at any time or for any period the otherwise
                  applicable rate or amount of interest provided for herein or
                  therein (without reference to the Maximum Rate limitations of
                  this Agreement) with respect to any Note or other Obligation
                  would exceed the Maximum Rate, then the amount and rate of
                  interest on such Loan or other Obligation will be limited to
                  the Maximum Rate at such time or during such period, and at
                  all times thereafter (including periods during which any or
                  all of such applicable rate(s) of interest otherwise provided
                  for herein would be less than the Maximum Rate), the interest
                  rate on such Note or other Obligation shall (while such Note
                  or Obligation remains outstanding) continue and remain at (but
                  shall not exceed) the Maximum Rate until the total amount of
                  interest accrued on such Note or other Obligation equals the


                                      -20-
<PAGE>

                  amount of interest that would have accrued thereon if the
                  applicable rate of interest otherwise provided for herein
                  (without reference to the Maximum Rate limitation) had at all
                  times been in effect; PROVIDED, HOWEVER, that in no event will
                  the aggregate of all interest charged, received, contracted
                  for, payable or paid in connection with the any Note or other
                  Obligation exceed an amount equal to interest on such Note or
                  other Obligation during the period such are outstanding,
                  incurred or existing at the Maximum Rate, so long (and for
                  such periods) as the Maximum Rate will be applicable to this
                  Agreement and the transactions contemplated hereby. If, at
                  maturity or final payment of any Note or other Obligation, as
                  applicable, the total amount of interest paid or accrued on
                  such Note or other Obligation under the foregoing provisions
                  is less than the total amount of interest that would have been
                  paid or accrued if the applicable contractual rate of interest
                  provided for herein (without limitation to the Maximum Rate)
                  had at all times been in effect, then the Borrowers agree, to
                  the fullest extent permitted by and in compliance with
                  Applicable Law, to pay an amount equal to the difference
                  between (x) the lesser of (A) the amount of interest that
                  would have been paid or accrued on such Note or other
                  Obligation, as applicable, if the Maximum Rate had at all
                  times been in effect and (B) the amount of interest that would
                  have been paid or accrued on such Note or other Obligation, as
                  applicable, if a rate per annum equal to the applicable
                  contractual rate of interest provided for herein (without
                  limitation to the Maximum Rate) had at all times been in
                  effect, and (y) the amount of interest paid or accrued in
                  accordance with the other provisions of such Note or other
                  Obligation, as applicable.

         Section 2.8 FEES.

                  (a) ORIGINATION FEE. The Borrowers together shall pay the
         Lender a fully earned and non-refundable origination fee of $175,000,
         due and payable upon the Funding Date.

                  (b) UNUSED LINE FEE. For the purposes of this SECTION 2.8(b),
         "Unused Amount" means the Maximum Line Amount reduced by the sum of
         outstanding Revolving Advances and the L/C Amount. Each Borrower agrees
         to pay to the Lender an aggregate unused line fee (the "Unused Line
         Fee") at the rate of one-half of one percent (0.50%) per annum on the
         average daily Unused Amount from the date of this Agreement to and
         including the Termination Date, due and payable monthly in arrears on
         the first day of the month and on the Termination Date.

                  (c) COLLATERAL EXAM FEES. Each Borrower shall pay the Lender
         fees in connection with any collateral exams, audits or inspections
         conducted by or on behalf of the Lender of any Collateral or any
         Borrower's operations or business at the rates established from time to
         time by the Lender as its collateral exam fees (which fees are
         currently $850 per day per collateral examiner), together with all
         actual out-of-pocket costs and expenses incurred in conducting any such
         collateral examination or inspection.

                                      -21-
<PAGE>

                  (d) LETTER OF CREDIT FEES. The Borrower for whose account any
         Letter of Credit is issued shall pay to the Lender a fee with respect
         to such Letter of Credit, if any, accruing on a daily basis and
         computed at an annual rate of three and one-half percent (3.5%) of the
         aggregate amount that may then be drawn, assuming compliance with all
         conditions for drawing (the "Aggregate Face Amount"), from and
         including the date of issuance of such Letter of Credit until such date
         as such Letter of Credit shall terminate by its terms or be returned to
         the Lender, due and payable monthly in arrears on the first day of each
         month and on the Termination Date; PROVIDED, HOWEVER, that during
         Default Periods, in the Lender's sole discretion and without waiving
         any of its other rights and remedies, such fee shall increase to six
         and one-half percent (6.5%) of the Aggregate Face Amount. The foregoing
         fee shall be in addition to any and all fees, commissions and charges
         of Wells Fargo Bank with respect to or in connection with such Letter
         of Credit.

                  (e) LETTER OF CREDIT ADMINISTRATIVE FEES. The Borrower for
         whose account any Letter of Credit is issued shall pay to the Lender
         all administrative fees charged by Wells Fargo Bank in connection with
         the honoring of drafts under any Letter of Credit, amendments thereto,
         transfers thereof and all other activity with respect to the Letters of
         Credit at the then-current rates published by Wells Fargo Bank for such
         services rendered on behalf of customers of Wells Fargo Bank generally.

                  (f) TERMINATION AND LINE REDUCTION FEES. If the Credit
         Facility is terminated (i) by the Lender during a Default Period that
         begins before the Maturity Date, (ii) by any Borrower (A) as of a date
         other than the Maturity Date or (B) as of the Maturity Date but without
         the Lender having received written notice of such termination at least
         thirty (30) days before such Maturity Date, or if any Borrower reduces
         the Maximum Line Amount, the Borrowers shall pay to the Lender a fee in
         an amount equal to a percentage of the Maximum Line Amount (or the
         reduction of the Maximum Line Amount, as the case may be) as follows:
         (A) two percent (2%) if the termination or reduction occurs on or
         before the first anniversary of the Funding Date; and (B) one percent
         (1%) if the termination or reduction occurs after the first anniversary
         of the Funding Date.

                  (g) PREPAYMENT FEES. If the Term A Note or the Term B Note is
         prepaid for any reason (other than in accordance with SECTION 2.6),
         whether voluntarily or by acceleration, the Borrowers shall pay to the
         Lender a prepayment fee in an amount equal to (i) two percent (2%) of
         the amount prepaid, if prepayment occurs on or before the first
         anniversary of the Funding Date; (ii) one percent (1%) of the amount
         prepaid, if prepayment occurs after the first anniversary of the
         Funding Date.

                  (h) WAIVER OF TERMINATION AND PREPAYMENT FEES. Each Borrower,
         will be excused from the payment of termination and prepayment fees
         otherwise due under SECTION 2.8(f) and SECTION 2.8(g) (i) if such
         termination or prepayment is made because of refinancing of such
         Borrower in full through Wells Fargo Bank or (ii) if up to fifty
         percent (50%) of the outstanding principal and accrued interest on such
         Term A Note or Term B Note shall be refinanced with funds raised from
         new equity issuances of Allis Chalmers or (iii) for up to $100,000 in
         prepayments of the Term A Note in any fiscal year using proceeds of
         sales of Equipment in accordance with SECTION 6.17.

                                      -22-
<PAGE>

                  (i) OVERADVANCE FEES. The Borrower shall pay a fee for each
         Overadvance in the minimum amount of $500 for each day or portion
         thereof that Revolving Advances exceed the Borrowing Base, regardless
         of how the Overadvance arises or whether or not the Overadvance has
         been agreed to in advance by Lender; PROVIDED, HOWEVER, that payment of
         any such Overadvance fee shall not be deemed to constitute either
         consent to the Overadvance or the waiver of any Event of Default
         arising as the result of an Overadvance not otherwise consented to in
         advance by Lender.

                  (j) OTHER FEES AND CHARGES; PAYMENT OF FEES. The Lender may
         from time to time impose additional fees and charges as consideration
         for Advances made in excess of Availability or for other events that
         constitute an Event of Default or a Default hereunder, including fees
         and charges for the administration of Collateral by the Lender, and
         fees and charges for the late delivery of reports, which may be
         assessed in the Lender's sole discretion on either an hourly, periodic,
         or flat fee basis, and in lieu of or in addition to imposing interest
         at the Default Rate.

         Section 2.9 TIME FOR INTEREST PAYMENTS; PAYMENT ON NON-BUSINESS DAYS;
COMPUTATION OF INTEREST AND FEES.

                  (a) TIME FOR INTEREST PAYMENTS. Accrued and unpaid interest
         shall be due and payable on the first day of each month and on the
         Termination Date (each an "Interest Payment Date"), or if any such day
         is not a Business Day, on the next succeeding Business Day. Interest
         will accrue from the most recent date to which interest has been paid
         or, if no interest has been paid, from the date of advance to the
         Interest Payment Date. If an Interest Payment Date is not a Business
         Day, payment shall be made on the next succeeding Business Day.

                  (b) PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
         made hereunder shall be stated to be due on a day which is not a
         Business Day, such payment may be made on the next succeeding Business
         Day, and such extension of time shall in such case be included in the
         computation of interest on the Advances or the fees hereunder, as the
         case may be.

                  (c) COMPUTATION OF INTEREST AND FEES. Interest accruing on the
         outstanding principal balance of the Advances and fees hereunder
         outstanding from time to time shall be computed on the basis of actual
         number of days elapsed in a year of three hundred sixty (360) days.

         Section 2.10 LOCKBOX AND COLLATERAL ACCOUNT; SWEEP OF FUNDS.

                  (a) LOCKBOX AND COLLATERAL ACCOUNT.

                           (i) Each Borrower shall instruct all account debtors
                  to pay all Accounts directly to the Lockbox. If,
                  notwithstanding such instructions, any Borrower receives any
                  payments on Accounts, such Borrower shall deposit such
                  payments into the Collateral Account. Each Borrower shall also
                  deposit all other cash proceeds of Collateral regardless of
                  source or nature directly into the Collateral Account. Until


                                      -23-
<PAGE>

                  so deposited, such Borrower shall hold all such payments and
                  cash proceeds in trust for and as the property of the Lender
                  and shall not commingle such property with any of its other
                  funds or property. All deposits in the Collateral Account
                  shall constitute proceeds of Collateral and shall not
                  constitute payment of the Obligations.

                           (ii) All items deposited in the Collateral Account
                  shall be subject to final payment. If any such item is
                  returned uncollected, such Borrower will immediately pay the
                  Lender, or, for items deposited in the Collateral Account, the
                  bank maintaining such account, the amount of that item, or
                  such bank at its discretion may charge any uncollected item to
                  such Borrower's commercial account or other account. Each
                  Borrower shall be liable as an endorser on all items deposited
                  in the Collateral Account, whether or not in fact endorsed by
                  such Borrower.

                  (b) SWEEP OF FUNDS. The Lender shall from time to time, in
         accordance with the applicable Wholesale Lockbox and Collection Account
         Agreement, cause funds in each Borrower's Collateral Account to be
         transferred to the Lender's general account for payment of Obligations
         that are then due and payable. Amounts deposited in the Collateral
         Account shall not be subject to withdrawal by such Borrower, EXCEPT
         after payment in full and discharge of all Obligations.

         Section 2.11 VOLUNTARY PREPAYMENT; REDUCTION OF THE MAXIMUM LINE
AMOUNT; TERMINATION OF THE CREDIT FACILITY BY THE BORROWERS. Except as otherwise
provided herein, the Borrowers may prepay the Advances in whole at any time or
from time to time in part. Any Borrower may prepay the Term A Advance or the
Term B Advances, terminate the Credit Facility or reduce the Maximum Line Amount
at any time if such Borrower (i) gives the Lender at least thirty (30) days
prior written notice and (ii) pays the Lender termination fees, prepayment fees,
contracted funds breakage fees and Maximum Line Amount reduction fees in
accordance with SECTION 2.8(f) and SECTION 2.8(g). Any reduction in the Maximum
Line Amount shall be in integral multiples of $100,000, and with a minimum
reduction of at least $500,000. If any Borrower terminates the Credit Facility
or reduces the Maximum Line Amount to zero (0), all Obligations shall be
immediately due and payable, and if such Borrower gives Lender less than the
required thirty (30) days notice, such Borrower shall be liable for payment of
additional interest for each day that the notice was short of the required
thirty (30) day notice, which interest shall be the greater of the Minimum
Interest Charge or Unused Line Fee calculated based on the Borrowers' average
borrowings under the Credit Facility for the six (6) months prior to the date
that any Borrower gives notice of its intent to terminate the Credit Facility or
reduce the Maximum Line Amount. Subject to termination of the Credit Facility
and payment and performance of all Obligations, the Lender shall, at the
Borrowers' expense and within the time periods required under applicable law,
release or terminate any filings or other agreements that perfect the Security
Interest.

                                      -24-
<PAGE>

         Section 2.12 MANDATORY PREPAYMENT. Without notice or demand, if the sum
of the outstanding principal balance of the Revolving Advances PLUS the L/C
Amount shall at any time exceed the Borrowing Base, the Borrowers shall (i)
FIRST, immediately prepay the Revolving Advances to the extent necessary to
eliminate such excess; and (ii) SECOND, if prepayment in full of the Revolving
Advances is insufficient to eliminate such excess, pay to the Lender in
immediately available funds for deposit in the Special Account an amount equal
to the remaining excess. Any payment received by the Lender under this SECTION
2.12 or under SECTION 2.11 may be applied to the Obligations, in such order and
in such amounts as the Lender in its sole discretion may determine from time to
time.

         Section 2.13 REVOLVING ADVANCES TO PAY OBLIGATIONS. Notwithstanding the
terms of SECTION 2.1, the Lender may, in its discretion at any time or from time
to time, without any Borrower's request and even if the conditions set forth in
SECTION 4.2 would not be satisfied, make a Revolving Advance in an amount equal
to the portion of the Obligations from time to time due and payable, and may
deliver the proceeds of any such Revolving Advance to Wells Fargo Bank to pay
any unpaid Wells Fargo Bank Obligations.

         Section 2.14 USE OF PROCEEDS. Each Borrower shall use the proceeds of
Advances and each Letter of Credit issued for its account in accordance with
SCHEDULE 2.14 and for ordinary working capital purposes.

         Section 2.15 LIABILITY RECORDS. The Lender may maintain from time to
time, at its discretion, records as to the Obligations. All entries made on any
such record shall be presumed correct until a Borrower establishes the contrary.
Upon the Lender's demand, each Borrower will admit and certify in writing the
exact principal balance of the Obligations that such Borrower then asserts to be
outstanding. Any billing statement or accounting rendered by the Lender shall be
conclusive and fully binding on the Borrowers unless a Borrower gives the Lender
specific written notice of exception within thirty (30) days after receipt.

                                   ARTICLE III

                      SECURITY INTEREST; OCCUPANCY; SETOFF

         Section 3.1 GRANT OF SECURITY INTEREST. Each Borrower hereby pledges,
assigns and grants to the Lender, for the benefit of itself and Wells Fargo Bank
with respect to Wells Fargo Bank Obligations, a lien and security interest
(collectively referred to as the "Security Interest") in the Collateral, as
security for the payment and performance of the Obligations. Upon request by the
Lender, each Borrower will grant the Lender, for the benefit of itself and Wells
Fargo Bank, with respect to any Wells Fargo Bank Obligations, a security
interest in all commercial tort claims it may have against any Person.

         Section 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. The
Lender may at any time during a Default Period notify any account debtor or
other person obligated to pay the amount due that such right to payment has been
assigned or transferred to the Lender for security and shall be paid directly to
the Lender. Each Borrower will join in giving such notice if the Lender so
requests. At any time after such Borrower or the Lender gives such notice to an
account debtor or other obligor, the Lender may, but need not, in the Lender's
name or in such Borrower's name, demand, sue for, collect or receive any money
or property at any time payable or receivable on account of, or securing, any


                                      -25-
<PAGE>

such right to payment, or grant any extension to, make any compromise or
settlement with or otherwise agree to waive, modify, amend or change the
obligations (including collateral obligations) of any such account debtor or
other obligor. The Lender may, in the Lender's name or in such Borrower's name,
as such Borrower's agent and attorney-in-fact, notify the United States Postal
Service to change the address for delivery of such Borrower's mail to any
address designated by the Lender, otherwise intercept such Borrower's mail, and
receive, open and dispose of such Borrower's mail, applying all Collateral as
permitted under this Agreement and holding all other mail for such Borrower's
account or forwarding such mail to such Borrower's last known address.

         Section 3.3 ASSIGNMENT OF INSURANCE. As additional security for the
payment and performance of the Obligations, each Borrower hereby assigns to the
Lender any and all monies (including proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of such
Borrower with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and such Borrower hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in such Borrower's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.

         Section 3.4 OCCUPANCY. (a) Each Borrower hereby irrevocably grants to
the Lender the right to take exclusive possession of the Premises at any time
during a Default Period without notice or consent.

                  (a) The Lender may use the Premises only to hold, process,
         manufacture, sell, use, store, liquidate, realize upon or otherwise
         dispose of goods that are Collateral and for other purposes that the
         Lender may in good faith deem to be related or incidental purposes.

                  (b) The Lender's right to hold the Premises shall cease and
         terminate upon the earlier of (i) payment in full and discharge of all
         Obligations and termination of the Credit Facility, and (ii) final sale
         or disposition of all goods constituting Collateral and delivery of all
         such goods to purchasers.

                  (c) The Lender shall not be obligated to pay or account for
         any rent or other compensation for the possession, occupancy or use of
         any of the Premises; PROVIDED, HOWEVER, that if the Lender does pay or
         account for any rent or other compensation for the possession,
         occupancy or use of any of the Premises, such Borrower shall reimburse
         the Lender promptly for the full amount thereof. In addition, such
         Borrower will pay, or reimburse the Lender for, all taxes, fees,
         duties, imposts, charges and expenses at any time incurred by or
         imposed upon the Lender by reason of the execution, delivery,
         existence, recordation, performance or enforcement of this Agreement or
         the provisions of this SECTION 3.4.

                                      -26-
<PAGE>

         Section 3.5 LICENSE. Without limiting the generality of any other
Security Document, each Borrower hereby grants to the Lender a non-exclusive,
worldwide and royalty-free license to use or otherwise exploit all Intellectual
Property Rights of such Borrower for the purpose of: (a) completing the
manufacture of any in-process materials during any Default Period so that such
materials become saleable Inventory, all in accordance with the same quality
standards previously adopted by such Borrower for its own manufacturing and
subject to such Borrower's reasonable exercise of quality control; and (b)
selling, leasing or otherwise disposing of any or all Collateral during any
Default Period.

         Section 3.6 FINANCING STATEMENT. Each Borrower authorizes the Lender to
file from time to time, such financing statements against collateral described
as "all personal property" or "all assets" or describing specific items of
collateral including commercial tort claims as the Lender deems necessary or
useful to perfect the Security Interest. All financing statements filed before
the date hereof to perfect the Security Interest were authorized by each
Borrower and are hereby re-authorized. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by such
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, each Borrower represents and warrants that the following
information is true and correct:

                  Name and address of Borrowers:

                  Allis-Chalmers Corporation
                  5075 Westheimer Road, Suite 890
                  Houston, Texas 77056
                  Organizational Identification No.  0000285806

                  Strata Directional Technology, Inc.
                  1034 Regional Park Drive
                  Houston, Texas 77060
                  Organizational Identification No. 138384700

                  Jens' Oil Field Service, Inc.
                  5205 W. University Drive
                  P.O. Box 1176 Edinburgh, Texas 78540
                  Organizational Identification No. 58880300

                  Safco-Oil Field Products, Inc.
                  21131 Hardy Street
                  Houston, TX 77073
                  Organizational Identification No.  0046281400

                                      -27-
<PAGE>

                  Name and address of Lender:

                  Wells Fargo Credit, Inc.
                  MAC T5698-030
                  40 N.E. Loop 410, Suite 340
                  San Antonio, Texas 78216

         Section 3.7 SETOFF. The Lender may at any time or from time to time, at
its sole discretion and without demand and without notice to anyone, setoff any
liability owed to any Borrower by the Lender, whether or not due, against any
Obligation, whether or not due. In addition, each other Person holding a
participating interest in any Obligations shall have the right to appropriate or
setoff any deposit or other liability then owed by such Person to any Borrower,
whether or not due, and apply the same to the payment of said participating
interest, as fully as if such Person had lent directly to such Borrower the
amount of such participating interest.

         Section 3.8 COLLATERAL. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrowers are entitled to any surplus and shall remain liable for any
deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third person,
and the Lender need not otherwise preserve, protect, insure or care for any
Collateral. The Lender shall not be obligated to preserve any rights of any
Borrower may have against any Person, to realize on the Collateral at all or in
any particular manner or order or to apply any cash proceeds of the Collateral
in any particular order of application. The Lender has no obligation to clean-up
or otherwise prepare the Collateral for sale. Each Borrower waives any right it
may have to require the Lender to pursue any Person for any of the Obligations.

                                   ARTICLE IV

                              CONDITIONS OF LENDING

         Section 4.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCES AND LETTERS OF
CREDIT. The Lender's obligation to make the initial Advances or to cause any
Letters of Credit to be issued shall be subject to the condition precedent that
the Lender shall have received all of the following, each properly executed by
the appropriate party and in form and substance satisfactory to the Lender:

                  (a) This Agreement.

                  (b) The Notes.

                  (c) A Standby Letter of Credit Agreement, and L/C Application
         for each Letter of Credit that each Borrower wishes to have issued
         thereunder.

                                      -28-
<PAGE>

                  (d) A true and correct copy of any and all leases pursuant to
         which each Borrower is leasing the Premises, together with a landlord's
         disclaimer and consent with respect to each such lease.

                  (e) A Wholesale Lockbox and Collection Account Agreement for
         each Borrower.

                  (f) Control agreements with each bank at which each Borrower
         maintains deposit accounts.

                  (g) The Subordination Agreements.

                  (h) An Amendment to the Deed of Trust, expanding the
         obligations secured thereunder to include all of the Obligations.

                  (i) Current searches of appropriate filing offices showing
         that (i) no Liens have been filed and remain in effect against any
         Borrower except Permitted Liens , Liens held by the Lender pursuant to
         the Security Documents and Liens held by Persons who have agreed in
         writing that upon receipt of proceeds of the initial Advances, they
         will satisfy, release or terminate such Liens in a manner satisfactory
         to the Lender, and (ii) the Lender has duly filed all financing
         statements necessary to perfect the Security Interest, to the extent
         the Security Interest is capable of being perfected by filing.

                  (j) A certificate of each Borrower's Secretary or Assistant
         Secretary certifying that attached to such certificate are (i) the
         resolutions of each Borrower's Directors and, if required, Owners,
         authorizing the execution, delivery and performance of the Loan
         Documents, (ii) true, correct and complete copies of each Borrower's
         Constituent Documents, and (iii) examples of the signatures of each
         Borrower's Officers or agents authorized to execute and deliver the
         Loan Documents and other instruments, agreements and certificates,
         including Advance requests, on such Borrower's behalf.

                  (k) A current certificate issued by the Secretary of State of
         the state of organization of each Borrower that such Borrower is in
         compliance with all applicable organizational requirements of such
         state.

                  (l) Evidence that each Borrower is duly licensed or qualified
         to transact business in all jurisdictions where the character of the
         property owned or leased or the nature of the business transacted by it
         makes such licensing or qualification necessary.

                  (m) A certificate of an Officer of each Borrower confirming,
         in his personal capacity, the representations and warranties set forth
         in ARTICLE V.

                  (n) An opinion of counsel to each Borrower and each Guarantor,
         addressed to the Lender.

                  (o) Certificates of the insurance required hereunder, with all
         hazard insurance containing a lender's loss payable endorsement in the
         Lender's favor and with all liability insurance naming the Lender as an
         additional insured.

                  (p) The separate guaranty of each Guarantor, pursuant to which
         each Guarantor unconditionally guarantees the full and prompt payment
         of all Obligations.

                                      -29-
<PAGE>

                  (q) A separate security agreement, properly executed by each
         Guarantor pursuant to which each such Guarantor grants a security
         interest in all of its personal property to the Lender, to secure such
         Guarantor's obligations under its guaranty.

                  (r) The Pledge Agreement, properly executed by OilQuip,
         pursuant to which such Guarantor grants a security interest in all of
         the stock of MCA to Lender secure such Guarantor's obligations under
         its guaranty.

                  (s) The Pledge Agreement, properly executed by Allis Chalmers,
         pursuant to which Allis Chalmers grants a security interest in all of
         the stock of OilQuip to Lender secure the Obligations.

                  (t) Payment of the fees and commissions due under SECTION 2.8
         through the date of the initial Advance or Letter of Credit and
         expenses incurred by the Lender through such date and required to be
         paid by any Borrower under SECTION 8.5, including all legal expenses
         incurred through the date of this Agreement.

                  (u) Such other documents as the Lender in its sole discretion
         may require.

         Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT.
The Lender's obligation to make each Advance or to cause the issuance of a
Letter of Credit shall be subject to the further conditions precedent that:

                  (a) the representations and warranties contained in ARTICLE V
         are correct on and as of the date of such Advance or issuance of a
         Letter of Credit as though made on and as of such date, EXCEPT to the
         extent that such representations and warranties relate solely to an
         earlier date; and

                  (b) no event has occurred and is continuing, or would result
         from such Advance or issuance of a Letter of Credit which constitutes a
         Default or an Event of Default.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

         Each Borrower represents and warrants to the Lender as follows:

         Section 5.1 EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE OFFICE;
INVENTORY AND EQUIPMENT LOCATIONS; FEDERAL EMPLOYER IDENTIFICATION NUMBER AND
ORGANIZATIONAL IDENTIFICATION NUMBER. Each Borrower is a corporation, duly
organized, validly existing and in good standing under the laws of the state if
its formation and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary. Each Borrower has all requisite power and authority to conduct its


                                      -30-
<PAGE>

business, to own its properties and to execute and deliver, and to perform all
of its obligations under, the Loan Documents. During its existence, each
Borrower has done business solely under the names set forth in SCHEDULE 5.1.
Each Borrower's chief executive office and principal place of business is
located at the address set forth in SCHEDULE 5.1, and all of such Borrower's
records relating to its business or the Collateral are kept at that location.
All Inventory and Equipment is located at that location or at one of the other
locations listed in SCHEDULE 5.1. Each Borrower's federal employer
identification number and organization identification number are correctly set
forth in SECTION 3.6.

         Section 5.2 CAPITALIZATION. SCHEDULE 5.2 constitutes a correct and
complete list of all ownership interests of each Borrower and rights to acquire
ownership interests including the record holder, number of interests and
percentage interests on a fully diluted basis, and an organizational chart
showing the ownership structure of all Subsidiaries of each Borrower.

         Section 5.3 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by each Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of any of a Borrower's Owners; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including Regulation X of the
Board of Governors of the Federal Reserve System) or of any order, writ,
injunction or decree presently in effect having applicability to any Borrower or
of any Borrower's Constituent Documents; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which any Borrower is a party
or by which it or its properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than the Security
Interest) upon or with respect to any of the properties now owned or hereafter
acquired by any Borrower.

         Section 5.4 LEGAL AGREEMENTS. This Agreement constitutes and, upon due
execution by each Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of each Borrower, enforceable against each
Borrower in accordance with their respective terms.

         Section 5.5 SUBSIDIARIES. Except as set forth in SCHEDULE 5.5, each
Borrower has no Subsidiaries.

         Section 5.6 FINANCIAL CONDITION; NO ADVERSE CHANGE. Allis Chalmers has
furnished to the Lender its audited financial statements for its fiscal year
ended December 31, 2003 and unaudited financial statements for the
fiscal-year-to-date period ended September 30, 2004, and those statements fairly
present each Borrower's financial condition on the dates thereof and the results
of its operations and cash flows for the periods then ended and were prepared in
accordance with generally accepted accounting principals. Since the date of the
most recent financial statements, there has been no change in any Borrower's
business, properties or condition (financial or otherwise) which has had a
Material Adverse Effect.

                                      -31-
<PAGE>

         Section 5.7 LITIGATION. Except as set forth on SCHEDULE 5.7, there are
no actions, suits or proceedings pending or, to each Borrower's knowledge,
threatened against or affecting any Borrower or any of its Affiliates or the
properties of any Borrower or any of its Affiliates before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which, if determined adversely to any Borrower or any of
its Affiliates, would result in a Material Adverse Effect.

         Section 5.8 REGULATION U. No Borrower is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Advance will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.

         Section 5.9 TAXES. Each Borrower and its Affiliates have paid or caused
to be paid to the proper authorities when due all federal, state and local taxes
required to be withheld by each of them. Each Borrower and its Affiliates have
filed all federal, state and local tax returns which to the knowledge of the
Officers of such Borrower or any Affiliate, as the case may be, are required to
be filed, and such Borrower and its Affiliates have paid or caused to be paid to
the respective taxing authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become due.

         Section 5.10 TITLES AND LIENS. Each Borrower has good and absolute
title to all Collateral free and clear of all Liens other than Permitted Liens.
No financing statement naming such Borrower as debtor is on file in any office
except to perfect only Permitted Liens.

         Section 5.11 INTELLECTUAL PROPERTY RIGHTS.

                  (a) OWNED INTELLECTUAL PROPERTY. SCHEDULE 5.11 is a complete
         list of all patents, applications for patents, trademarks, applications
         to register trademarks, service marks, applications to register service
         marks, mask works, trade dress and copyrights for which the Borrower is
         the owner of record (the "Owned Intellectual Property"). Except as
         disclosed on SCHEDULE 5.11, (i) such Borrower owns the Owned
         Intellectual Property free and clear of all restrictions (including
         covenants not to sue a third party), court orders, injunctions,
         decrees, writs or Liens, whether by written agreement or otherwise,
         (ii) no Person other than such Borrower owns or has been granted any
         right in the Owned Intellectual Property, (iii) all Owned Intellectual
         Property is valid, subsisting and enforceable and (iv) such Borrower
         has taken all commercially reasonable action necessary to maintain and
         protect the Owned Intellectual Property.

                  (b) AGREEMENTS WITH EMPLOYEES AND CONTRACTORS. In the event
         any Borrower has uses, requires, licenses, or otherwise has any
         interest in any Intellectual Property Rights, each Borrower will enter
         into a legally enforceable agreement with any of its employees and
         subcontractors obligating each such Person to assign to such Borrower,
         without any additional compensation, any Intellectual Property Rights
         created, discovered or invented by such Person in the course of such
         Person's employment or engagement with such Borrower (except to the
         extent prohibited by law), and further requiring such Person to


                                      -32-
<PAGE>

         cooperate with such Borrower, without any additional compensation, in
         connection with securing and enforcing any Intellectual Property Rights
         therein; PROVIDED, HOWEVER, that the foregoing shall not apply with
         respect to employees and subcontractors whose job descriptions are of
         the type such that no such assignments are reasonably foreseeable.

                  (c) INTELLECTUAL PROPERTY RIGHTS LICENSED FROM OTHERS.
         SCHEDULE 5.11 is a complete list of all agreements under which each
         Borrower has licensed Intellectual Property Rights from another Person
         ("Licensed Intellectual Property") other than readily available,
         non-negotiated licenses of computer software and other intellectual
         property used solely for performing accounting, word processing and
         similar administrative tasks ("Off-the-shelf Software") and a summary
         of any ongoing payments such Borrower is obligated to make with respect
         thereto. Except as disclosed on SCHEDULE 5.11 and in written agreements
         copies of which have been given to the Lender, each Borrower's licenses
         to use the Licensed Intellectual Property are free and clear of all
         restrictions, Liens, court orders, injunctions, decrees, or writs,
         whether by written agreement or otherwise. Except as disclosed on
         SCHEDULE 5.11, each Borrower is not obligated or under any liability
         whatsoever to make any payments of a material nature by way of
         royalties, fees or otherwise to any owner of, licensor of, or other
         claimant to, any Intellectual Property Rights.

                  (d) OTHER INTELLECTUAL PROPERTY NEEDED FOR BUSINESS. Except
         for Off-the-shelf Software and as disclosed on SCHEDULE 5.11, the Owned
         Intellectual Property and the Licensed Intellectual Property constitute
         all Intellectual Property Rights used or necessary to conduct such
         Borrower's business as it is presently conducted or as the Borrower
         reasonably foresees conducting it.

                  (e) INFRINGEMENT. Except as disclosed on SCHEDULE 5.11, no
         Borrower has any knowledge of, and has not received any written claim
         or notice alleging, any Infringement of another Person's Intellectual
         Property Rights (including any written claim that such Borrower must
         license or refrain from using the Intellectual Property Rights of any
         third party) nor, to such Borrower's knowledge, is there any threatened
         claim or any reasonable basis for any such claim.

         Section 5.12 PLANS. Except as disclosed to the Lender in writing prior
to the date hereof, neither any Borrower nor any ERISA Affiliate (i) maintains
or has maintained any Pension Plan, (ii) contributes or has contributed to any
Multiemployer Plan or (iii) provides or has provided post-retirement medical or
insurance benefits with respect to employees or former employees (other than
benefits required under Section 601 of ERISA, Section 4980B of the IRC or
applicable state law). Neither any Borrower nor any ERISA Affiliate has received
any notice or has any knowledge to the effect that it is not in full compliance
with any of the requirements of ERISA, the IRC or applicable state law with
respect to any Plan. No Reportable Event exists in connection with any Pension
Plan. Each Plan which is intended to qualify under the IRC is so qualified, and
no fact or circumstance exists which may have an adverse effect on the Plan's
tax-qualified status. Neither any Borrower nor any ERISA Affiliate has (i) any
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the IRC) under any Plan, whether or not waived, (ii) any liability under
Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan or (iii) any
liability or knowledge of any facts or circumstances which could result in any
liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan
(other than routine claims for benefits under the Plan).

                                      -33-
<PAGE>

         Section 5.13 DEFAULT. Each Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a Material Adverse Effect.

         Section 5.14 ENVIRONMENTAL MATTERS.

                  (a) Except as disclosed on SCHEDULE 5.14, there are not
         present in, on or under the Premises any Hazardous Substances in such
         form or quantity as to create any material liability or obligation for
         any Borrower or the Lender under the common law of any jurisdiction or
         under any Environmental Law, and no Hazardous Substances have ever been
         stored, buried, spilled, leaked, discharged, emitted or released in, on
         or under the Premises in such a way as to create any such material
         liability.

                  (b) Except as disclosed on SCHEDULE 5.14, no Borrower has
         disposed of Hazardous Substances in such a manner as to create any
         material liability under any Environmental Law.

                  (c) Except as disclosed on SCHEDULE 5.14, there have not
         existed in the past, nor are there any threatened or impending
         requests, claims, notices, investigations, demands, administrative
         proceedings, hearings or litigation relating in any way to any Borrower
         or, to each Borrower's best knowledge, to the Premises, alleging
         material liability under, violation of, or noncompliance with any
         Environmental Law or any license, permit or other authorization issued
         pursuant thereto.

                  (d) Except as disclosed on SCHEDULE 5.14, each Borrower's
         businesses are and have in the past always been conducted in accordance
         with all Environmental Laws and all licenses, permits and other
         authorizations required pursuant to any Environmental Law and necessary
         for the lawful and efficient operation of such businesses are in such
         Borrower's possession and are in full force and effect, nor has any
         Borrower been denied insurance on grounds related to potential
         environmental liability. No permit required under any Environmental Law
         is scheduled to expire within twelve (12) months and there is no threat
         that any such permit will be withdrawn, terminated, limited or
         materially changed.

                  (e) Except as disclosed on SCHEDULE 5.14, the Premises are not
         and never have been listed on the National Priorities List, the
         Comprehensive Environmental Response, Compensation and Liability
         Information System or any similar federal, state or local list,
         schedule, log, inventory or database.

                  (f) Each Borrower has delivered to the Lender all
         environmental assessments, audits, reports, permits, licenses and other
         documents describing or relating in any way to such Borrower's business
         or, to such Borrower's best knowledge, to the Premises.

                                      -34-
<PAGE>

         Section 5.15 SUBMISSIONS TO LENDER. All financial and other information
provided to the Lender by or on behalf of any Borrower in connection with any
Borrower's request for the credit facilities contemplated hereby is (i) true and
correct in all material respects, (ii) does not omit any material fact necessary
to make such information not misleading and, (iii) as to projections, valuations
or proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.

         Section 5.16 FINANCING STATEMENTS. The financing statements authorized
by each Borrower and filed by the Lender prior to the date of this Agreement are
sufficient to perfect the Security Interest and the other security interests
created by the Security Documents. The Lender has a valid and perfected security
interest in all Collateral which is capable of being perfected by filing
financing statements. None of the Collateral is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.

         Section 5.17 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral is (or, in the case of all future Collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in any Borrower's records pertaining thereto as being
obligated to pay such obligation.

         Section 5.18 FINANCIAL SOLVENCY. Both before and after giving effect to
all of the transactions contemplated in the Loan Documents, no Borrower and no
Affiliate:

                  (a) Was or will be insolvent, as that term is used and defined
         in Section 101(32) of the United States Bankruptcy Code and Section 2
         of the Uniform Fraudulent Transfer Act;

                  (b) Has unreasonably small capital or is engaged or about to
         engage in a business or a transaction for which any remaining assets of
         such Borrower or such Affiliate are unreasonably small;

                  (c) By executing, delivering or performing its obligations
         under the Loan Documents or other documents to which it is a party or
         by taking any action with respect thereto, intends to, nor believes
         that it will, incur debts beyond its ability to pay them as they
         mature;

                  (d) By executing, delivering or performing its obligations
         under the Loan Documents or other documents to which it is a party or
         by taking any action with respect thereto, intends to hinder, delay or
         defraud either its present or future creditors; and

                  (e) At this time contemplates filing a petition in bankruptcy
         or for an arrangement or reorganization or similar proceeding under any
         law of any jurisdiction, nor, to the best knowledge of any Borrower, is
         the subject of any actual, pending or threatened bankruptcy, insolvency
         or similar proceedings under any law of any jurisdiction.

                                      -35-
<PAGE>

                                   ARTICLE VI

                                    COVENANTS

         So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, each Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:

         Section 6.1 REPORTING REQUIREMENTS. Each Borrower will deliver, or
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:

                  (a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
         any event within one hundred twenty (120) days after the end of each
         fiscal year, Allis Chalmers will deliver, or cause to be delivered, to
         the Lender, its audited consolidated financial statements with the
         unqualified opinion of independent certified public accountants
         selected by such Borrower and acceptable to the Lender, and its
         unaudited consolidating financial statements, which annual financial
         statements shall include a balance sheet as at the end of such fiscal
         year and the related statements of income, retained earnings and cash
         flows for the fiscal year then ended, all in reasonable detail and
         prepared in accordance with GAAP, together with (i) copies of all
         management letters prepared by such accountants; (ii) a report signed
         by such accountants stating that in making the investigations necessary
         for said opinion they obtained no knowledge, except as specifically
         stated, of any Default or Event of Default and all relevant facts in
         reasonable detail to evidence, and the computations as to, whether or
         not the Borrowers are in compliance with the Financial Covenants; and
         (iii) a certificate of the chief financial Officer of Allis Chalmers
         stating that such financial statements have been prepared in accordance
         with GAAP, fairly represent each Borrower's financial position and the
         results of its operations, and whether or not such Officer has
         knowledge of the occurrence of any Default or Event of Default and, if
         so, stating in reasonable detail the facts with respect thereto.

                  (b) MONTHLY FINANCIAL STATEMENTS. As soon as available and in
         any event within thirty (30) days after the end of each month, Allis
         Chalmers will deliver to the Lender an unaudited/internal consolidated
         and consolidating balance sheet and statements of income and retained
         earnings as at the end of and for such month and for the year to date
         period then ended, in reasonable detail and stating in comparative form
         the figures for the corresponding date and periods in the previous
         year, all prepared in accordance with GAAP, subject to year-end audit
         adjustments and which fairly represent each Borrower's financial
         position and the results of its operations; and accompanied by a
         certificate of the chief financial Officer of Allis Chalmers,
         substantially in the form of EXHIBIT D hereto stating (i) that such
         financial statements have been prepared in accordance with GAAP,
         subject to year-end audit adjustments, and fairly represent each
         Borrower's financial position and the results of its operations (ii)
         whether or not such Officer has knowledge of the occurrence of any
         Default or Event of Default not theretofore reported and remedied and,
         if so, stating in reasonable detail the facts with respect thereto, and
         (iii) all relevant facts in reasonable detail to evidence, and the
         computations as to, whether or not the Borrowers are in compliance with
         the Financial Covenants.

                                      -36-
<PAGE>

                  (c) COLLATERAL REPORTS. Within fifteen (15) days after the end
         of each month or more frequently if the Lender so requires, each
         Borrower will deliver to the Lender, or its designated agent, agings of
         such Borrower's accounts receivable and its accounts payable, and a
         calculation of such Borrower's Accounts and Eligible Accounts as at the
         end of such month or shorter time period.

                  (d) PROJECTIONS. No later than the last day of each fiscal
         year, Allis Chalmers will deliver to the Lender the projected income
         statements prepared on a consolidating basis, and balance sheets,
         statements of cash flow and projected Availability prepared on a
         consolidated basis, for each month of the succeeding fiscal year, each
         in reasonable detail. Such items will be certified by the chief
         financial Officer of Allis Chalmers as being the most accurate
         projections available and identical to the projections used by the
         Borrowers for internal planning purposes and be delivered with a
         statement of underlying assumptions and such supporting schedules and
         information as the Lender may in its discretion require.

                  (e) SUPPLEMENTAL REPORTS. Weekly, or more frequently if the
         Lender so requires, the Borrowers will deliver to the Lender the
         "weekly collateral reports," receivables schedules, collection reports,
         copies of invoices to account debtors in excess of $100,000, signed and
         dated shipment documents and delivery receipts for goods sold to said
         account debtors in excess of $100,000.

                  (f) LITIGATION. Immediately after the commencement thereof,
         each Borrower will deliver to the Lender notice in writing of all
         litigation and of all proceedings before any governmental or regulatory
         agency affecting such Borrower (i) of the type described in SECTION
         5.14(c) or which seek a monetary recovery against the Borrower in
         excess of $500,000.

                  (g) DEFAULTS. When any Officer of any Borrower becomes aware
         of the probable occurrence of any Default or Event of Default, such
         Borrower will deliver to the Lender, no later than three (3) days after
         such officer becomes aware of such Default or Event of Default, notice
         of such occurrence, together with a detailed statement by a responsible
         Officer of such Borrower of the steps being taken by such Borrower to
         cure the effect thereof.

                  (h) PLANS. As soon as possible, and in any event within thirty
         (30) days after any Borrower knows or has reason to know that any
         Reportable Event with respect to any Pension Plan has occurred, such
         Borrower will deliver to the Lender a statement of such Borrower's
         chief financial Officer setting forth details as to such Reportable
         Event and the action which such Borrower proposes to take with respect
         thereto, together with a copy of the notice of such Reportable Event to
         the Pension Benefit Guaranty Corporation. As soon as possible, and in
         any event within ten (10) days after any Borrower fails to make any
         quarterly contribution required with respect to any Pension Plan under
         Section 412(m) of the IRC, such Borrower will deliver to the Lender a


                                      -37-
<PAGE>

         statement of such Borrower's chief financial Officer setting forth
         details as to such failure and the action which such Borrower proposes
         to take with respect thereto, together with a copy of any notice of
         such failure required to be provided to the Pension Benefit Guaranty
         Corporation. As soon as possible, and in any event within ten (10) days
         after such Borrower knows or has reason to know that it has or is
         reasonably expected to have any liability under Sections 4201 or 4243
         of ERISA for any withdrawal, partial withdrawal, reorganization or
         other event under any Multiemployer Plan, such Borrower will deliver to
         the Lender a statement of such Borrower's chief financial Officer
         setting forth details as to such liability and the action which such
         Borrower proposes to take with respect thereto.

                  (i) DISPUTES. Promptly upon knowledge thereof, each Borrower
         will deliver to the Lender notice of (i) any disputes or claims by such
         Borrower's customers exceeding $200,000 individually or $500,000 in the
         aggregate during any fiscal year; (ii) credit memos; and (iii) any
         goods returned to or recovered by such Borrower.

                  (j) OFFICERS AND DIRECTORS. Promptly upon knowledge thereof,
         each Borrower will deliver to the Lender notice any change in the
         persons constituting such Borrower's Officers and Directors.

                  (k) COLLATERAL. Promptly upon knowledge thereof, each Borrower
         will deliver to the Lender notice of any loss of or material damage to
         any Collateral or of any substantial adverse change in any Collateral
         or the prospect of payment thereof.

                  (l) COMMERCIAL TORT CLAIMS. Promptly upon knowledge thereof,
         each Borrower will deliver to the Lender notice of any commercial tort
         claims it may bring against any Person, including the name and address
         of each defendant, a summary of the facts, an estimate of such
         Borrower's damages, copies of any complaint or demand letter submitted
         by such Borrower, and such other information as the Lender may request.

                  (m) INTELLECTUAL PROPERTY.

                           (i) Each Borrower will give the Lender thirty (30)
                  days prior written notice of its intent to acquire material
                  Intellectual Property Rights; EXCEPT for transfers permitted
                  under SECTION 6.17, each Borrower will give the Lender thirty
                  (30) days prior written notice of its intent to dispose of
                  material Intellectual Property Rights and upon request shall
                  provide the Lender with copies of all proposed documents and
                  agreements concerning such rights.

                           (ii) Promptly upon knowledge thereof, each Borrower
                  will deliver to the Lender notice of (A) any Infringement of
                  its Intellectual Property Rights by others, (B) claims that
                  such Borrower is Infringing another Person's Intellectual
                  Property Rights and (C) any threatened cancellation,
                  termination or material limitation of its Intellectual
                  Property Rights.

                           (iii) Promptly upon receipt, each Borrower will give
                  the Lender copies of all registrations and filings with
                  respect to its Intellectual Property Rights.

                                      -38-
<PAGE>

                  (n) REPORTS TO OWNERS. Promptly upon their distribution, each
         Borrower will deliver to the Lender copies of all financial statements,
         reports and proxy statements which such Borrower shall have sent to its
         Owners pursuant to applicable law.

                  (o) SEC FILINGS. Promptly after the sending or filing thereof,
         each Borrower will deliver to the Lender copies of all regular and
         periodic reports which such Borrower shall file with the Securities and
         Exchange Commission or any national securities exchange.

                  (p) TAX RETURNS OF BORROWER. As soon as possible, and in any
         event not later than five (5) days after they are due to be filed,
         copies of the state and federal income tax returns and all schedules
         thereto of each Borrower.

                  (q) VIOLATIONS OF LAW. Promptly upon knowledge thereof, each
         Borrower will deliver to the Lender notice of any Borrower's violation
         of any law, rule or regulation, the non-compliance with which could
         have a Material Adverse Effect on any Borrower.

                  (r) OTHER REPORTS. From time to time, with reasonable
         promptness, each Borrower will deliver to the Lender any and all
         receivables schedules, collection reports, deposit records, equipment
         schedules, copies of invoices to account debtors, shipment documents
         and delivery receipts for goods sold, and such other material, reports,
         records or information as the Lender may request.

         Section 6.2 FINANCIAL COVENANTS.

                  (a) STOP LOSS. Allis Chalmers on a consolidated basis will
         maintain, for each month, Net Income of not less than ($100,000),
         commencing with the month of December, 2004.

                  (b) MINIMUM DEBT SERVICE COVERAGE RATIO. Allis Chalmers on a
         consolidated basis will maintain, for each period described below, its
         Debt Service Coverage Ratio at not less than the ratio set forth
         opposite such period:

                             PERIOD                         MINIMUM DEBT SERVICE
                             ------                         --------------------
                                                               COVERAGE RATIO
                                                               --------------
Three months ending March 31 of each year                       1.00 to 1.00
Six months ending June 30 of each year                          1.00 to 1.00
Nine months ending September 30 of each year                    1.00 to 1.00
Twelve months ending December 31 of each year                   1.15 to 1.00

                  (c) CAPITAL EXPENDITURES. During fiscal year 2004 and fiscal
         year 2005, taken together, Allis Chalmers on a consolidated basis will
         not incur or contract to incur Capital Expenditures of more than
         $12,000,000 in the aggregate no more than $9,000,000 of which may be
         Unfinanced Capital Expenditures. During every fiscal year thereafter
         Allis Chalmers on a consolidated basis will not incur or contract to
         incur Capital Expenditures of more than $5,000,000 in the aggregate, no
         more than $2,500,000 of which may be Unfinanced Capital Expenditures.

                                      -39-
<PAGE>

                  (d) MEXICAN CAPITAL EXPENDITURES. During fiscal year 2004 and
         fiscal year 2005, taken together, Allis Chalmers on a consolidated
         basis will not incur or contract to incur Mexican Capital Expenditures
         of more than $4,500,000 in the aggregate. During every fiscal year
         thereafter Allis Chalmers on a consolidated basis will not incur or
         contract to incur any Mexican Capital Expenditures; PROVIDED, HOWEVER,
         that so long as no Default Period then exists and average Availability
         for the ninety (90) days prior to incurrence of such Mexican Capital
         Expenditures was not less than $1,000,000, Allis Chalmers on a
         consolidated basis may incur Mexican Capital Expenditures in an
         aggregate amount not to exceed the lesser of (A) $1,000,000 and (B) the
         sum of (1) cash equity contributions received by Allis Chalmers on or
         after January 1, 2005, and (2) the net amount by which the Borrowers'
         Cash Flow From Operations achieved on or after January 1, 2005, exceeds
         the minimum amount of Cash Flow From Operations that would have been
         required for such periods for the Borrowers to remain in compliance
         with all other Financial Covenants.

         Section 6.3 PERMITTED LIENS; FINANCING STATEMENTS.

                  (a) No Borrower will create, incur or suffer to exist any Lien
         upon or of any of its assets, now owned or hereafter acquired, to
         secure any indebtedness; EXCLUDING, HOWEVER, from the operation of the
         foregoing, the following (each a "Permitted Lien;" collectively,
         "Permitted Liens"):

                           (i) In the case of any of a Borrower's property that
                  is not Collateral, covenants, restrictions, rights, easements
                  and minor irregularities in title that do not materially
                  interfere with such Borrower's business or operations as
                  presently conducted;

                           (ii) Liens in existence on the date hereof and listed
                  in SCHEDULE 6.3 hereto, securing indebtedness for borrowed
                  money permitted under SECTION 6.4;

                           (iii) A Lien in favor of Texas State Bank encumbering
                  the Real Estate, securing the indebtedness permitted under
                  SECTION 6.4(C); PROVIDED, HOWEVER, Texas State Bank has signed
                  a mortgagee's disclaimer in favor of the Lender satisfactory
                  to the Lender in its sole discretion; and upon grant by the
                  Borrower of such Lien, the Lender agrees to subordinate or
                  release its Lien in the Real Estate;

                           (iv) The Security Interest and Liens created by the
                  Security Documents; and

                           (v) Purchase money Liens relating to the acquisition
                  of machinery and equipment of a Borrower not exceeding the
                  lesser of cost or fair market value thereof and so long as no
                  Default Period is then in existence and none would exist
                  immediately after such acquisition.

                  (b) No Borrower will amend any financing statements in favor
         of the Lender except as permitted by law. Any authorization by the
         Lender to any Person to amend financing statements in favor of the
         Lender shall be in writing.

                                      -40-
<PAGE>

         Section 6.4 INDEBTEDNESS. No Borrower will incur, create, assume or
permit to exist any indebtedness or liability on account of deposits or advances
or any indebtedness for borrowed money or letters of credit issued on any
Borrower's behalf, or any other indebtedness or liability evidenced by notes,
bonds, debentures or similar obligations, EXCEPT:

                  (a) Indebtedness arising hereunder;

                  (b) Indebtedness to the seller of stock or assets in a
         Permitted Acquisition, so long as (i) such indebtedness does not exceed
         the aggregate value of all consideration for such stock or assets, and
         (ii) such indebtedness is subordinated to the Obligations on terms
         acceptable to the Lender in its sole discretion, including that the
         subordinated creditor shall have no rights to receive any payment on
         such indebtedness if any Default Period then exists;

                  (c) Indebtedness of Jens to Texas State Bank in an amount not
         less than $450,000 and not more than $575,000, incurred on or before
         March 31, 2005, in connection with a refinancing of the Real Estate;

                  (d) Indebtedness of a Borrower in existence on the date hereof
         and listed in SCHEDULE 6.4; and

                  (e) Indebtedness relating to Permitted Liens described in
         SECTION 6.3(a)(v).

         Section 6.5 GUARANTIES. No Borrower will assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any other Person, EXCEPT:

                  (a) The endorsement of negotiable instruments by a Borrower
         for deposit or collection or similar transactions in the ordinary
         course of business; and

                  (b) Guaranties, endorsements and other direct or contingent
         liabilities in connection with the obligations of other Persons, in
         existence on the date hereof and listed in SCHEDULE 6.4 hereto.

         Section 6.6 INVESTMENTS AND SUBSIDIARIES. No Borrower will make or
permit to exist any loans or advances to, or make any investment or acquire any
interest whatsoever in, any other Person or Affiliate, including any partnership
or joint venture, nor purchase or hold beneficially any stock or other
securities or evidence of indebtedness of any other person or Affiliate, EXCEPT:

                  (a) Investments in direct obligations of the United States of
         America or any agency or instrumentality thereof whose obligations
         constitute full faith and credit obligations of the United States of
         America having a maturity of one year or less, commercial paper issued
         by U.S. corporations rated "A-1" or "A-2" by Standard & Poor's Ratings
         Services or "P-1" or "P-2" by Moody's Investors Service or certificates
         of deposit or bankers' acceptances having a maturity of one year or
         less issued by members of the Federal Reserve System having deposits in
         excess of $100,000,000 (which certificates of deposit or bankers'
         acceptances are fully insured by the Federal Deposit Insurance
         Corporation);

                                      -41-
<PAGE>

                  (b) Travel advances or loans to a Borrower's Officers and
         employees not exceeding at any one time an aggregate of $75,000;

                  (c) Prepaid rent not exceeding one month or security deposits;

                  (d) Current investments in the Subsidiaries in existence on
         the date hereof and listed in SCHEDULE 5.5;

                  (e) Up to $300,000 in loans and advances outstanding at any
         one time made to AirComp by Allis Chalmers; PROVIDED, that through and
         including December 21, 2004, such amount may be up to $400,000;

                  (f) Loans or advances to OilQuip and MCA directly or
         indirectly by Allis Chalmers not to exceed $5,500 in any month;

                  (g) Contributions or advances by Allis Chalmers to any
         Subsidiary that is also a Borrower;

                  (h) (i) acquisition of a Subsidiary in a Permitted
         Acquisition, or (ii) formation of a new Subsidiary for the sole purpose
         of effecting a Permitted Acquisition and funding of such Subsidiary in
         an amount not to exceed the amount allowed in connection with such
         Permitted Acquisition; and

                  (i) deposits in escrow accounts made in connection with
         Permitted Acquisitions.

         Section 6.7 DIVIDENDS AND DISTRIBUTIONS. No Borrower will declare or
pay any distributions or dividends (other than dividends payable solely in stock
of a Borrower) on any class of its stock or make any payment on account of the
purchase, redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly; PROVIDED,
HOWEVER, that so long as no Default Period then exists, each Borrower (other
than Allis Chalmers) may make distributions to Allis Chalmers.

         Section 6.8 SALARIES. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary or bonus (except to the extent resulting
from enhanced or increased performance), commissions, consultant fees or other
compensation of any Director, Officer, or any member of their families, by more
than ten percent (10%) in any one year, either individually or for all such
persons in the aggregate.

         Section 6.9 BOOKS AND RECORDS; COLLATERAL EXAMINATION, INSPECTION AND
APPRAISALS.

                                      -42-
<PAGE>

                  (a) Each Borrower will keep accurate books of record and
         account for itself pertaining to the Collateral and pertaining to such
         Borrower's business and financial condition and such other matters as
         the Lender may from time to time request in which true and complete
         entries will be made in accordance with GAAP and, upon the Lender's
         request, will permit any officer, employee, attorney, accountant or
         other agent of Lender to audit, review, make extracts from or copy any
         and all company and financial books and records of such Borrower at all
         times during ordinary business hours, to send and discuss with account
         debtors and other obligors requests for verification of amounts owed to
         such Borrower, and to discuss such Borrower's affairs with any of its
         Directors, Officers, employees or agents.

                  (b) Each Borrower hereby irrevocably authorizes all
         accountants and third parties to disclose and deliver to Lender or its
         designated agent, at such Borrower's expense, all financial
         information, books and records, work papers, management reports and
         other information in their possession regarding such Borrower.

                  (c) Each Borrower will permit the Lender or its employees,
         accountants, attorneys or agents, to examine and inspect any Collateral
         or any other property of such Borrower at any time during ordinary
         business hours.

                  (d) The Lender may also from time to time obtain an appraisal
         of Equipment by an appraiser acceptable to the Lender in its sole
         discretion, which appraisal shall be at the Borrowers' expense;
         PROVIDED, HOWEVER, that unless a Default Period then exists, the
         Borrower shall not be obligated to reimburse the Lender for more than
         one such appraisal during any fiscal year.

         Section 6.10 ACCOUNT VERIFICATION.

                  (a) The Lender or its agent may at any time and from time to
         time send or require each Borrower to send requests for verification of
         accounts or notices of assignment to account debtors and other
         obligors. The Lender or its agent may also at any time and from time to
         time telephone account debtors and other obligors to verify accounts.

                  (b) Each Borrower shall pay when due each account payable due
         to a Person holding a Permitted Lien (as a result of such payable) on
         any Collateral, except for a Permitted Lien that is subordinated to the
         Lender pursuant to a Subordination Agreement.

         Section 6.11 COMPLIANCE WITH LAWS.

                  (a) Each Borrower shall (i) comply with the requirements of
         applicable laws and regulations, the non-compliance with which would
         materially and adversely affect its business or its financial condition
         and (ii) use and keep the Collateral, and require that others use and
         keep the Collateral, only for lawful purposes, without violation of any
         federal, state or local law, statute or ordinance.

                  (b) Without limiting the foregoing undertakings, each Borrower
         specifically agrees that it will comply with all applicable
         Environmental Laws and obtain and comply with all permits, licenses and
         similar approvals required by any Environmental Laws, and will not
         generate, use, transport, treat, store or dispose of any Hazardous
         Substances in such a manner as to create any material liability or
         obligation under the common law of any jurisdiction or any
         Environmental Law.

                                      -43-
<PAGE>

                  (c) Each Borrower shall (i) ensure, and cause each Subsidiary
         to ensure, that no Owner shall be listed on the Specially Designated
         Nationals and Blocked Person List or other similar lists maintained by
         the Office of Foreign Assets Control ("OFAC"), the Department of the
         Treasury or included in any Executive Orders, (ii not use or permit the
         use of the proceeds of the Credit Facility or any other financial
         accommodation from Lender to violate any of the foreign asset control
         regulations of OFAC or other applicable law, (iii) comply, and cause
         each Subsidiary to comply, with all applicable Bank Secrecy Act laws
         and regulations, as amended from time to time, and (iv) otherwise
         comply with the USA Patriot Act as required by federal law and Lender's
         policies and practices.

         Section 6.12 PAYMENT OF TAXES AND OTHER CLAIMS. Each Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including the Collateral) or upon or against the creation,
perfection or continuance of the Security Interest, prior to the date on which
penalties attach thereto, (b) all federal, state and local taxes required to be
withheld by it, and (c) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon any properties of such
Borrower; PROVIDED, HOWEVER, that no Borrower shall not be required to pay any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which proper
reserves have been made.

         Section 6.13 MAINTENANCE OF PROPERTIES.

                  (a) Each Borrower will keep and maintain the Collateral and
         all of its other properties necessary or useful in its business in good
         condition, repair and working order (normal wear and tear excepted) and
         will from time to time replace or repair any worn, defective or broken
         parts; PROVIDED, however, that nothing in this SECTION 6.13 shall
         prevent any Borrower from discontinuing the operation and maintenance
         of any of its properties if such discontinuance is, in such Borrower's
         judgment, desirable in the conduct of such Borrower's business and not
         disadvantageous in any material respect to the Lender. Each Borrower
         will take all commercially reasonable steps necessary to protect and
         maintain its Intellectual Property Rights.

                  (b) Each Borrower will defend the Collateral against all
         Liens, claims or demands of all Persons (other than the Lender)
         claiming the Collateral or any interest therein. Each Borrower will
         keep all Collateral free and clear of all Liens except Permitted Liens.
         Each Borrower will take all commercially reasonable steps necessary to
         prosecute any Person Infringing its Intellectual Property Rights and to
         defend itself against any Person accusing it of Infringing any Person's
         Intellectual Property Rights.

         Section 6.14 INSURANCE. Each Borrower will obtain and at all times
maintain insurance with insurers acceptable to Lender, in such amounts, on such
terms (including any deductibles) and against such risks as may from time to
time be required by the Lender, but in all events in such amounts and against
such risks as is usually carried by companies engaged in similar business and
owning similar properties in the same general areas in which such Borrower


                                      -44-
<PAGE>

operates. Without limiting the generality of the foregoing, each Borrower will
at all times maintain coverage for FORCE MAJEURE and keep all tangible
Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request, with
any loss payable to the Lender to the extent of its interest, and all policies
of such insurance shall contain a lender's loss payable endorsement for the
Lender's benefit. All policies of liability insurance required hereunder shall
name the Lender as an additional insured.

         Section 6.15 PRESERVATION OF EXISTENCE. Each Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.

         Section 6.16 DELIVERY OF INSTRUMENTS, ETC. Upon request by the Lender,
each Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel paper constituting Collateral, duly endorsed or assigned
by such Borrower.

         Section 6.17 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS
OPERATIONS. No Borrower will sell, lease, assign, transfer or otherwise dispose
of (a) the stock of any Subsidiary, (b) all or a substantial part of its assets,
or (c) any Collateral or any interest therein (whether in one transaction or in
a series of transactions) to any other Person other than (i) the sale of
Inventory in the ordinary course of business and (ii) the sale of up Equipment
in an amount not to exceed $100,000 in any fiscal year. No Borrower will
liquidate, dissolve or suspend business operations. No Borrower will transfer
any part of its ownership interest in any Intellectual Property Rights and will
not permit any agreement under which it has licensed Intellectual Property to
lapse, EXCEPT that any Borrower may transfer such rights or permit such
agreements to lapse if it shall have reasonably determined that the applicable
Intellectual Property Rights are no longer useful in its business. If any
Borrower transfers any Intellectual Property Rights for value, such Borrower
will pay over the proceeds to the Lender for application to the Obligations. No
Borrower will license any other Person to use any of such Borrower's
Intellectual Property Rights, EXCEPT that any Borrower may grant licenses in the
ordinary course of its business in connection with sales of Inventory or
provision of services to its customers.

         Section 6.18 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS; PERMITTED
ACQUISITIONS. No Borrower will consolidate with or merge into any Person, or
permit any other Person to merge into it, or acquire (in a transaction analogous
in purpose or effect to a consolidation or merger) all or substantially all the
assets of any other Person; except that a Borrower may merge with another
Borrower after notice to the Lender, and a Borrower may acquire the assets or
capital stock or other equity interest in a Person (including by means of a
merger of such Person with or into a newly formed Subsidiary of such Borrower,
the effect of which is substantially the same as a purchase of the stock of such
Person) if such acquisition satisfies all of the following terms and conditions
(any such acquisition pursuant to this SECTION 6.18, a "Permitted Acquisition"):

                  (a) such Person is a domestic corporation, limited liability
         company, or partnership, and is engaged in a business that is an oil
         and gas drilling and related drilling and production services business;

                                      -45-
<PAGE>

                  (b) such acquisition and all transactions related thereto
         shall be consummated in accordance with applicable law;

                  (c) if the Borrower forms a Subsidiary to effect such
         acquisition, such Subsidiary shall guaranty all of the Obligations and
         shall execute a guaranty acceptable to the Lender, shall grant a
         security interest in all of its assets to the Lender to secure the
         Obligations, and shall execute such documents as may be required by the
         Lender to evidence such security interest; and the Borrower shall
         pledge the stock of such Subsidiary to the Lender to secure payment of
         the Obligations;

                  (d) no capital stock or other equity interest or assets
         acquired in connection with such acquisition shall be subject to any
         lien or encumbrance other than Permitted Liens;

                  (e) neither the Borrower nor any of its Subsidiaries shall
         assume or incur, directly or indirectly, any indebtedness or other
         liability in connection with such acquisition other than as permitted
         in accordance with SECTION 6.4;

                  (f) no Default Period shall exist either before or after
         giving effect to such acquisition or as a result thereof;

                  (g) the aggregate value of all consideration for any single
         such acquisition is not more than $3,000,000, which shall not include
         consideration paid in the form of Allis Chalmers capital stock;

                  (h) the aggregate value of all consideration for all such
         acquisitions does not exceed $5,000,000 in any fiscal year, which shall
         not include consideration paid in the form of Allis Chalmers capital
         stock;

                  (i) after giving effect to such acquisition, Liquidity shall
         not be less than $2,000,000;

                  (j) if the acquiring Borrower forms a Subsidiary to effect
         such acquisition, each holder of Subordinated Debt shall execute such
         documents as may be requested by the Lender to affirm that all
         obligations of the resulting Guarantor to such holder of Subordinated
         Debt shall be subordinated to all indebtedness of such resulting
         Guarantor to the Lender, on substantially the same terms and conditions
         as the pre-existing Subordinated Debt of such holder is subordinated;
         and

                  (k) such acquisition has been approved by the boards of
         directors (or equivalent governing body) of each of the participants.

         Section 6.19 SALE AND LEASEBACK. No Borrower will enter into any
arrangement, directly or indirectly, with any other Person whereby such Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which such Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.

                                      -46-
<PAGE>

         Section 6.20 RESTRICTIONS ON NATURE OF BUSINESS. No Borrower will
engage in any line of business other than oil and gas drilling and related
drilling and production services. No Borrower will purchase, lease or otherwise
acquire assets not related to such business.

         Section 6.21 ACCOUNTING. No Borrower will adopt any material change in
accounting principles other than as required by GAAP. No Borrower will adopt,
permit or consent to any change in its fiscal year.

         Section 6.22 DISCOUNTS, ETC. After notice from the Lender, no Borrower
will grant any discount, credit or allowance to any customer of such Borrower or
accept any return of goods sold. No Borrower will not at any time modify, amend,
subordinate, cancel or terminate the obligation of any account debtor or other
obligor of such Borrower.

         Section 6.23 PLANS. Unless disclosed to the Lender pursuant to SECTION
5.12, neither any Borrower nor any ERISA Affiliate will (i) adopt, create,
assume or become a party to any Pension Plan, (ii) incur any obligation to
contribute to any Multiemployer Plan, (iii) incur any obligation to provide
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required by law) or (iv) amend any Plan in
a manner that would materially increase its funding obligations.

         Section 6.24 PLACE OF BUSINESS; NAME. No Borrower will transfer its
chief executive office or principal place of business, or move, relocate, close
or sell any business location. No Borrower will permit any tangible Collateral
or any records pertaining to the Collateral to be located in any state or area
in which, in the event of such location, a financing statement covering such
Collateral would be required to be, but has not in fact been, filed in order to
perfect the Security Interest. No Borrower will change its name or jurisdiction
of organization.

         Section 6.25 CONSTITUENT DOCUMENTS; S CORPORATION STATUS. No Borrower
will amend its Constituent Documents. No Borrower will become an S Corporation.

         Section 6.26 SWAP OR COLLAR AGREEMENTS. At all times after February 28,
2005, Borrowers shall maintain interest rate swap or collar agreements with
Wells Fargo Bank or another financial institution acceptable to the Lender with
respect to at least thirty-three percent (33%) of the outstanding Obligations.

         Section 6.27 PERFORMANCE BY THE LENDER. If any Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
ARTICLE VI or elsewhere herein, and if such failure shall continue for a period
of ten (10) calendar days after the Lender gives any Borrower written notice
thereof (or in the case of the agreements contained in SECTION 6.12 and SECTION
6.14, immediately upon the occurrence of such failure, without notice or lapse
of time), the Lender may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of such Borrower (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including the payment of taxes, the satisfaction of Liens, the
performance of obligations owed to account debtors or other obligors, the
procurement and maintenance of insurance, the execution of assignments, security
agreements and financing statements, and the endorsement of instruments); and


                                      -47-
<PAGE>

such Borrower shall thereupon pay to the Lender on demand the amount of all
monies expended and all costs and expenses (including reasonable attorneys' fees
and legal expenses) incurred by the Lender in connection with or as a result of
the performance or observance of such agreements or the taking of such action by
the Lender, together with interest thereon from the date expended or incurred at
the Default Rate. To facilitate the Lender's performance or observance of such
covenants of the Borrowers, each Borrower hereby irrevocably appoints the
Lender, or the Lender's delegate, acting alone, as such Borrower's attorney in
fact (which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of such Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by such Borrower under this SECTION 6.27.

                                   ARTICLE VII

                     EVENTS OF DEFAULT, RIGHTS AND REMEDIES

         Section 7.1 EVENTS OF DEFAULT. "Event of Default," wherever used
herein, means any one of the following events:

                  (a) Default in the payment of any Obligations when they become
         due and payable;

                  (b) Default in the performance, or breach, of any covenant or
         agreement of any Borrower contained in this Agreement;

                  (c) The existence of any Overadvance arising as the result of
         any reduction in the Borrowing Base, or that arises in any manner and
         on terms not otherwise approved of in advance by Lender;

                  (d) A Change of Control shall occur;

                  (e) Any Borrower or any Guarantor shall be or become
         insolvent, or admit in writing its or his inability to pay its or his
         debts as they mature, or make an assignment for the benefit of
         creditors; or any Borrower or any Guarantor shall apply for or consent
         to the appointment of any receiver, trustee, or similar officer for it
         or him or for all or any substantial part of its or his property; or
         such receiver, trustee or similar officer shall be appointed without
         the application or consent of any Borrower or such Guarantor, as the
         case may be; or any Borrower or any Guarantor shall institute (by
         petition, application, answer, consent or otherwise) any bankruptcy,
         insolvency, reorganization, arrangement, readjustment of debt,
         dissolution, liquidation or similar proceeding relating to it or him
         under the laws of any jurisdiction; or any such proceeding shall be
         instituted (by petition, application or otherwise) against any Borrower
         or any such Guarantor; or any judgment, writ, warrant of attachment or
         execution or similar process shall be issued or levied against a
         substantial part of the property of any Borrower or any Guarantor;

                                      -48-
<PAGE>

                  (f) A petition shall be filed by or against any Borrower or
         any Guarantor under the United States Bankruptcy Code naming any
         Borrower or such Guarantor as debtor;

                  (g) Any representation or warranty made by any Borrower in
         this Agreement, by any Guarantor in any guaranty delivered to the
         Lender, or by any Borrower (or any of its Officers) or any Guarantor in
         any agreement, certificate, instrument or financial statement or other
         statement contemplated by or made or delivered pursuant to or in
         connection with this Agreement or any such guaranty shall prove to have
         been incorrect in any material respect when deemed to be effective;

                  (h) The rendering against any Borrower of an arbitration
         award, final judgment, decree or order for the payment of money in
         excess of $1,000,000 and the continuance of such arbitration award,
         judgment, decree or order unsatisfied and in effect for any period of
         thirty (30) consecutive days without a stay of execution;

                  (i) A default under any bond, debenture, note or other
         evidence of material indebtedness of any Borrower in excess of
         $1,000,000 owed to any Person other than the Lender, or under any
         indenture or other instrument under which any such evidence of
         indebtedness has been issued or by which it is governed, or under any
         material lease or other contract, and the expiration of the applicable
         period of grace, if any, specified in such evidence of indebtedness,
         indenture, other instrument, lease or contract;

                  (j) Any Reportable Event, that the Lender determines in good
         faith might constitute grounds for the termination of any Pension Plan
         or for the appointment by the appropriate United States District Court
         of a trustee to administer any Pension Plan, shall have occurred and be
         continuing thirty (30) days after written notice to such effect shall
         have been given to any Borrower by the Lender; or a trustee shall have
         been appointed by an appropriate United States District Court to
         administer any Pension Plan; or the Pension Benefit Guaranty
         Corporation shall have instituted proceedings to terminate any Pension
         Plan or to appoint a trustee to administer any Pension Plan; or the
         Borrower or any ERISA Affiliate shall have filed for a distress
         termination of any Pension Plan under Title IV of ERISA; or any
         Borrower or any ERISA Affiliate shall have failed to make any quarterly
         contribution required with respect to any Pension Plan under Section
         412(m) of the IRC, which the Lender determines in good faith may by
         itself, or in combination with any such failures that the Lender may
         determine are likely to occur in the future, result in the imposition
         of a Lien on the assets of any Borrower assets in favor of the Pension
         Plan; or any withdrawal, partial withdrawal, reorganization or other
         event occurs with respect to a Multiemployer Plan which results or
         could reasonably be expected to result in a material liability of any
         Borrower to the Multiemployer Plan under Title IV of ERISA;

                  (k) An event of default shall occur under any Security
         Document;

                                      -49-
<PAGE>

                  (l) Any Borrower shall liquidate, dissolve, terminate or
         suspend its business operations or otherwise fail to operate its
         business in the ordinary course, merge with another organization unless
         such Borrower is the surviving entity; or sell or attempt to sell all
         or substantially all of its assets, without the Lender's prior written
         consent;

                  (m) Default in the payment of any amount owed by any Borrower
         to the Lender other than any indebtedness arising hereunder;

                  (n) Any Guarantor shall repudiate, purport to revoke or fail
         to perform its obligations under its guaranty, or any other Guarantor
         shall cease to exist;

                  (o) Any Borrower shall take or participate in any action which
         would be prohibited under the provisions of any Subordination Agreement
         or make any payment on the Subordinated Indebtedness (as defined in any
         Subordination Agreement) that any Person was not entitled to receive
         under the provisions of such Subordination Agreement;

                  (p) Any event or circumstance with respect to any Borrower
         shall occur such that the Lender shall believe in good faith that the
         prospect of payment of all or any part of the Obligations or the
         performance by any Borrower under the Loan Documents is impaired or any
         material adverse change in the business or financial condition of any
         Borrower shall occur;

                  (q) Any breach, default or event of default by or attributable
         to any Affiliate under any agreement between such Affiliate and the
         Lender, or between such Affiliate and any Affiliate of the Lender,
         shall occur, including, without limitation, any default by or
         attributable to OilQuip, MCA, or AirComp under any agreement with Wells
         Fargo Bank; or

                  (r) The indictment of any Director, Owner, Officer, Guarantor
         or senior manager of any Borrower for a felony offence under state or
         federal law.

         Section 7.2 RIGHTS AND REMEDIES. During any Default Period, the Lender
may exercise any or all of the following rights and remedies:

                  (a) The Lender may, by notice to the Borrowers, declare the
         Commitment to be terminated, whereupon the same shall forthwith
         terminate;

                  (b) The Lender may, by notice to the Borrowers, declare the
         Obligations to be forthwith due and payable, whereupon all Obligations
         shall become and be forthwith due and payable, without presentment,
         notice of dishonor, protest or further notice of any kind, all of which
         each Borrower hereby expressly waives;

                  (c) The Lender may, without notice to the Borrowers and
         without further action, apply any and all money owing by the Lender to
         the Borrowers to the payment of the Obligations;

                  (d) The Lender may exercise and enforce any and all rights and
         remedies available upon default to a secured party under the UCC,
         including the right to take possession of Collateral, or any evidence
         thereof, proceeding without judicial process or by judicial process
         (without a prior hearing or notice thereof, which each Borrower hereby


                                      -50-
<PAGE>

         expressly waives) and the right to sell, lease or otherwise dispose of
         any or all of the Collateral (with or without giving any warranties as
         to the Collateral, title to the Collateral or similar warranties), and,
         in connection therewith, each Borrower will on demand assemble the
         Collateral and make it available to the Lender at a place to be
         designated by the Lender which is reasonably convenient to both
         parties;

                  (e) The Lender may make demand upon the Borrowers and,
         forthwith upon such demand, each Borrower will pay to the Lender in
         immediately available funds for deposit in the Special Account pursuant
         to SECTION 2.4 an amount equal to the aggregate maximum amount
         available to be drawn under all Letters of Credit then outstanding,
         assuming compliance with all conditions for drawing thereunder;

                  (f) The Lender may exercise and enforce its rights and
         remedies under the Loan Documents;

                  (g) The Lender may without regard to any waste, adequacy of
         the security or solvency of the Borrowers, apply for the appointment of
         a receiver of the Collateral, to which appointment each Borrower hereby
         consents, whether or not foreclosure proceedings have been commenced
         under the Security Documents and whether or not a foreclosure sale has
         occurred; and

                  (h) The Lender may exercise any other rights and remedies
         available to it by law or agreement.

         Notwithstanding the foregoing, upon the occurrence of an Event of
Default described in SECTION 7.1(e) or SECTION 7.1(f), the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind. If the Lender sells any of the Collateral on credit, the
Obligations will be reduced only to the extent of payments actually received. If
the purchaser fails to pay for the Collateral, the Lender may resell the
Collateral and shall apply any proceeds actually received to the Obligations.

         Section 7.3 CERTAIN NOTICES. If notice to any Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in SECTION 8.3) at least ten (10) calendar days
before the date of intended disposition or other action.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         Section 8.1 NO WAIVER; CUMULATIVE REMEDIES; COMPLIANCE WITH LAWS. No
failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the Collateral.

                                      -51-
<PAGE>

         Section 8.2 AMENDMENTS, ETC. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by any
Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on any Borrower in any
case shall entitle such Borrower to any other or further notice or demand in
similar or other circumstances.

         Section 8.3 NOTICES; COMMUNICATION OF CONFIDENTIAL INFORMATION;
REQUESTS FOR ACCOUNTING. Except as otherwise expressly provided herein, all
notices, requests, demands and other communications provided for under the Loan
Documents shall be in writing and shall be (a) personally delivered, (b) sent by
first class United States mail, (c) sent by overnight courier of national
reputation, (d) transmitted by telecopy, or (e) sent as electronic mail, in each
case delivered or sent to the party to whom notice is being given to the
business address, telecopier number, or e mail address set forth below next to
its signature or, as to each party, at such other business address, telecopier
number, or e mail address as it may hereafter designate in writing to the other
party pursuant to the terms of this SECTION 8.3. All such notices, requests,
demands and other communications shall be deemed to be an authenticated record
communicated or given on (a) the date received if personally delivered, (b) when
deposited in the mail if delivered by mail, (c) the date delivered to the
courier if delivered by overnight courier, or (d) the date of transmission if
sent by telecopy or by e mail, except that notices or requests delivered to the
Lender pursuant to any of the provisions of ARTICLE II of this Agreement shall
not be effective until received by the Lender. All notices, financial
information, or other business records sent by either party to this Agreement
may be transmitted, sent, or otherwise communicated via such medium as the
sending party may deem appropriate and commercially reasonable; PROVIDED,
HOWEVER, that the risk that the confidentiality or privacy of such notices,
financial information, or other business records sent by either party may be
compromised shall be borne exclusively by the Borrowers. All requests for an
accounting under Section 9-210 of the UCC (i) shall be made in a writing signed
by a Person authorized under SECTION 2.2(a), (ii) shall be personally delivered,
sent by registered or certified mail, return receipt requested, or by overnight
courier of national reputation, (iii) shall be deemed to be sent when received
by the Lender and (iv) shall otherwise comply with the requirements of Section
9-210. Each Borrower requests that the Lender respond to all such requests which
on their face appear to come from an authorized individual and releases the
Lender from any liability for so responding. Each Borrower shall pay the Lender
the maximum amount allowed by law for responding to such requests.

         Section 8.4 FURTHER DOCUMENTS. Each Borrower will from time to time
execute, deliver, endorse and authorize the filing of any and all instruments,
documents, conveyances, assignments, security agreements, financing statements,
control agreements and other agreements and writings that the Lender may
reasonably request in order to secure, protect, perfect or enforce the Security
Interest or the Lender's rights under the Loan Documents (but any failure to
request or assure that such Borrower executes, delivers, endorses or authorizes
the filing of any such item shall not affect or impair the validity, sufficiency
or enforceability of the Loan Documents and the Security Interest, regardless of
whether any such item was or was not executed, delivered or endorsed in a
similar context or on a prior occasion).

                                      -52-
<PAGE>

         Section 8.5 COSTS AND EXPENSES. Each Borrower shall pay on demand all
costs and expenses, including reasonable attorneys' fees incurred by the Lender
in connection with the Obligations, this Agreement, the Loan Documents, any
Letter of Credit and any other document or agreement related hereto or thereto,
and the transactions contemplated hereby, including all such costs, expenses and
fees incurred in connection with the negotiation, preparation, execution,
amendment, administration, performance, collection and enforcement of the
Obligations and all such documents and agreements and the creation, perfection,
protection, satisfaction, foreclosure or enforcement of the Security Interest.

         Section 8.6 INDEMNITY. In addition to the payment of expenses pursuant
to SECTION 8.5, the Borrower shall indemnify, defend and hold harmless the
Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities"):

                           (i) Any and all transfer taxes, documentary taxes,
                  assessments or charges made by any governmental authority by
                  reason of the execution and delivery of the Loan Documents or
                  the making of the Advances;

                           (ii) Any claims, loss or damage to which any
                  Indemnitee may be subjected if any representation or warranty
                  contained in SECTION 5.14 proves to be incorrect in any
                  respect or as a result of any violation of the covenant
                  contained in SECTION 6.11(B); and

                           (iii) Any and all other liabilities, losses, damages,
                  penalties, judgments, suits, claims, costs and expenses of any
                  kind or nature whatsoever (including the reasonable fees and
                  disbursements of counsel) in connection with the foregoing and
                  any other investigative, administrative or judicial
                  proceedings, whether or not such Indemnitee shall be
                  designated a party thereto, which may be imposed on, incurred
                  by or asserted against any such Indemnitee, in any manner
                  related to or arising out of or in connection with the making
                  of the Advances and the Loan Documents or the use or intended
                  use of the proceeds of the Advances.

         If any investigative, judicial or administrative proceeding arising
from any of the foregoing is brought against any Indemnitee, upon such
Indemnitee's request, each Borrower, or counsel designated by the Borrowers and
satisfactory to the Indemnitee, will resist and defend such action, suit or
proceeding to the extent and in the manner directed by the Indemnitee, at the
Borrowers' sole costs and expense. Each Indemnitee will use its best efforts to
cooperate in the defense of any such action, suit or proceeding. If the
foregoing undertaking to indemnify, defend and hold harmless may be held to be
unenforceable because it violates any law or public policy, each Borrower shall
nevertheless make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
Each Borrower's obligation under this SECTION 8.6 shall survive the termination
of this Agreement and the discharge of such Borrower's other obligations
hereunder.

                                      -53-
<PAGE>

         Section 8.7 PARTICIPANTS. The Lender and its participants, if any, are
not partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.

         Section 8.8 EXECUTION IN COUNTERPARTS; TELEFACSIMILE EXECUTION. This
Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.

         Section 8.9 RETENTION OF BORROWERS' RECORDS. The Lender shall have no
obligation to maintain any electronic records or any documents, schedules,
invoices, agings, or other papers delivered to the Lender by the Borrowers or in
connection with the Loan Documents for more than thirty (30) days after receipt
by the Lender. If there is a special need to retain specific records, such
Borrower must inform Lender of its need to retain those records with
particularity, which must be delivered in accordance with the notice provisions
of SECTION 8.3 of this Agreement within thirty (30) days of Lender taking
control of same.

         Section 8.10 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT; SHARING
INFORMATION. The Loan Documents shall be binding upon and inure to the benefit
of each Borrower and the Lender and their respective successors and assigns,
EXCEPT that no Borrower shall have the right to assign its rights thereunder or
any interest therein without the Lender's prior written consent. To the extent
permitted by law, each Borrower waives and will not assert against any assignee
any claims, defenses or set-offs which such Borrower could assert against the
Lender. This Agreement shall also bind all Persons who become a party to this
Agreement as a borrower. This Agreement, together with the Loan Documents,
comprises the complete and integrated agreement of the parties on the subject
matter hereof and supersedes all prior agreements, written or oral, on the
subject matter hereof. To the extent that any provision of this Agreement
contradicts other provisions of the Loan Documents, this Agreement shall
control. Without limiting the Lender's right to share information regarding any
Borrower and its Affiliates with the Lender's participants, accountants, lawyers
and other advisors, the Lender and Wells Fargo Bank may share any and all
information they may have in their possession regarding any Borrower and its
Affiliates, and each Borrower waives any right of confidentiality it may have
with respect to such sharing of information.

         Section 8.11 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement that is prohibited or unenforceable shall be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof.

                                      -54-
<PAGE>

         Section 8.12 HEADINGS. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.

         Section 8.13 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY TRIAL.
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Minnesota. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient; (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents may be venued in either the state or federal courts located in
Hennepin County, Minnesota; and (iv) agree that a final judgment in any such
suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

         EACH BORROWER AND LENDER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN
ANY ACTION AT LAW OR IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.

Allis Chalmers' Initials: ______________    Lender's Initials: _________________
Jens' Initials: ________________________
Strata's Initials: _____________________
Safco's Initials: ______________________






        [The remainder of this page is left is left intentionally blank.]


                                      -55-
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.



Allis Chalmers Corporation                  ALLIS-CHALMERS CORPORATION
5075 Westheimer Road, Suite 890
Houston, Texas 77056
Telecopier: (713) 369-0555
Attention:  Munawar Hidayatallah            By /S/ MUNAWAR HIDAYATALLAH
e-mail: vperez@alchenergy.com                  ---------------------------------
                                               Munawar Hidayatallah, Chief
                                               Executive Officer

Strata Directional Technology, Inc.         STRATA DIRECTIONAL TECHNOLOGY, INC.
1034 Regional Park Drive
Houston, Texas 77060
Telecopier: (713) 934-9067
Attention:  Dave Wilde                      By /S/ DAVE WILDE
e-mail:  vperez@alchenergy.com                 ---------------------------------
                                               Dave Wilde, Chief Executive
                                               Officer

Jens' Oil Field Services, Inc.
5205 W. University Drive                    JENS' OIL FIELD SERVICE, INC.
P.O. Box 1176
Edinburgh, Texas 78540
Telecopier: (956) 381-1151
Attention:  Munawar Hidayatallah            By /S/ MUNAWAR HIDAYATALLAH
e-mail:  vperez@alchenergy.com                 ---------------------------------
                                               Munawar Hidayatallah, Chief
                                               Executive Officer

Safco-Oil Field Products Inc.               SAFCO-OIL FIELD PRODUCTS, INC.
21131 Hardy Street
Houston, TX 77073
Telecopier: (281) 443-6474
Attention:  Munawar Hidayatallah            By /S/ MUNAWAR HIDAYATALLAH
e-mail:  vperez@alchenergy.com                 ---------------------------------
                                               Munawar Hidayatallah, Chief
                                               Executive Officer

Wells Fargo Credit, Inc.
MAC T5698-030                               WELLS FARGO CREDIT, INC.
40 N.E. Loop 410, Suite 340
San Antonio, Texas 78216
Telecopier:  210-856-8989
Attention:  Michelle Guetter                By /S/ MICHELLE GUETTER
e-mail: michelle.guetter@wellsfargo.com        ---------------------------------
                                               Michelle Guetter, Vice President


                                SIGNATURE PAGE TO
               AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

                                      -56-
<PAGE>

                         TABLE OF EXHIBITS AND SCHEDULES

         Exhibit A         Form of Amended and Restated Revolving Note

         Exhibit B         Form of Amended and Restated Term A Note

         Exhibit C         Form of Term B Note

         Exhibit D         Compliance Certificate

         Exhibit E         Premises


            ---------------------------------------------------------

         Schedule 2.15             Sources and Uses of Funds

         Schedule 5.1              Trade Names, Chief Executive Office,
                                   Principal Place of Business, and Locations of
                                   Collateral

         Schedule 5.2              Capitalization and Organizational Chart

         Schedule 5.5              Subsidiaries

         Schedule 5.7              Certain Litigation Matters

         Schedule 5.11             Intellectual Property Disclosures

         Schedule 5.14             Environmental Matters

         Schedule 6.3              Permitted Liens

         Schedule 6.4              Permitted Indebtedness and Guaranties


<PAGE>

         EXHIBIT A to Amended and Restated Credit and Security Agreement


                       AMENDED AND RESTATED REVOLVING NOTE


$10,000,000                                               Minneapolis, Minnesota
                                                                December 7, 2004

         For value received, the undersigned, ALLIS-CHALMERS CORPORATION, a
Delaware corporation, JENS' OIL FIELD SERVICE, INC., a Texas corporation, STRATA
DIRECTIONAL TECHNOLOGY, INC., a Texas corporation, and SAFCO-OIL FIELD PRODUCTS,
INC., a Texas corporation (collectively, the "Borrowers"), hereby promise to
pay, jointly and severally, on the Termination Date under the Credit Agreement
(defined below), to the order of Wells Fargo Credit, Inc., a Minnesota
corporation (the "Lender"), at its office in Minneapolis, Minnesota, or at any
other place designated at any time by the holder hereof, in lawful money of the
United States of America and in immediately available funds, the principal sum
of Ten Million Dollars ($10,000,000) or the aggregate unpaid principal amount of
all Revolving Advances made by the Lender to the Borrowers under the Credit
Agreement (defined below) together with interest on the principal amount
hereunder remaining unpaid from time to time, computed on the basis of the
actual number of days elapsed and a three hundred sixty (360) day year, from the
date hereof until this Note is fully paid at the rate from time to time in
effect under the Amended and Restated Credit and Security Agreement dated the
same date as this Note (as the same may hereafter be amended, supplemented or
restated from time to time, the "Credit Agreement") by and between the Lender
and the Borrowers. The principal hereof and interest accruing thereon shall be
due and payable as provided in the Credit Agreement. This Note may be prepaid
only in accordance with the Credit Agreement.

         This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is issued
in replacement of and substitution for, but not in repayment of, (a) the Third
Amended and Restated Revolving Note of Strata dated as of April 2, 2004, in the
original principal amount of $4,000,000, and (b) the Revolving Note of Jens
dated as of February 1, 2002, in the original principal amount of $1,000,000.

         This Note is the Revolving Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit Agreement and
the Security Documents as therein defined, and may now or hereafter be secured
by one or more other security agreements, mortgages, deeds of trust, assignments
or other instruments or agreements.

         The Borrowers shall pay all costs of collection, including reasonable
attorneys' fees and legal expenses if this Note is not paid when due, whether or
not legal proceedings are commenced.

         Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.

            [The remainder of this page is left blank intentionally.]


                                      A-1
<PAGE>



                                       ALLIS-CHALMERS CORPORATION


                                       --------------------------------
                                       By:  Munawar Hidayatallah
                                       Its: Chief Executive Officer

                                       JENS' OIL FIELD SERVICE, INC.


                                       --------------------------------
                                       By:  Munawar Hidayatallah
                                       Its: Chief Executive Officer

                                       STRATA DIRECTIONAL TECHNOLOGY, INC.


                                       --------------------------------
                                       By:  Dave Wilde, Chief Executive Officer
                                       Its: Chief Executive Officer

                                       SAFCO-OIL FIELD PRODUCTS, INC.


                                       --------------------------------
                                       By:  Munawar Hidayatallah
                                       Its: Chief Executive Officer



                                SIGNATURE PAGE TO
                       AMENDED AND RESTATED REVOLVING NOTE

<PAGE>

         EXHIBIT B to Amended and Restated Credit and Security Agreement


                        AMENDED AND RESTATED TERM A NOTE


$6,335,000                                                Minneapolis, Minnesota
                                                               December  7, 2004


         For value received, the undersigned, ALLIS-CHALMERS CORPORATION, a
Delaware corporation, JENS' OIL FIELD SERVICE, INC., a Texas corporation, STRATA
DIRECTIONAL TECHNOLOGY, INC., a Texas corporation, and SAFCO-OIL FIELD PRODUCTS,
INC., a Texas corporation (collectively, the "Borrowers"), hereby promise to
pay, jointly and severally, on the Termination Date under the Credit Agreement
(defined below), to the order of Wells Fargo Credit, Inc., a Minnesota
corporation (the "Lender"), at its office in Minneapolis, Minnesota, or at any
other place designated at any time by the holder hereof, in lawful money of the
United States of America and in immediately available funds, the principal sum
of Six Million Three Hundred Thirty-Five Thousand Dollars ($6,335,000) or the
aggregate unpaid principal amount of all Term A Advances made by the Lender to
the Borrowers under the Credit Agreement together with interest on the principal
amount hereunder remaining unpaid from time to time, computed on the basis of
the actual number of days elapsed and a three hundred sixty (360) day year, from
the date hereof until this Note is fully paid at the rate from time to time in
effect under the Amended and Restated Credit and Security Agreement dated the
same date as this Note (as the same may hereafter be amended, supplemented or
restated from time to time, the "Credit Agreement") by and between the Lender
and the Borrowers. The principal hereof and interest accruing thereon shall be
due and payable as provided in the Credit Agreement. This Note may be prepaid
only in accordance with the Credit Agreement.

         This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is issued
in replacement of and substitution for, but not in repayment of, (a) the Term
Note of Jens dated as of February 1, 2002, in the original principal amount of
$4,042,396, and (b) the Real Estate Note of Jens dated as of February 1, 2002,
in the original principal amount of $532,000. This Note is the Term A Note
referred to in the Credit Agreement.

         This Note is secured, among other things, pursuant to the Credit
Agreement and the Security Documents as therein defined, and may now or
hereafter be secured by one or more other security agreements, mortgages, deeds
of trust, assignments or other instruments or agreements.

         The Borrower hereby agree to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.

         Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.

            [The remainder of this page is left blank intentionally.]


                                      B-1
<PAGE>



                                            ALLIS-CHALMERS CORPORATION


                                            --------------------------------
                                            By:  Munawar Hidayatallah
                                            Its: Chief Executive Officer

                                            JENS' OIL FIELD SERVICE, INC.


                                            --------------------------------
                                            By:  Munawar Hidayatallah
                                            Its: Chief Executive Officer

                                            STRATA DIRECTIONAL TECHNOLOGY, INC.


                                            --------------------------------
                                            By:  Dave Wilde
                                            Its: Chief Executive Officer

                                            SAFCO-OIL FIELD PRODUCTS, INC.


                                            --------------------------------
                                            By:  Munawar Hidayatallah
                                            Its: Chief Executive Officer



                                SIGNATURE PAGE TO
                        AMENDED AND RESTATED TERM A NOTE

<PAGE>

         EXHIBIT C to Amended and Restated Credit and Security Agreement


                                   TERM B NOTE


$6,000,000                                                Minneapolis, Minnesota
                                                                December 7, 2004

         For value received, the undersigned, ALLIS-CHALMERS CORPORATION, a
Delaware corporation, JENS' OIL FIELD SERVICE, INC., a Texas corporation, STRATA
DIRECTIONAL TECHNOLOGY, INC., a Texas corporation, and SAFCO-OIL FIELD PRODUCTS,
INC., a Texas corporation (collectively, the "Borrowers"), hereby promise to
pay, jointly and severally, on the Termination Date under the Credit Agreement
(defined below), to the order of Wells Fargo Credit, Inc., a Minnesota
corporation (the "Lender"), at its office in Minneapolis, Minnesota, or at any
other place designated at any time by the holder hereof, in lawful money of the
United States of America and in immediately available funds, the principal sum
of Six Million Dollars ($6,000,000) or the aggregate unpaid principal amount of
all Term B Advances made by the Lender to the Borrowers under the Credit
Agreement together with interest on the principal amount hereunder remaining
unpaid from time to time, computed on the basis of the actual number of days
elapsed and a three hundred sixty (360) day year, from the date hereof until
this Note is fully paid at the rate from time to time in effect under the
Amended and Restated Credit and Security Agreement dated the same date as this
Note (as the same may hereafter be amended, supplemented or restated from time
to time, the "Credit Agreement") by and between the Lender and the Borrowers.
The principal hereof and interest accruing thereon shall be due and payable as
provided in the Credit Agreement. This Note may be prepaid only in accordance
with the Credit Agreement.

         This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Term B Note referred to in the Credit Agreement.

         This Note is secured, among other things, pursuant to the Credit
Agreement and the Security Documents as therein defined, and may now or
hereafter be secured by one or more other security agreements, mortgages, deeds
of trust, assignments or other instruments or agreements.

         The Borrowers hereby agree to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.

         Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.

            [The remainder of this page is left blank intentionally.]


                                      C-1
<PAGE>



                                            ALLIS-CHALMERS CORPORATION


                                            --------------------------------
                                            By:  Munawar Hidayatallah
                                            Its: Chief Executive Officer

                                            JENS' OIL FIELD SERVICE, INC.


                                            --------------------------------
                                            By:  Munawar Hidayatallah
                                            Its: Chief Executive Officer

                                            STRATA DIRECTIONAL TECHNOLOGY, INC.


                                            --------------------------------
                                            By:  Dave Wilde
                                            Its: Chief Executive Officer

                                            SAFCO-OIL FIELD PRODUCTS, INC.


                                            --------------------------------
                                            By:  Munawar Hidayatallah
                                            Its: Chief Executive Officer


                                SIGNATURE PAGE TO
                                   TERM B NOTE
<PAGE>

         EXHIBIT D to Amended and Restated Credit and Security Agreement


                             COMPLIANCE CERTIFICATE
                             ----------------------


To:               Wells Fargo Credit, Inc.
Date:             __________________, 200___
Subject:          Financial Statements

         In accordance with our Amended and Restated Credit and Security
Agreement dated as of December 7, 2004 (the "Credit Agreement"), attached are
the financial statements of ALLIS-CHALMERS CORPORATION, a Delaware corporation,
STRATA DIRECTIONAL TECHNOLOGY, INC., a Texas corporation, JENS' OIL FIELD
SERVICE, INC., a Texas corporation, and SAFCO-OIL FIELD PRODUCTS, INC., a Texas
corporation (collectively, the "Borrowers") as of and for ________________,
200__ (the "Reporting Date") and the year-to-date period then ended (the
"Current Financials"). All terms used in this certificate have the meanings
given in the Credit Agreement.

         I certify that the Current Financials have been prepared in accordance
with GAAP, subject to year-end audit adjustments, and fairly present the
Borrowers' financial condition as of the date thereof.

         I further hereby certify as follows:

         EVENTS OF DEFAULT.  (Check one):

         (__)     The undersigned does not have knowledge of the occurrence of a
                  Default or Event of Default under the Credit Agreement except
                  as previously reported in writing to the Lender.

         (__)     The undersigned has knowledge of the occurrence of a Default
                  or Event of Default under the Credit Agreement not previously
                  reported in writing to the Lender and attached hereto is a
                  statement of the facts with respect to thereto. The Borrowers
                  acknowledge that pursuant to SECTION 2.8(d) of the Credit
                  Agreement, the Lender may impose the Default Rate at any time
                  during the resulting Default Period.

         MATERIAL ADVERSE CHANGE IN LITIGATION MATTERS OF BORROWER. I further
         hereby certify as follows (check one):

         (__)     The undersigned has no knowledge of any material adverse
                  change to the litigation exposure of the Borrowers or any of
                  its Guarantors or Affiliates.

         (__)     The undersigned has knowledge of material adverse changes to
                  the litigation exposure of the Borrowers or any of its
                  Guarantors or Affiliates not previously disclosed in SCHEDULE
                  5.7 to the Credit Agreement. Attached to this Certificate is a
                  statement of the facts with respect thereto.


                                      D-1
<PAGE>

         FINANCIAL COVENANTS. I further hereby certify as follows (check and
complete each of the following):

         1. STOP LOSS. Pursuant to SECTION 6.2(a) of the Credit Agreement, for
the month ending on the Reporting Date, the Borrowers have achieved Net Income
of $______________, which [ ] satisfies [ ] does not satisfy the requirement
that the Borrowers maintain Net Income in excess of ($_____________) for each
month.

         2. MINIMUM DEBT SERVICE COVERAGE RATIO. Pursuant to SECTION 6.2(B) of
the Credit Agreement, as of the Reporting Date, the Borrowers' Debt Service
Coverage Ratio was _____ to 1.00 which [ ] satisfies [ ] does not satisfy the
requirement that such ratio be no less than ______ to 1.00 on the Reporting Date
as set forth in the table below:

                                                           MINIMUM DEBT SERVICE
                                                           --------------------
               PERIOD                                         COVERAGE RATIO
               ------                                         --------------
Three months ending March 31 of each year                       1.00 to 1.00
Six months ending June 30 of each year                          1.00 to 1.00
Nine months ending September 30 of each year                    1.00 to 1.00
Twelve months ending December 31 of each year                   1.15 to 1.00

         3. CAPITAL EXPENDITURES. Pursuant to SECTION 6.2(c) of the Credit
Agreement, for the fiscal year-to-date period ending on the Reporting Date, the
Borrowers have expended or contracted to expend for Capital Expenditures,
$__________ in the aggregate, of which $____________ were unfinanced, which [ ]
satisfies [ ] does not satisfy the requirement that such expenditures not exceed
$__________ in the aggregate during the fiscal year, no more than $_____________
of which may be unfinanced.

         4. MEXICAN CAPITAL EXPENDITURES. Pursuant to SECTION 6.2(d) of the
Credit Agreement, for the fiscal year-to-date period ending on the Reporting
Date, the Borrowers have expended or contracted to expend for Mexican Capital
Expenditures, $__________ in the aggregate, which [ ] satisfies [ ] does not
satisfy (a) for fiscal years ending December 31, 2004 and December 31, 2005, the
requirement that such expenditures not exceed $4,500,000 in the aggregate during
the fiscal years ending December 31, 2004 and December 31, 2005, taken together
or (b) for fiscal years ending December 31, 2006 and thereafter, the requirement
that no such expenditures may be made during a Default Period or if average
daily Availability for the 90 days preceding such expenditure is less than
$1,000,000, and in any case that such expenditures not exceed the lesser of (i)
$1,000,000 and (ii) the sum of (1) cash equity contributions received by the
Borrowers on or after January 1, 2005, which total $______________, and (2) the
net amount by which the Borrowers' Cash Flow From Operations achieved on or
after January 1, 2005, which totals $______________, exceeds the minimum amount
of Cash Flow From Operations that would have been required for such periods for
the Borrowers to remain in compliance with all other Financial Covenants, which
is $_____________.

                                      D-2
<PAGE>

         5. SALARIES. As of the Reporting Date, the Borrowers have not paid
excessive or unreasonable salaries, bonuses, commissions, consultant fees or
other compensation, or increased the salary, bonus (except to the extent
resulting from enhanced or increased performance), commissions, consultant fees
or other compensation of any Director, Officer or consultant, or any member of
their families, by more than ten percent (10%) over the amount paid in the
Borrowers' previous fiscal year, either individually or for all such persons in
the aggregate, and has not paid any increase from any source other than profits
earned in the year of payment, and as a consequence [ ] is [ ] is not in
compliance with SECTION 6.8 of the Credit Agreement.

         Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.


            [The remainder of this page is left blank intentionally.]


                                      D-3
<PAGE>


                                            ALLIS-CHALMERS CORPORATION


                                            --------------------------------
                                            By:  Munawar Hidayatallah
                                            Its: Chief Executive Officer

                                            JENS' OIL FIELD SERVICE, INC.


                                            --------------------------------
                                            By:  Munawar Hidayatallah
                                            Its: Chief Executive Officer

                                            STRATA DIRECTIONAL TECHNOLOGY, INC.


                                            --------------------------------
                                            By:  Dave Wilde
                                            Its: Chief Executive Officer

                                            SAFCO-OIL FIELD PRODUCTS, INC.


                                            --------------------------------
                                            By:  Munawar Hidayatallah
                                            Its: Chief Executive Officer



                                SIGNATURE PAGE TO
                             COMPLIANCE CERTIFICATE

<PAGE>




                               SECURITY AGREEMENT
                         (MOUNTAIN COMPRESSED AIR, INC.)

         This Security Agreement (this "Agreement"), dated as of December 7,
2004, is made by and between Mountain Compressed Air, Inc., a Delaware
corporation (the "Debtor"), and Wells Fargo Credit, Inc., a Minnesota
corporation (the "Secured Party").

                  Pursuant to an Amended and Restated Credit and Security
Agreement dated as of December 7, 2004 (as the same may be amended, supplemented
or restated from time to time, the "Credit Agreement"), the Secured Party may
extend credit accommodations to Allis-Chalmers Corporation, a Delaware
corporation, Strata Directional Technology, Inc., a Texas corporation, Jens' Oil
Field Service, Inc., a Texas corporation, and Safco-Oil Field Products, Inc., a
Texas corporation (collectively, the "Borrower").

                  As a condition to extending credit to the Borrower, the
Secured Party has required the execution and delivery of the Debtor's Guaranty
of even date herewith, guaranteeing the payment and performance of all
obligations of the Borrower arising under or pursuant to the Credit Agreement
(the "Guaranty").

                  As a further condition to extending credit to the Borrower
under the Credit Agreement, the Secured Party has required the execution and
delivery of this Agreement by the Debtor.

                  ACCORDINGLY, in consideration of the mutual covenants
contained in the Credit Agreement and herein, the parties hereby agree as
follows:

         1. DEFINITIONS. All terms defined in the recitals hereto and the Credit
Agreement that are not otherwise defined herein shall have the meanings given
them in the recitals and the Credit Agreement. All terms defined in the UCC and
not otherwise defined herein have the meanings assigned to them in the UCC. In
addition, the following terms have the meanings set forth below or in the
referenced Section of this Agreement:

                  "Accounts" means all of the Debtor's accounts, as such term is
         defined in the UCC, including each and every right of the Debtor to the
         payment of money, whether such right to payment now exists or hereafter
         arises, whether such right to payment arises out of a sale, lease or
         other disposition of goods or other property, out of a rendering of
         services, out of a loan, out of the overpayment of taxes or other
         liabilities, or otherwise arises under any contract or agreement,
         whether such right to payment is created, generated or earned by the
         Debtor or by some other person who subsequently transfers such person's
         interest to the Debtor, whether such right to payment is or is not
         already earned by performance, and howsoever such right to payment may
         be evidenced, together with all other rights and interests (including
         all Liens) which the Debtor may at any time have by law or agreement
         against any account debtor or other obligor obligated to make any such
         payment or against any property of such account debtor or other
         obligor; all including but not limited to all present and future
         accounts, contract rights, loans and obligations receivable, chattel
         papers, bonds, notes and other debt instruments, tax refunds and rights
         to payment in the nature of general intangibles.


<PAGE>

                  "Collateral" means all of the Debtor's Accounts, chattel
         paper, deposit accounts, documents, Equipment, General Intangibles,
         goods, instruments, Inventory, Investment Property, letter-of-credit
         rights, letters of credit, all sums on deposit in any Collateral
         Account, and any items in any Lockbox; together with (i) all
         substitutions and replacements for and products of any of the
         foregoing; (ii) in the case of all goods, all accessions; (iii) all
         accessories, attachments, parts, equipment and repairs now or hereafter
         attached or affixed to or used in connection with any goods; (iv) all
         warehouse receipts, bills of lading and other documents of title now or
         hereafter covering such goods; (v) any money, or other assets of the
         Debtor that now or hereafter come into the possession, custody, or
         control of the Lender; and (vi) proceeds of any and all of the
         foregoing.

                  "Equipment" means all of the Debtor's equipment, as such term
         is defined in the UCC, whether now owned or hereafter acquired,
         including but not limited to all present and future machinery,
         vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
         office and recordkeeping equipment, parts, tools, supplies, and
         including specifically the goods described in any equipment schedule or
         list herewith or hereafter furnished to the Lender by the Debtor.

                  "Event of Default" has the meaning given in SECTION 6 hereof.

                  "General Intangibles" means all of the Debtor's general
         intangibles, as such term is defined in the UCC, whether now owned or
         hereafter acquired, including all present and future Intellectual
         Property Rights, customer or supplier lists and contracts, manuals,
         operating instructions, permits, franchises, the right to use the
         Debtor's name, and the goodwill of the Debtor's business.

                  "Intellectual Property Rights" means all actual or prospective
         rights arising in connection with any intellectual property or other
         proprietary rights, including all rights arising in connection with
         copyrights, patents, service marks, trade dress, trade secrets,
         trademarks, trade names or mask works.

                  "Inventory" means all of the Debtor's inventory, as such term
         is defined in the UCC, whether now owned or hereafter acquired, whether
         consisting of whole goods, spare parts or components, supplies or
         materials, whether acquired, held or furnished for sale, for lease or
         under service contracts or for manufacture or processing, and wherever
         located.

                  "Investment Property" means all of the Debtor's investment
         property, as such term is defined in the UCC, whether now owned or
         hereafter acquired, including but not limited to all securities,
         security entitlements, securities accounts, commodity contracts,
         commodity accounts, stocks, bonds, mutual fund shares, money market
         shares and U.S. Government securities.


                                       2
<PAGE>

                  "Lien" means any security interest, mortgage, deed of trust,
         pledge, lien, charge, encumbrance, title retention agreement or
         analogous instrument or device, including the interest of each lessor
         under any capitalized lease and the interest of any bondsman under any
         payment or performance bond, in, of or on any assets or properties of a
         person, whether now owned or hereafter acquired and whether arising by
         agreement or operation of law.

                  "Obligations" means each and every debt, liability and
         obligation of every type and description which the Debtor may now or at
         any time hereafter owe to the Secured Party, whether such debt,
         liability or obligation now exists or is hereafter created or incurred
         and whether it is or may be direct or indirect, due or to become due,
         or absolute or contingent, including without limitation all obligations
         under the Guaranty.

                  "Permitted Liens" means (i) the Security Interest, (ii)
         covenants, restrictions, rights, easements and minor irregularities in
         title which do not materially interfere with the Debtor's business or
         operations as presently conducted, and (iii) Liens in existence on the
         date hereof and described on EXHIBIT C hereto.

                  "Security Interest" has the meaning given in SECTION 2 hereof.

                  "UCC" means Uniform Commercial Code as in effect from time to
time in the State of Minnesota.

         2. SECURITY INTEREST. The Debtor hereby grants the Secured Party a
security interest (the "Security Interest") in the Collateral to secure payment
of the Obligations.

         3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The Debtor hereby
represents, warrants and agrees as follows:

                  (a) TITLE. The Debtor (i) has absolute title to each item of
         Collateral in existence on the date hereof, free and clear of all Liens
         except Permitted Liens, (ii) will have, at the time the Debtor acquires
         any rights in Collateral hereafter arising, absolute title to each such
         item of Collateral free and clear of all Liens except Permitted Liens,
         (iii) will keep all Collateral free and clear of all Liens except
         Permitted Liens, and (iv) will defend the Collateral against all claims
         or demands of all persons other than the Secured Party. The Debtor will
         not sell or otherwise dispose of the Collateral or any interest
         therein, outside the ordinary course of business, without the prior
         written consent of the Secured Party.

                  (b) CHIEF EXECUTIVE OFFICE; IDENTIFICATION NUMBERS. The
         Debtor's chief executive office and principal place of business is
         located at the address set forth under its signature below. The
         Debtor's federal employer identification number and organizational
         identification number are correctly set forth under its signature
         below.

                  (c) LOCATION OF COLLATERAL. As of the date hereof, the
         tangible Collateral is located only in the states and at the addresses
         identified on EXHIBIT A hereto.


                                       3
<PAGE>

                  (d) CHANGES IN NAME, CONSTITUENT DOCUMENTS, LOCATION. The
         Debtor will not change its name, articles of incorporation or bylaws,
         or jurisdiction of organization, without the prior written consent of
         the Secured Party. The Debtor will not change its business address,
         without prior written notice to the Secured Party.

                  (e) FIXTURES. The Debtor will not permit any tangible
         Collateral to become part of or to be affixed to any real property
         without first assuring to the reasonable satisfaction of the Secured
         Party that the Security Interest will be prior and senior to any Lien
         then held or thereafter acquired by any mortgagee of such real property
         or the owner or purchaser of any interest therein. If any part or all
         of the tangible Collateral is now or will become so related to
         particular real estate as to be a fixture, the real estate concerned
         and the name of the record owner are accurately set forth in EXHIBIT B
         hereto.

                  (f) RIGHTS TO PAYMENT. Each right to payment and each
         instrument, document, chattel paper and other agreement constituting or
         evidencing Collateral is (or will be when arising, issued or assigned
         to the Secured Party) the valid, genuine and legally enforceable
         obligation, subject to no defense, setoff or counterclaim (other than
         those arising in the ordinary course of business), of the account
         debtor or other obligor named therein or in the Debtor's records
         pertaining thereto as being obligated to pay such obligation. The
         Debtor will neither agree to any material modification or amendment nor
         agree to any forbearance, release or cancellation of any such
         obligation, and will not subordinate any such right to payment to
         claims of other creditors of such account debtor or other obligor.

                  (g) COMMERCIAL TORT CLAIMS. Promptly upon knowledge thereof,
         the Debtor will deliver to the Secured Party notice of any commercial
         tort claims it may bring against any person, including the name and
         address of each defendant, a summary of the facts, an estimate of the
         Debtor's damages, copies of any complaint or demand letter submitted by
         the Debtor, and such other information as the Lender may request. Upon
         request by the Secured Party, the Debtor will grant the Secured Party a
         security interest in all commercial tort claims it may have against any
         person.

                  (h) MISCELLANEOUS COVENANTS. The Debtor will:

                           (i) keep all tangible Collateral in good repair,
                  working order and condition, normal depreciation excepted, and
                  will, from time to time, replace any worn, broken or defective
                  parts thereof;

                           (ii) promptly pay all taxes and other governmental
                  charges levied or assessed upon or against any Collateral or
                  upon or against the creation, perfection or continuance of the
                  Security Interest;

                           (iii) at all reasonable times, permit the Secured
                  Party or its representatives to examine or inspect any
                  Collateral, wherever located, and to examine, inspect and copy
                  the Debtor's books and records pertaining to the Collateral
                  and its business and financial condition and to send and
                  discuss with account debtors and other obligors requests for
                  verifications of amounts owed to the Debtor;


                                       4
<PAGE>

                           (iv) keep accurate and complete records pertaining to
                  the Collateral and pertaining to the Debtor's business and
                  financial condition and submit to the Secured Party such
                  periodic reports concerning the Collateral and the Debtor's
                  business and financial condition as the Secured Party may from
                  time to time reasonably request;

                           (v) promptly notify the Secured Party of any loss of
                  or material damage to any Collateral or of any adverse change,
                  known to the Debtor, in the prospect of payment of any sums
                  due on or under any instrument, chattel paper, or account
                  constituting Collateral;

                           (vi) if the Secured Party at any time so requests
                  (after the occurrence of an Event of Default), promptly
                  deliver to the Secured Party any instrument, document or
                  chattel paper constituting Collateral, duly endorsed or
                  assigned by the Debtor;

                           (vii) at all times keep all tangible Collateral
                  insured against risks of fire (including so-called extended
                  coverage), theft, collision (in case of Collateral consisting
                  of motor vehicles) and such other risks and in such amounts as
                  the Secured Party may reasonably request, with any such
                  policies containing a lender loss payable endorsement
                  acceptable to the Secured Party;

                           (viii) from time to time authorize such financing
                  statements as the Secured Party may reasonably require in
                  order to perfect the Security Interest and, if any Collateral
                  consists of a motor vehicle, execute such documents as may be
                  required to have the Security Interest properly noted on a
                  certificate of title;

                           (ix) pay when due or reimburse the Secured Party on
                  demand for all costs of collection of any of the Obligations
                  and all other out-of-pocket expenses (including in each case
                  all reasonable attorneys' fees) incurred by the Secured Party
                  in connection with the creation, perfection, satisfaction,
                  protection, defense or enforcement of the Security Interest or
                  the creation, continuance, protection, defense or enforcement
                  of this Agreement or any or all of the Obligations, including
                  expenses incurred in any litigation or bankruptcy or
                  insolvency proceedings;

                           (x) execute, deliver or endorse any and all
                  instruments, documents, assignments, security agreements and
                  other agreements and writings which the Secured Party may at
                  any time reasonably request in order to secure, protect,
                  perfect or enforce the Security Interest and the Secured
                  Party's rights under this Agreement; and

                           (xi) not use or keep any Collateral, or permit it to
                  be used or kept, for any unlawful purpose or in violation of
                  any federal, state or local law, statute or ordinance.


<PAGE>

                  (i) SECURED PARTY'S RIGHT TO TAKE ACTION. The Debtor
         authorizes the Secured Party to file from time to time where permitted
         by law, such financing statements against collateral described as "all
         personal property" or describing specific items of collateral including
         commercial tort claims as the Secured Party deems necessary or useful
         to perfect the Security Interest. The Debtor will not amend any
         financing statements in favor of the Secured Party except as permitted
         by law. Further, if the Debtor at any time fails to perform or observe
         any agreement contained in SECTION 3(h), and if such failure continues
         for a period of ten (10) days after the Secured Party gives the Debtor
         written notice thereof (or, in the case of the agreements contained in
         clauses (vii) and (viii) of SECTION 3(h), immediately upon the
         occurrence of such failure, without notice or lapse of time), the
         Secured Party may (but need not) perform or observe such agreement on
         behalf and in the name, place and stead of the Debtor (or, at the
         Secured Party's option, in the Secured Party's own name) and may (but
         need not) take any and all other actions which the Secured Party may
         reasonably deem necessary to cure or correct such failure (including,
         without limitation the payment of taxes, the satisfaction of security
         interests, liens, or encumbrances, the performance of obligations under
         contracts or agreements with account debtors or other obligors, the
         procurement and maintenance of insurance, the filing of financing
         statements, the endorsement of instruments, and the procurement of
         repairs or transportation); and, except to the extent that the effect
         of such payment would be to render any loan or forbearance of money
         usurious or otherwise illegal under any applicable law, the Debtor
         shall thereupon pay the Secured Party on demand the amount of all
         moneys expended and all costs and expenses (including reasonable
         attorneys' fees) incurred by the Secured Party in connection with or as
         a result of the Secured Party's performing or observing such agreements
         or taking such actions, together with interest thereon from the date
         expended or incurred by the Secured Party at the highest rate then
         applicable to any of the Obligations. To facilitate the performance or
         observance by the Secured Party of such agreements of the Debtor, the
         Debtor hereby irrevocably appoints (which appointment is coupled with
         an interest) the Secured Party, or its delegate, as the
         attorney-in-fact of the Debtor with the right (but not the duty) from
         time to time to create, prepare, complete, execute, deliver, endorse or
         file, in the name and on behalf of the Debtor, any and all instruments,
         documents, financing statements, applications for insurance and other
         agreements and writings required to be obtained, executed, delivered or
         endorsed by the Debtor under this SECTION 3 and SECTION 4.

         4. RIGHTS OF SECURED PARTY. At any time and from time to time, whether
before or after an Event of Default, the Secured Party may take any or all of
the following actions:

                  (a) ACCOUNT VERIFICATION. The Secured Party may at any time
         and from time to time send or require the Debtor to send requests for
         verification of accounts or notices of assignment to account debtors
         and other obligors. The Secured Party may also at any time and from
         time to time telephone account debtors and other obligors to verify
         accounts.

                  (b) COLLATERAL ACCOUNT. The Secured Party may establish a
         collateral account for the deposit of checks, drafts and cash payments
         made by the Debtor's account debtors. If a collateral account is so
         established, the Debtor shall promptly deliver to the Secured Party,
         for deposit into said collateral account, all payments on Accounts and
         chattel paper received by it. All such payments shall be delivered to
         the Secured Party in the form received (except for the Debtor's
         endorsement where necessary). Until so deposited, all payments on
         Accounts and chattel paper received by the Debtor shall be held in
         trust by the Debtor for and as the property of the Secured Party and
         shall not be commingled with any funds or property of the Debtor. All
         deposits in said collateral account shall constitute proceeds of
         Collateral and shall not constitute payment of any Obligation. Unless
         otherwise agreed in writing, the Debtor shall have no right to withdraw
         amounts on deposit in any collateral account.

                                       6
<PAGE>

                  (c) LOCKBOX. The Secured Party may, by notice to the Debtor,
         require the Debtor to direct each of its account debtors to make
         payment directly to a special lockbox to be under the control of the
         Secured Party. The Debtor hereby authorizes and directs the Secured
         Party to deposit all checks, drafts and cash payments received in said
         lockbox into the collateral account established as set forth above.

                  (d) DIRECT COLLECTION. The Secured Party may notify any
         account debtor, or any other person obligated to pay any amount due,
         that such chattel paper, Account, or other right to payment has been
         assigned or transferred to the Secured Party for security and shall be
         paid directly to the Secured Party. At any time after the Secured Party
         or the Debtor gives such notice to an account debtor or other obligor,
         the Secured Party may (but need not), in its own name or in the
         Debtor's name, demand, sue for, collect or receive any money or
         property at any time payable or receivable on account of, or securing,
         any such chattel paper, Account, or other right to payment, or grant
         any extension to, make any compromise or settlement with or otherwise
         agree to waive, modify, amend or change the obligations (including
         collateral obligations) of any such account debtor or other obligor.

         5. ASSIGNMENT OF INSURANCE. The Debtor hereby assigns to the Secured
Party, as additional security for the payment of the Obligations, any and all
moneys (including but not limited to proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Debtor under or with respect to, any and all policies of insurance covering the
Collateral, and the Debtor hereby directs the issuer of any such policy to pay
any such moneys directly to the Secured Party. After the occurrence of an Event
of Default, the Secured Party may (but need not), in its own name or in the
Debtor's name, execute and deliver proofs of claim, receive all such moneys,
endorse checks and other instruments representing payment of such moneys, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.

         6. EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an event of default under this Agreement (herein called "Event of
Default"): (i) an Event of Default shall occur under the Credit Agreement; or
(ii) the Debtor shall fail to pay any or all of the Obligations when due or (if
payable on demand) on demand; or (iii) the Debtor shall fail to observe or
perform any covenant or agreement herein binding on it.

         7. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default and at any time thereafter, the Secured Party may exercise any one or
more of the following rights and remedies: (i) declare all unmatured Obligations
to be immediately due and payable, and the same shall thereupon be immediately
due and payable, without presentment or other notice or demand; (ii) exercise
and enforce any or all rights and remedies available upon default to a secured
party under the UCC, including but not limited to the right to take possession
of any Collateral, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which the Debtor hereby expressly
waives), and the right to sell, lease or otherwise dispose of any or all of the
Collateral, and in connection therewith, the Secured Party may require the
Debtor to make the Collateral available to the Secured Party at a place to be


                                       7
<PAGE>

designated by the Secured Party which is reasonably convenient to both parties,
and if notice to the Debtor of any intended disposition of Collateral or any
other intended action is required by law in a particular instance, such notice
shall be deemed commercially reasonable if given (in the manner specified in
SECTION 9) at least ten (10) days prior to the date of intended disposition or
other action; (iii) exercise or enforce any or all other rights or remedies
available to the Secured Party by law or agreement against the Collateral,
against the Debtor or against any other person or property. The Secured Party is
hereby granted a nonexclusive, worldwide and royalty-free license to use or
otherwise exploit all Intellectual Property Rights owned by or licensed to the
Debtor that the Secured Party deems necessary or appropriate to the disposition
of any Collateral.

         8. OTHER PERSONAL PROPERTY. Unless at the time the Secured Party takes
possession of any tangible Collateral, or within seven days thereafter, the
Debtor gives written notice to the Secured Party of the existence of any goods,
papers or other property of the Debtor, not affixed to or constituting a part of
such Collateral, but which are located or found upon or within such Collateral,
describing such property, the Secured Party shall not be responsible or liable
to the Debtor for any action taken or omitted by or on behalf of the Secured
Party with respect to such property.

         9. NOTICES; REQUESTS FOR ACCOUNTING. All notices and other
communications hereunder shall be in writing and shall be (a) personally
delivered, (b) sent by first class United States mail, (c) sent by overnight
courier of national reputation, or (d) transmitted by telecopy, in each case
addressed or telecopied to the party to whom notice is being given at its
address or telecopier number as set forth below its signature or, as to each
party, at such other address or telecopier number as may hereafter be designated
by such party in a written notice to the other party complying as to delivery
with the terms of this Section. All such notices, requests, demands and other
communications shall be deemed to have been given on (i) the date received if
personally delivered, (ii) when deposited in the mail if delivered by mail,
(iii) the date sent if sent by overnight courier, or (iv) the date of
transmission if delivered by telecopy. All requests under Section 9-210 of the
UCC (i) shall be made in a writing signed by an authorized person, (ii) shall be
personally delivered, sent by registered or certified mail, return receipt
requested, or by overnight courier of national reputation (iii) shall be deemed
to be sent when received by the Secured Party and (iv) shall otherwise comply
with the requirements of Section 9-210. The Debtor requests that the Secured
Party respond to all such requests which on their face appear to come from an
authorized individual and releases the Secured Party from any liability for so
responding. The Debtor shall pay Secured Party the maximum amount allowed by law
for responding to such requests.

         10. MISCELLANEOUS. This Agreement has been duly and validly authorized
by all necessary corporate action. This Agreement does not contemplate a sale of
accounts, or chattel paper. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by the Secured Party, and, in the case of
amendment or modification, in a writing signed by the Debtor. A waiver signed by
the Secured Party shall be effective only in the specific instance and for the
specific purpose given. Mere delay or failure to act shall not preclude the
exercise or enforcement of any of the Secured Party's rights or remedies. All
rights and remedies of the Secured Party shall be cumulative and may be


                                       8
<PAGE>

exercised singularly or concurrently, at the Secured Party's option, and the
exercise or enforcement of any one such right or remedy shall neither be a
condition to nor bar the exercise or enforcement of any other. The Secured
Party's duty of care with respect to Collateral in its possession (as imposed by
law) shall be deemed fulfilled if the Secured Party exercises reasonable care in
physically safekeeping such Collateral or, in the case of Collateral in the
custody or possession of a bailee or other third person, exercises reasonable
care in the selection of the bailee or other third person, and the Secured Party
need not otherwise preserve, protect, insure or care for any Collateral. The
Secured Party shall not be obligated to preserve any rights the Debtor may have
against prior parties, to realize on the Collateral at all or in any particular
manner or order, or to apply any cash proceeds of Collateral in any particular
order of application. This Agreement shall be binding upon and inure to the
benefit of the Debtor and the Secured Party and their respective successors and
assigns and shall take effect when signed by the Debtor and delivered to the
Secured Party, and the Debtor waives notice of the Secured Party's acceptance
hereof. The Secured Party may execute this Agreement if appropriate for the
purpose of filing, but the failure of the Secured Party to execute this
Agreement shall not affect or impair the validity or effectiveness of this
Agreement. This Agreement shall be governed by and construed in accordance with
the substantive laws (other than conflict laws) of the State of Minnesota. If
any provision or application of this Agreement is held unlawful or unenforceable
in any respect, such illegality or unenforceability shall not affect other
provisions or applications which can be given effect and this Agreement shall be
construed as if the unlawful or unenforceable provision or application had never
been contained herein or prescribed hereby. All representations and warranties
contained in this Agreement shall survive the execution, delivery and
performance of this Agreement and the creation and payment of the Obligations.
The parties hereto hereby (i) consent to the personal jurisdiction of the state
and federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Secured Party or the Debtor in connection with this Agreement or the other Loan
Documents may be venued in either the state or federal courts located in
Hennepin County, Minnesota; and (iv) agree that a final judgment in any such
suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

          THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
              PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.



            [The remainder of this page is left blank intentionally.]



                                       9
<PAGE>




         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.



WELLS FARGO CREDIT, INC.                MOUNTAIN COMPRESSED AIR, INC.


By /S/ MICHELLE GUETTER                 By /S/ MUNAWAR HIDAYATALLAH
   Michelle Guetter, Vice President        Chairman and Chief Executive Officer

Address:                                Address:
MAC T5698-030                           5075 Westheimer, Suite 890
40 N.E. Loop 410, Suite 340             Houston, Texas  77056
San Antonio, Texas 78216                Attention: Chief Financial Officer
Attention: Michelle Guetter             Organizational ID number: 01613850



                                SIGNATURE PAGE TO
                               SECURITY AGREEMENT
                         (MOUNTAIN COMPRESSED AIR, INC.)

<PAGE>

                                                                       EXHIBIT A

                             LOCATION OF COLLATERAL






<PAGE>


                                                                       EXHIBIT B



                                LEGAL DESCRIPTION





<PAGE>


                                                                       EXHIBIT C


                                 PERMITTED LIENS


<PAGE>




                               SECURITY AGREEMENT
                                    (OILQUIP)

         This Security Agreement (this "Agreement"), dated as of December 7,
2004, is made by and between Oilquip Rentals, Inc., a Delaware corporation (the
"Debtor"), and Wells Fargo Credit, Inc., a Minnesota corporation (the "Secured
Party").

                  Pursuant to an Amended and Restated Credit and Security
Agreement dated as of December 7, 2004 (as the same may be amended, supplemented
or restated from time to time, the "Credit Agreement"), the Secured Party may
extend credit accommodations to Allis-Chalmers Corporation, a Delaware
corporation, Strata Directional Technology, Inc., a Texas corporation, Jens' Oil
Field Service, Inc., a Texas corporation, and Safco-Oil Field Products, Inc., a
Texas corporation (collectively, the "Borrower").

                  As a condition to extending credit to the Borrower, the
Secured Party has required the execution and delivery of the Debtor's Guaranty
of even date herewith, guaranteeing the payment and performance of all
obligations of the Borrower arising under or pursuant to the Credit Agreement
(the "Guaranty").

                  As a further condition to extending credit to the Borrower
under the Credit Agreement, the Secured Party has required the execution and
delivery of this Agreement by the Debtor.

                  ACCORDINGLY, in consideration of the mutual covenants
contained in the Credit Agreement and herein, the parties hereby agree as
follows:

         1. DEFINITIONS. All terms defined in the recitals hereto and the Credit
Agreement that are not otherwise defined herein shall have the meanings given
them in the recitals and the Credit Agreement. All terms defined in the UCC and
not otherwise defined herein have the meanings assigned to them in the UCC. In
addition, the following terms have the meanings set forth below or in the
referenced Section of this Agreement:

                  "Accounts" means all of the Debtor's accounts, as such term is
         defined in the UCC, including each and every right of the Debtor to the
         payment of money, whether such right to payment now exists or hereafter
         arises, whether such right to payment arises out of a sale, lease or
         other disposition of goods or other property, out of a rendering of
         services, out of a loan, out of the overpayment of taxes or other
         liabilities, or otherwise arises under any contract or agreement,
         whether such right to payment is created, generated or earned by the
         Debtor or by some other person who subsequently transfers such person's
         interest to the Debtor, whether such right to payment is or is not
         already earned by performance, and howsoever such right to payment may
         be evidenced, together with all other rights and interests (including
         all Liens) which the Debtor may at any time have by law or agreement
         against any account debtor or other obligor obligated to make any such
         payment or against any property of such account debtor or other
         obligor; all including but not limited to all present and future
         accounts, contract rights, loans and obligations receivable, chattel
         papers, bonds, notes and other debt instruments, tax refunds and rights
         to payment in the nature of general intangibles.

<PAGE>

                  "Collateral" means all of the Debtor's Accounts, chattel
         paper, deposit accounts, documents, Equipment, General Intangibles,
         goods, instruments, Inventory, Investment Property, letter-of-credit
         rights, letters of credit, all sums on deposit in any Collateral
         Account, and any items in any Lockbox; together with (i) all
         substitutions and replacements for and products of any of the
         foregoing; (ii) in the case of all goods, all accessions; (iii) all
         accessories, attachments, parts, equipment and repairs now or hereafter
         attached or affixed to or used in connection with any goods; (iv) all
         warehouse receipts, bills of lading and other documents of title now or
         hereafter covering such goods; (v) any money, or other assets of the
         Debtor that now or hereafter come into the possession, custody, or
         control of the Lender; and (vi) proceeds of any and all of the
         foregoing.

                  "Equipment" means all of the Debtor's equipment, as such term
         is defined in the UCC, whether now owned or hereafter acquired,
         including but not limited to all present and future machinery,
         vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
         office and recordkeeping equipment, parts, tools, supplies, and
         including specifically the goods described in any equipment schedule or
         list herewith or hereafter furnished to the Lender by the Debtor.

                  "Event of Default" has the meaning given in SECTION 6 hereof.

                  "General Intangibles" means all of the Debtor's general
         intangibles, as such term is defined in the UCC, whether now owned or
         hereafter acquired, including all present and future Intellectual
         Property Rights, customer or supplier lists and contracts, manuals,
         operating instructions, permits, franchises, the right to use the
         Debtor's name, and the goodwill of the Debtor's business.

                  "Intellectual Property Rights" means all actual or prospective
         rights arising in connection with any intellectual property or other
         proprietary rights, including all rights arising in connection with
         copyrights, patents, service marks, trade dress, trade secrets,
         trademarks, trade names or mask works.

                  "Inventory" means all of the Debtor's inventory, as such term
         is defined in the UCC, whether now owned or hereafter acquired, whether
         consisting of whole goods, spare parts or components, supplies or
         materials, whether acquired, held or furnished for sale, for lease or
         under service contracts or for manufacture or processing, and wherever
         located.

                  "Investment Property" means all of the Debtor's investment
         property, as such term is defined in the UCC, whether now owned or
         hereafter acquired, including but not limited to all securities,
         security entitlements, securities accounts, commodity contracts,
         commodity accounts, stocks, bonds, mutual fund shares, money market
         shares and U.S. Government securities.


                                       2
<PAGE>

                  "Lien" means any security interest, mortgage, deed of trust,
         pledge, lien, charge, encumbrance, title retention agreement or
         analogous instrument or device, including the interest of each lessor
         under any capitalized lease and the interest of any bondsman under any
         payment or performance bond, in, of or on any assets or properties of a
         person, whether now owned or hereafter acquired and whether arising by
         agreement or operation of law.

                  "Obligations" means each and every debt, liability and
         obligation of every type and description which the Debtor may now or at
         any time hereafter owe to the Secured Party, whether such debt,
         liability or obligation now exists or is hereafter created or incurred
         and whether it is or may be direct or indirect, due or to become due,
         or absolute or contingent, including without limitation all obligations
         under the Guaranty.

                  "Permitted Liens" means (i) the Security Interest, (ii)
         covenants, restrictions, rights, easements and minor irregularities in
         title which do not materially interfere with the Debtor's business or
         operations as presently conducted, and (iii) Liens in existence on the
         date hereof and described on EXHIBIT C hereto.

                  "Security Interest" has the meaning given in SECTION 2 hereof.

                  "UCC" means Uniform Commercial Code as in effect from time to
time in the State of Minnesota.

         2. SECURITY INTEREST. The Debtor hereby grants the Secured Party a
security interest (the "Security Interest") in the Collateral to secure payment
of the Obligations.

         3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The Debtor hereby
represents, warrants and agrees as follows:

                  (a) TITLE. The Debtor (i) has absolute title to each item of
         Collateral in existence on the date hereof, free and clear of all Liens
         except Permitted Liens, (ii) will have, at the time the Debtor acquires
         any rights in Collateral hereafter arising, absolute title to each such
         item of Collateral free and clear of all Liens except Permitted Liens,
         (iii) will keep all Collateral free and clear of all Liens except
         Permitted Liens, and (iv) will defend the Collateral against all claims
         or demands of all persons other than the Secured Party. The Debtor will
         not sell or otherwise dispose of the Collateral or any interest
         therein, outside the ordinary course of business, without the prior
         written consent of the Secured Party.

                  (b) CHIEF EXECUTIVE OFFICE; IDENTIFICATION NUMBERS. The
         Debtor's chief executive office and principal place of business is
         located at the address set forth under its signature below. The
         Debtor's federal employer identification number and organizational
         identification number are correctly set forth under its signature
         below.


                                       3
<PAGE>

                  (c) LOCATION OF COLLATERAL. As of the date hereof, the
         tangible Collateral is located only in the states and at the addresses
         identified on EXHIBIT A hereto.

                  (d) CHANGES IN NAME, CONSTITUENT DOCUMENTS, LOCATION. The
         Debtor will not change its name, articles of incorporation or bylaws,
         or jurisdiction of organization, without the prior written consent of
         the Secured Party. The Debtor will not change its business address,
         without prior written notice to the Secured Party.

                  (e) FIXTURES. The Debtor will not permit any tangible
         Collateral to become part of or to be affixed to any real property
         without first assuring to the reasonable satisfaction of the Secured
         Party that the Security Interest will be prior and senior to any Lien
         then held or thereafter acquired by any mortgagee of such real property
         or the owner or purchaser of any interest therein. If any part or all
         of the tangible Collateral is now or will become so related to
         particular real estate as to be a fixture, the real estate concerned
         and the name of the record owner are accurately set forth in EXHIBIT B
         hereto.

                  (f) RIGHTS TO PAYMENT. Each right to payment and each
         instrument, document, chattel paper and other agreement constituting or
         evidencing Collateral is (or will be when arising, issued or assigned
         to the Secured Party) the valid, genuine and legally enforceable
         obligation, subject to no defense, setoff or counterclaim (other than
         those arising in the ordinary course of business), of the account
         debtor or other obligor named therein or in the Debtor's records
         pertaining thereto as being obligated to pay such obligation. The
         Debtor will neither agree to any material modification or amendment nor
         agree to any forbearance, release or cancellation of any such
         obligation, and will not subordinate any such right to payment to
         claims of other creditors of such account debtor or other obligor.

                  (g) COMMERCIAL TORT CLAIMS. Promptly upon knowledge thereof,
         the Debtor will deliver to the Secured Party notice of any commercial
         tort claims it may bring against any person, including the name and
         address of each defendant, a summary of the facts, an estimate of the
         Debtor's damages, copies of any complaint or demand letter submitted by
         the Debtor, and such other information as the Lender may request. Upon
         request by the Secured Party, the Debtor will grant the Secured Party a
         security interest in all commercial tort claims it may have against any
         person.

                  (h) MISCELLANEOUS COVENANTS. The Debtor will:

                           (i) keep all tangible Collateral in good repair,
                  working order and condition, normal depreciation excepted, and
                  will, from time to time, replace any worn, broken or defective
                  parts thereof;

                           (ii) promptly pay all taxes and other governmental
                  charges levied or assessed upon or against any Collateral or
                  upon or against the creation, perfection or continuance of the
                  Security Interest;



                                       4
<PAGE>

                           (iii) at all reasonable times, permit the Secured
                  Party or its representatives to examine or inspect any
                  Collateral, wherever located, and to examine, inspect and copy
                  the Debtor's books and records pertaining to the Collateral
                  and its business and financial condition and to send and
                  discuss with account debtors and other obligors requests for
                  verifications of amounts owed to the Debtor;

                           (iv) keep accurate and complete records pertaining to
                  the Collateral and pertaining to the Debtor's business and
                  financial condition and submit to the Secured Party such
                  periodic reports concerning the Collateral and the Debtor's
                  business and financial condition as the Secured Party may from
                  time to time reasonably request;

                           (v) promptly notify the Secured Party of any loss of
                  or material damage to any Collateral or of any adverse change,
                  known to the Debtor, in the prospect of payment of any sums
                  due on or under any instrument, chattel paper, or account
                  constituting Collateral;

                           (vi) if the Secured Party at any time so requests
                  (after the occurrence of an Event of Default), promptly
                  deliver to the Secured Party any instrument, document or
                  chattel paper constituting Collateral, duly endorsed or
                  assigned by the Debtor;

                           (vii) at all times keep all tangible Collateral
                  insured against risks of fire (including so-called extended
                  coverage), theft, collision (in case of Collateral consisting
                  of motor vehicles) and such other risks and in such amounts as
                  the Secured Party may reasonably request, with any such
                  policies containing a lender loss payable endorsement
                  acceptable to the Secured Party; (viii) from time to time
                  authorize such financing statements as the Secured Party may
                  reasonably require in order to perfect the Security Interest
                  and, if any Collateral consists of a motor vehicle, execute
                  such documents as may be required to have the Security
                  Interest properly noted on a certificate of title;

                           (ix) pay when due or reimburse the Secured Party on
                  demand for all costs of collection of any of the Obligations
                  and all other out-of-pocket expenses (including in each case
                  all reasonable attorneys' fees) incurred by the Secured Party
                  in connection with the creation, perfection, satisfaction,
                  protection, defense or enforcement of the Security Interest or
                  the creation, continuance, protection, defense or enforcement
                  of this Agreement or any or all of the Obligations, including
                  expenses incurred in any litigation or bankruptcy or
                  insolvency proceedings;

                           (x) execute, deliver or endorse any and all
                  instruments, documents, assignments, security agreements and
                  other agreements and writings which the Secured Party may at
                  any time reasonably request in order to secure, protect,
                  perfect or enforce the Security Interest and the Secured
                  Party's rights under this Agreement; and


                                       5
<PAGE>

                           (xi) not use or keep any Collateral, or permit it to
                  be used or kept, for any unlawful purpose or in violation of
                  any federal, state or local law, statute or ordinance.

                  (i) SECURED PARTY'S RIGHT TO TAKE ACTION. The Debtor
         authorizes the Secured Party to file from time to time where permitted
         by law, such financing statements against collateral described as "all
         personal property" or describing specific items of collateral including
         commercial tort claims as the Secured Party deems necessary or useful
         to perfect the Security Interest. The Debtor will not amend any
         financing statements in favor of the Secured Party except as permitted
         by law. Further, if the Debtor at any time fails to perform or observe
         any agreement contained in SECTION 3(h), and if such failure continues
         for a period of ten (10) days after the Secured Party gives the Debtor
         written notice thereof (or, in the case of the agreements contained in
         clauses (vii) and (viii) of SECTION 3(h), immediately upon the
         occurrence of such failure, without notice or lapse of time), the
         Secured Party may (but need not) perform or observe such agreement on
         behalf and in the name, place and stead of the Debtor (or, at the
         Secured Party's option, in the Secured Party's own name) and may (but
         need not) take any and all other actions which the Secured Party may
         reasonably deem necessary to cure or correct such failure (including,
         without limitation the payment of taxes, the satisfaction of security
         interests, liens, or encumbrances, the performance of obligations under
         contracts or agreements with account debtors or other obligors, the
         procurement and maintenance of insurance, the filing of financing
         statements, the endorsement of instruments, and the procurement of
         repairs or transportation); and, except to the extent that the effect
         of such payment would be to render any loan or forbearance of money
         usurious or otherwise illegal under any applicable law, the Debtor
         shall thereupon pay the Secured Party on demand the amount of all
         moneys expended and all costs and expenses (including reasonable
         attorneys' fees) incurred by the Secured Party in connection with or as
         a result of the Secured Party's performing or observing such agreements
         or taking such actions, together with interest thereon from the date
         expended or incurred by the Secured Party at the highest rate then
         applicable to any of the Obligations. To facilitate the performance or
         observance by the Secured Party of such agreements of the Debtor, the
         Debtor hereby irrevocably appoints (which appointment is coupled with
         an interest) the Secured Party, or its delegate, as the
         attorney-in-fact of the Debtor with the right (but not the duty) from
         time to time to create, prepare, complete, execute, deliver, endorse or
         file, in the name and on behalf of the Debtor, any and all instruments,
         documents, financing statements, applications for insurance and other
         agreements and writings required to be obtained, executed, delivered or
         endorsed by the Debtor under this SECTION 3 and SECTION 4.

         4. RIGHTS OF SECURED PARTY. At any time and from time to time, whether
before or after an Event of Default, the Secured Party may take any or all of
the following actions:

                  (a) ACCOUNT VERIFICATION. The Secured Party may at any time
         and from time to time send or require the Debtor to send requests for
         verification of accounts or notices of assignment to account debtors
         and other obligors. The Secured Party may also at any time and from
         time to time telephone account debtors and other obligors to verify
         accounts.


                                       6
<PAGE>

                  (b) COLLATERAL ACCOUNT. The Secured Party may establish a
         collateral account for the deposit of checks, drafts and cash payments
         made by the Debtor's account debtors. If a collateral account is so
         established, the Debtor shall promptly deliver to the Secured Party,
         for deposit into said collateral account, all payments on Accounts and
         chattel paper received by it. All such payments shall be delivered to
         the Secured Party in the form received (except for the Debtor's
         endorsement where necessary). Until so deposited, all payments on
         Accounts and chattel paper received by the Debtor shall be held in
         trust by the Debtor for and as the property of the Secured Party and
         shall not be commingled with any funds or property of the Debtor. All
         deposits in said collateral account shall constitute proceeds of
         Collateral and shall not constitute payment of any Obligation. Unless
         otherwise agreed in writing, the Debtor shall have no right to withdraw
         amounts on deposit in any collateral account.

                  (c) LOCKBOX. The Secured Party may, by notice to the Debtor,
         require the Debtor to direct each of its account debtors to make
         payment directly to a special lockbox to be under the control of the
         Secured Party. The Debtor hereby authorizes and directs the Secured
         Party to deposit all checks, drafts and cash payments received in said
         lockbox into the collateral account established as set forth above.

                  (d) DIRECT COLLECTION. The Secured Party may notify any
         account debtor, or any other person obligated to pay any amount due,
         that such chattel paper, Account, or other right to payment has been
         assigned or transferred to the Secured Party for security and shall be
         paid directly to the Secured Party. At any time after the Secured Party
         or the Debtor gives such notice to an account debtor or other obligor,
         the Secured Party may (but need not), in its own name or in the
         Debtor's name, demand, sue for, collect or receive any money or
         property at any time payable or receivable on account of, or securing,
         any such chattel paper, Account, or other right to payment, or grant
         any extension to, make any compromise or settlement with or otherwise
         agree to waive, modify, amend or change the obligations (including
         collateral obligations) of any such account debtor or other obligor.

         5. ASSIGNMENT OF INSURANCE. The Debtor hereby assigns to the Secured
Party, as additional security for the payment of the Obligations, any and all
moneys (including but not limited to proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Debtor under or with respect to, any and all policies of insurance covering the
Collateral, and the Debtor hereby directs the issuer of any such policy to pay
any such moneys directly to the Secured Party. After the occurrence of an Event
of Default, the Secured Party may (but need not), in its own name or in the
Debtor's name, execute and deliver proofs of claim, receive all such moneys,
endorse checks and other instruments representing payment of such moneys, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.


                                       7
<PAGE>

         6. EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an event of default under this Agreement (herein called "Event of
Default"): (i) an Event of Default shall occur under the Credit Agreement; or
(ii) the Debtor shall fail to pay any or all of the Obligations when due or (if
payable on demand) on demand; or (iii) the Debtor shall fail to observe or
perform any covenant or agreement herein binding on it.

         7. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default and at any time thereafter, the Secured Party may exercise any one or
more of the following rights and remedies: (i) declare all unmatured Obligations
to be immediately due and payable, and the same shall thereupon be immediately
due and payable, without presentment or other notice or demand; (ii) exercise
and enforce any or all rights and remedies available upon default to a secured
party under the UCC, including but not limited to the right to take possession
of any Collateral, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which the Debtor hereby expressly
waives), and the right to sell, lease or otherwise dispose of any or all of the
Collateral, and in connection therewith, the Secured Party may require the
Debtor to make the Collateral available to the Secured Party at a place to be
designated by the Secured Party which is reasonably convenient to both parties,
and if notice to the Debtor of any intended disposition of Collateral or any
other intended action is required by law in a particular instance, such notice
shall be deemed commercially reasonable if given (in the manner specified in
SECTION 9) at least ten (10) days prior to the date of intended disposition or
other action; (iii) exercise or enforce any or all other rights or remedies
available to the Secured Party by law or agreement against the Collateral,
against the Debtor or against any other person or property. The Secured Party is
hereby granted a nonexclusive, worldwide and royalty-free license to use or
otherwise exploit all Intellectual Property Rights owned by or licensed to the
Debtor that the Secured Party deems necessary or appropriate to the disposition
of any Collateral.

         8. OTHER PERSONAL PROPERTY. Unless at the time the Secured Party takes
possession of any tangible Collateral, or within seven days thereafter, the
Debtor gives written notice to the Secured Party of the existence of any goods,
papers or other property of the Debtor, not affixed to or constituting a part of
such Collateral, but which are located or found upon or within such Collateral,
describing such property, the Secured Party shall not be responsible or liable
to the Debtor for any action taken or omitted by or on behalf of the Secured
Party with respect to such property.

         9. NOTICES; REQUESTS FOR ACCOUNTING. All notices and other
communications hereunder shall be in writing and shall be (a) personally
delivered, (b) sent by first class United States mail, (c) sent by overnight
courier of national reputation, or (d) transmitted by telecopy, in each case
addressed or telecopied to the party to whom notice is being given at its
address or telecopier number as set forth below its signature or, as to each
party, at such other address or telecopier number as may hereafter be designated
by such party in a written notice to the other party complying as to delivery
with the terms of this Section. All such notices, requests, demands and other
communications shall be deemed to have been given on (i) the date received if
personally delivered, (ii) when deposited in the mail if delivered by mail,
(iii) the date sent if sent by overnight courier, or (iv) the date of
transmission if delivered by telecopy. All requests under Section 9-210 of the
UCC (i) shall be made in a writing signed by an authorized person, (ii) shall be
personally delivered, sent by registered or certified mail, return receipt
requested, or by overnight courier of national reputation (iii) shall be deemed
to be sent when received by the Secured Party and (iv) shall otherwise comply
with the requirements of Section 9-210. The Debtor requests that the Secured
Party respond to all such requests which on their face appear to come from an
authorized individual and releases the Secured Party from any liability for so
responding. The Debtor shall pay Secured Party the maximum amount allowed by law
for responding to such requests.

                                       8
<PAGE>

         10. MISCELLANEOUS. This Agreement has been duly and validly authorized
by all necessary corporate action. This Agreement does not contemplate a sale of
accounts, or chattel paper. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by the Secured Party, and, in the case of
amendment or modification, in a writing signed by the Debtor. A waiver signed by
the Secured Party shall be effective only in the specific instance and for the
specific purpose given. Mere delay or failure to act shall not preclude the
exercise or enforcement of any of the Secured Party's rights or remedies. All
rights and remedies of the Secured Party shall be cumulative and may be
exercised singularly or concurrently, at the Secured Party's option, and the
exercise or enforcement of any one such right or remedy shall neither be a
condition to nor bar the exercise or enforcement of any other. The Secured
Party's duty of care with respect to Collateral in its possession (as imposed by
law) shall be deemed fulfilled if the Secured Party exercises reasonable care in
physically safekeeping such Collateral or, in the case of Collateral in the
custody or possession of a bailee or other third person, exercises reasonable
care in the selection of the bailee or other third person, and the Secured Party
need not otherwise preserve, protect, insure or care for any Collateral. The
Secured Party shall not be obligated to preserve any rights the Debtor may have
against prior parties, to realize on the Collateral at all or in any particular
manner or order, or to apply any cash proceeds of Collateral in any particular
order of application. This Agreement shall be binding upon and inure to the
benefit of the Debtor and the Secured Party and their respective successors and
assigns and shall take effect when signed by the Debtor and delivered to the
Secured Party, and the Debtor waives notice of the Secured Party's acceptance
hereof. The Secured Party may execute this Agreement if appropriate for the
purpose of filing, but the failure of the Secured Party to execute this
Agreement shall not affect or impair the validity or effectiveness of this
Agreement. This Agreement shall be governed by and construed in accordance with
the substantive laws (other than conflict laws) of the State of Minnesota. If
any provision or application of this Agreement is held unlawful or unenforceable
in any respect, such illegality or unenforceability shall not affect other
provisions or applications which can be given effect and this Agreement shall be
construed as if the unlawful or unenforceable provision or application had never
been contained herein or prescribed hereby. All representations and warranties
contained in this Agreement shall survive the execution, delivery and
performance of this Agreement and the creation and payment of the Obligations.
The parties hereto hereby (i) consent to the personal jurisdiction of the state
and federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Secured Party or the Debtor in connection with this Agreement or the other Loan
Documents may be venued in either the state or federal courts located in
Hennepin County, Minnesota; and (iv) agree that a final judgment in any such
suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

                                       9
<PAGE>

          THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
              PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.



            [The remainder of this page is left blank intentionally.]



                                       10
<PAGE>




         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.



WELLS FARGO CREDIT, INC.                OILQUIP RENTALS, INC.


By /S/ MICHELLE GUETTER                 By /S/ MUNAWAR H. HIDAYATALLAH
   --------------------                    ---------------------------
Michelle Guetter, Vice President           Chairman and Chief Executive Officer

Address:                                Address:
MAC T5698-030                           5075 Westheimer, Suite 890
40 N.E. Loop 410, Suite 340             Houston, Texas  77056
San Antonio, Texas 78216                Attention: Chief Financial Officer
Attention: Michelle Guetter             Organizational ID number: 3170954




                                SIGNATURE PAGE TO
                               SECURITY AGREEMENT
                                    (OILQUIP)

<PAGE>


                                                                       EXHIBIT A

                             LOCATION OF COLLATERAL






<PAGE>


                                                                       EXHIBIT B



                                LEGAL DESCRIPTION





<PAGE>


                                                                       EXHIBIT C


                                 PERMITTED LIENS


<PAGE>
                           COLLATERAL PLEDGE AGREEMENT
                                (ALLIS CHALMERS)

                             Date: December 7, 2004

DEBTOR:                    Allis-Chalmers Corporation
                           5075 Westheimer Road, Suite 890
                           Houston, Texas 77056
                           Telecopier No. (713) 369-0555

SECURED PARTY:             Wells Fargo Credit, Inc.
                           MAC T5698-030
                           40 N.E. Loop 410, Suite 340
                           San Antonio, Texas 78216
                           Telecopier No. 210-856-8989

         1. SECURITY INTEREST AND COLLATERAL. To secure the payment and
performance of each and every debt, liability and obligation of every type and
description that the Debtor may now or at any time hereafter owe to the Secured
Party (whether such debt, liability or obligation now exists or is hereafter
created or incurred, and whether it is or may be direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several; all such debts,
liabilities and obligations being herein collectively referred to as the
"Obligations"), the Debtor hereby grants the Secured Party a security interest
(herein called the "Security Interest") in all property of any kind now or at
any time hereafter owned by the Debtor, or in which the Debtor may now or
hereafter have an interest, which may now be or may at any time hereafter (i)
come into the possession or control of the Secured Party or into the possession
or control of the Secured Party's agents or correspondents, whether such
possession or control is given for collateral purposes or for safekeeping; or
(ii) be transferred or assigned to the Secured Party by any means permitted
under Article 8 of the Uniform Commercial Code including, but not limited to,
common stock of Oilquip Rentals, Inc., a Delaware corporation, together with all
rights in connection with such property (the "Collateral").

         2. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Debtor represents,
warrants and covenants that:

                  (a) The Debtor will duly endorse, in blank, each and every
         instrument constituting Collateral by signing on said instrument or by
         signing a separate document of assignment or transfer, if required by
         the Secured Party.

                  (b) The Debtor is the owner of the Collateral free and clear
         of all liens, encumbrances, security interests and restrictions, except
         the Security Interest and any restrictive legend appearing on any
         instrument constituting Collateral.

<PAGE>

                  (c) The Debtor will keep the Collateral free and clear of all
         liens, encumbrances and security interests, except the Security
         Interest and any restrictive legend appearing on any instrument
         constituting Collateral.

                  (d) The Debtor will pay, when due, all taxes and other
         governmental charges levied or assessed upon or against any Collateral.

                  (e) At any time, upon request by the Secured Party, the Debtor
         will deliver to the Secured Party all notices, financial statements,
         reports or other communications received by the Debtor as an owner or
         holder of the Collateral.

                  (f) The Debtor will upon receipt deliver to the Secured Party
         in pledge as additional Collateral all securities distributed on
         account of the Collateral such as stock dividends and securities
         resulting from stock splits, reorganizations and recapitalizations.

         3. RIGHTS OF THE SECURED PARTY. The Debtor agrees that the Secured
Party may at any time, whether before or after the occurrence of an Event of
Default and without notice or demand of any kind, (i) notify the obligor on or
issuer of any Collateral to make payment to the Secured Party of any amounts due
or distributable thereon; (ii) in the Debtor's name or the Secured Party's name
enforce collection of any Collateral by suit or otherwise, or surrender, release
or exchange all or any part of it, or compromise, extend or renew for any period
any obligation evidenced by the Collateral; (iii) receive all proceeds of the
Collateral; and (iv) hold any increase or profits received from the Collateral
as additional security for the Obligations, except that any money received from
the Collateral shall, at the Secured Party's option, be applied in reduction of
the Obligations, in such order of application as the Secured Party may
determine, or be remitted to the Debtor.

         4. EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an event of default under this Agreement (herein called "Event of
Default"): (i) the Debtor shall fail to pay any or all of the Obligations when
due or (if payable on demand) on demand, or the Debtor shall fail to observe or
perform any covenant or agreement herein binding on it; (ii) any representation
or warranty by the Debtor set forth in this Agreement or made to the Secured
Party in any financial statements or reports submitted to the Secured Party by
or on behalf of the Debtor shall prove materially false or misleading; (iii) an
Event of Default, as defined in any credit agreement or other instrument or
agreement evidencing or governing any or all of the Obligations, shall occur.

         5. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default and at any time thereafter, the Secured Party may exercise any one or
more of the following rights or remedies: (i) declare all unmatured Obligations
to be immediately due and payable, and the same shall thereupon be immediately
due and payable, without presentment or other notice or demand; (ii) exercise
all voting and other rights as a holder of the Collateral; (iii) exercise and
enforce any or all rights and remedies available upon default to a secured party
under the Uniform Commercial Code as in effect from time to time in the state of
Minnesota, including the right to offer and sell the Collateral privately to
purchasers who will agree to take the Collateral for investment and not with a
view to distribution and who will agree to the imposition of restrictive legends

                                       2
<PAGE>

on the certificates representing the Collateral, and the right to arrange for a
sale which would otherwise qualify as exempt from registration under the
Securities Act of 1933; and if notice to the Debtor of any intended disposition
of the Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given at least ten (10) days prior to the date of intended disposition or other
action; (iv) exercise or enforce any or all other rights or remedies available
to the Secured Party by law or agreement against the Collateral, against the
Debtor or against any other person or property.

         6. MISCELLANEOUS. Any disposition of the Collateral in the manner
provided in SECTION 5 hereof shall be deemed commercially reasonable. This
Agreement can be waived, modified, amended, terminated or discharged, and the
Security Interest can be released, only explicitly in a writing signed by the
Secured Party. A waiver signed by the Secured Party shall be effective only in
the specific instance and for the specific purpose given. Mere delay or failure
to act shall not preclude the exercise or enforcement of any of the Secured
Party's rights or remedies. All rights and remedies of the Secured Party shall
be cumulative and may be exercised singularly or concurrently, at the Secured
Party's option, and the exercise or enforcement of any one such right or remedy
shall neither be a condition to nor bar the exercise or enforcement of any
other. All notices to be given to the Debtor shall be deemed sufficiently given
if delivered or mailed by registered or certified mail, postage prepaid, or by
telecopier to the Debtor at its address or telecopier number, as the case may
be, set forth above or at the most recent address or telecopier number shown on
the Secured Party's records. All requests under Section 9-210 of the Uniform
Commercial Code (i) shall be made in a writing signed by a person authorized
under Section 2.2(a) of the Credit Agreement, (ii) shall be personally
delivered, sent by registered or certified mail, return receipt requested, or by
overnight courier of national reputation, (iii) shall be deemed to be sent when
received by the Secured Party and (iv) shall otherwise comply with the
requirements of Section 9-210. The Debtor requests that the Secured Party
respond to all such requests which on their face appear to come from an
authorized individual and releases the Secured Party from any liability for so
responding. The Debtor shall pay Secured Party the maximum amount allowed by law
for responding to such requests. The Secured Party's duty of care with respect
to Collateral in its possession (as imposed by law) shall be deemed fulfilled if
the Secured Party exercises reasonable care in physically safekeeping such
Collateral or, in the case of Collateral in the custody or possession of a
bailee or other third person, exercises reasonable care in the selection of the
bailee or other third person, and the Secured Party need not otherwise preserve,
protect, insure or care for any Collateral. The Secured Party shall not be
obligated to preserve any rights the Debtor may have against prior parties, to
exercise at all or in any particular manner any voting rights which may be
available with respect to any Collateral, to realize on the Collateral at all or
in any particular manner or order, or to apply any cash proceeds of Collateral
in any particular order of application. The Debtor will reimburse the Secured
Party for all expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Secured Party in the protection, defense or enforcement of the
Security Interest, including expenses incurred in any litigation or bankruptcy
or insolvency proceedings. This Agreement shall be binding upon and inure to the
benefit of the Debtor and the Secured Party and their respective heirs,
representatives, successors and assigns and shall take effect when signed by the
Debtor and delivered to the Secured Party, and the Debtor waives notice of the
Secured Party's acceptance hereof. If any provision or application of this
Agreement is held unlawful or unenforceable in any respect, such illegality or
unenforceability shall not affect other provisions or applications which can be
given effect, and this Agreement shall be construed as if the unlawful or
unenforceable provision or application had never been contained herein or
prescribed hereby. All representations and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations. If this Agreement is

                                       3
<PAGE>

signed by more than one person as the Debtor, the term "Debtor" shall refer to
each of them separately and to both or all of them jointly; all such persons
shall be bound both severally and jointly with the other(s); and all property
described in SECTION 1 hereof shall be included as part Collateral, whether it
is owned jointly by both or all Debtors or is owned in whole or in part by one
(or more) of them. This Agreement shall be governed by the internal laws (other
than conflict laws) of the state of Minnesota and, unless the context otherwise
requires, all terms used herein which are defined in Articles 1 and 9 of the
Uniform Commercial Code, as in effect in Minnesota, shall have the meanings
therein stated. Each party consents to the personal jurisdiction of the state
and federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement, waives any argument that venue in any
such forum is not convenient, and agrees that any litigation initiated by any of
them in connection with this Agreement may be venued in either the state and
federal courts located in Hennepin County, Minnesota.

THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR PERTAINING TO THIS AGREEMENT.

            [The remainder of this page is left blank intentionally.]



                                       4
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.



                               ALLIS-CHALMERS CORPORATION


                               By: /S/ MUNAWAR HIDAYATALLAH
                                   ---------------------------------------------
                                   Munawar Hidayatallah, Chief Executive Officer



                                SIGNATURE PAGE TO
                           COLLATERAL PLEDGE AGREEMENT
                                (ALLIS-CHALMERS)
<PAGE>
                           COLLATERAL PLEDGE AGREEMENT
                                    (OILQUIP)

                             Date: December 7, 2004

DEBTOR:                    OilQuip Rentals, Inc.
                           5075 Westheimer, Suite 890
                           Houston, TX 77056
                           Telecopier No. (713) 369-0550

SECURED PARTY:             Wells Fargo Credit, Inc.
                           MAC T5698-030
                           40 N.E. Loop 410, Suite 340
                           San Antonio, Texas 78216
                           Telecopier No. 210-856-8989

         1. SECURITY INTEREST AND COLLATERAL. To secure the payment and
performance of each and every debt, liability and obligation of every type and
description that Allis-Chalmers Corporation, a Delaware corporation (the
"Borrower") may now or at any time hereafter owe to the Secured Party (whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or unliquidated, or
joint, several or joint and several; all such debts, liabilities and obligations
being herein collectively referred to as the "Obligations"), the Debtor hereby
grants the Secured Party a security interest (herein called the "Security
Interest") in all property of any kind now or at any time hereafter owned by the
Debtor, or in which the Debtor may now or hereafter have an interest, which may
now be or may at any time hereafter (i) come into the possession or control of
the Secured Party or into the possession or control of the Secured Party's
agents or correspondents, whether such possession or control is given for
collateral purposes or for safekeeping; or (ii) be transferred or assigned to
the Secured Party by any means permitted under Article 8 of the Uniform
Commercial Code including, but is not limited to, common stock of Mountain
Compressed Air, Inc., a Texas corporation, together with all rights in
connection with such property (the "Collateral").

         2. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Debtor represents,
warrants and covenants that:

                  (a) The Debtor will duly endorse, in blank, each and every
         instrument constituting Collateral by signing on said instrument or by
         signing a separate document of assignment or transfer, if required by
         the Secured Party.

                  (b) The Debtor is the owner of the Collateral free and clear
         of all liens, encumbrances, security interests and restrictions, except
         the Security Interest and any restrictive legend appearing on any
         instrument constituting Collateral.


<PAGE>

                  (c) The Debtor will keep the Collateral free and clear of all
         liens, encumbrances and security interests, except the Security
         Interest and any restrictive legend appearing on any instrument
         constituting Collateral.

                  (d) The Debtor will pay, when due, all taxes and other
         governmental charges levied or assessed upon or against any Collateral.

                  (e) At any time, upon request by the Secured Party, the Debtor
         will deliver to the Secured Party all notices, financial statements,
         reports or other communications received by the Debtor as an owner or
         holder of the Collateral.

                  (f) The Debtor will upon receipt deliver to the Secured Party
         in pledge as additional Collateral all securities distributed on
         account of the Collateral such as stock dividends and securities
         resulting from stock splits, reorganizations and recapitalizations.

         3. RIGHTS OF THE SECURED PARTY. The Debtor agrees that the Secured
Party may at any time, whether before or after the occurrence of an Event of
Default and without notice or demand of any kind, (i) notify the obligor on or
issuer of any Collateral to make payment to the Secured Party of any amounts due
or distributable thereon; (ii) in the Debtor's name or the Secured Party's name
enforce collection of any Collateral by suit or otherwise, or surrender, release
or exchange all or any part of it, or compromise, extend or renew for any period
any obligation evidenced by the Collateral; (iii) receive all proceeds of the
Collateral; and (iv) hold any increase or profits received from the Collateral
as additional security for the Obligations, except that any money received from
the Collateral shall, at the Secured Party's option, be applied in reduction of
the Obligations, in such order of application as the Secured Party may
determine, or be remitted to the Debtor.

         4. EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an event of default under this Agreement (herein called "Event of
Default"): (i) the Borrower shall fail to pay any or all of the Obligations when
due or (if payable on demand) on demand, or the Borrower shall fail to observe
or perform any covenant or agreement herein binding on it; (ii) any
representation or warranty by the Debtor set forth in this Agreement or made to
the Secured Party in any financial statements or reports submitted to the
Secured Party by or on behalf of the Debtor shall prove materially false or
misleading; (iii) an Event of Default, as defined in any credit agreement or
other instrument or agreement evidencing or governing any or all of the
Obligations, shall occur.

         5. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default and at any time thereafter, the Secured Party may exercise any one or
more of the following rights or remedies: (i) declare all unmatured Obligations
to be immediately due and payable, and the same shall thereupon be immediately
due and payable, without presentment or other notice or demand; (ii) exercise
all voting and other rights as a holder of the Collateral; (iii) exercise and
enforce any or all rights and remedies available upon default to a secured party
under the Uniform Commercial Code as in effect from time to time in the state of
Minnesota, including the right to offer and sell the Collateral privately to
purchasers who will agree to take the Collateral for investment and not with a
view to distribution and who will agree to the imposition of restrictive legends

                                       2
<PAGE>

on the certificates representing the Collateral, and the right to arrange for a
sale which would otherwise qualify as exempt from registration under the
Securities Act of 1933; and if notice to the Debtor of any intended disposition
of the Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given at least ten (10) days prior to the date of intended disposition or other
action; (iv) exercise or enforce any or all other rights or remedies available
to the Secured Party by law or agreement against the Collateral, against the
Debtor or against any other person or property.

         6. MISCELLANEOUS. Any disposition of the Collateral in the manner
provided in SECTION 5 hereof shall be deemed commercially reasonable. This
Agreement can be waived, modified, amended, terminated or discharged, and the
Security Interest can be released, only explicitly in a writing signed by the
Secured Party. A waiver signed by the Secured Party shall be effective only in
the specific instance and for the specific purpose given. Mere delay or failure
to act shall not preclude the exercise or enforcement of any of the Secured
Party's rights or remedies. All rights and remedies of the Secured Party shall
be cumulative and may be exercised singularly or concurrently, at the Secured
Party's option, and the exercise or enforcement of any one such right or remedy
shall neither be a condition to nor bar the exercise or enforcement of any
other. All notices to be given to the Debtor shall be deemed sufficiently given
if delivered or mailed by registered or certified mail, postage prepaid, or by
telecopier to the Debtor at its address or telecopier number, as the case may
be, set forth above or at the most recent address or telecopier number shown on
the Secured Party's records. All requests under Section 9-210 of the Uniform
Commercial Code (i) shall be made in a writing signed by a person authorized
under Section 2.2(a) of the Credit Agreement, (ii) shall be personally
delivered, sent by registered or certified mail, return receipt requested, or by
overnight courier of national reputation (iii) shall be deemed to be sent when
received by the Secured Party and (iv) shall otherwise comply with the
requirements of Section 9-210. The Debtor requests that the Secured Party
respond to all such requests which on their face appear to come from an
authorized individual and releases the Secured Party from any liability for so
responding. The Debtor shall pay Secured Party the maximum amount allowed by law
for responding to such requests. The Secured Party's duty of care with respect
to Collateral in its possession (as imposed by law) shall be deemed fulfilled if
the Secured Party exercises reasonable care in physically safekeeping such
Collateral or, in the case of Collateral in the custody or possession of a
bailee or other third person, exercises reasonable care in the selection of the
bailee or other third person, and the Secured Party need not otherwise preserve,
protect, insure or care for any Collateral. The Secured Party shall not be
obligated to preserve any rights the Debtor may have against prior parties, to
exercise at all or in any particular manner any voting rights which may be
available with respect to any Collateral, to realize on the Collateral at all or
in any particular manner or order, or to apply any cash proceeds of Collateral
in any particular order of application. The Debtor will reimburse the Secured
Party for all expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Secured Party in the protection, defense or enforcement of the
Security Interest, including expenses incurred in any litigation or bankruptcy
or insolvency proceedings. This Agreement shall be binding upon and inure to the
benefit of the Debtor and the Secured Party and their respective heirs,
representatives, successors and assigns and shall take effect when signed by the
Debtor and delivered to the Secured Party, and the Debtor waives notice of the
Secured Party's acceptance hereof. If any provision or application of this
Agreement is held unlawful or unenforceable in any respect, such illegality or
unenforceability shall not affect other provisions or applications which can be
given effect, and this Agreement shall be construed as if the unlawful or
unenforceable provision or application had never been contained herein or
prescribed hereby. All representations and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations. If this Agreement is

                                       4
<PAGE>

signed by more than one person as the Debtor, the term "Debtor" shall refer to
each of them separately and to both or all of them jointly; all such persons
shall be bound both severally and jointly with the other(s); and all property
described in SECTION 1 hereof shall be included as part Collateral, whether it
is owned jointly by both or all Debtors or is owned in whole or in part by one
(or more) of them. This Agreement shall be governed by the internal laws (other
than conflict laws) of the state of Minnesota and, unless the context otherwise
requires, all terms used herein which are defined in Articles 1 and 9 of the
Uniform Commercial Code, as in effect in Minnesota, shall have the meanings
therein stated. Each party consents to the personal jurisdiction of the state
and federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement, waives any argument that venue in any
such forum is not convenient, and agrees that any litigation initiated by any of
them in connection with this Agreement may be venued in either the state and
federal courts located in Hennepin County, Minnesota.

THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR PERTAINING TO THIS AGREEMENT.


            [The remainder of this page is left blank intentionally.]



                                       4
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.



                                   OILQUIP RENTALS, INC.



                                   By: /S/ MUNAWAR HIDAYATALLAH
                                       -----------------------------------------
                                       Its: Chairman and Chief Executive Officer




                                SIGNATURE PAGE TO
                           COLLATERAL PLEDGE AGREEMENT
                                    (OILQUIP)