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Exhibit 10.3

AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

(Allis-Chalmers Energy Inc.)

     THIS AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (herein referred to as this “Security
Agreement”) is executed as of April 26, 2007, by ALLIS-CHALMERS ENERGY INC., a Delaware corporation
(“Debtor”), whose address is 5075 Westheimer, Suite 890, Houston, Texas 77056, for the benefit of
ROYAL BANK OF CANADA (in its capacity as “Administrative Agent” and “Collateral Agent” for the
Lenders (hereafter defined)), as “Secured Party,” whose address is Royal Bank Plaza, P.O. Box 50,
200 Bay Street, 12th Floor, South Tower, Toronto, Ontario M5J 2W7.

RECITALS

     WHEREAS, pursuant to that certain Credit Agreement, dated as of July 11, 2005 (as amended,
supplemented and restated, the “Original Credit Agreement”), among Debtor, as Borrower, the various
financial institutions that are, or may from time to time become, parties thereto (individually a
"Lender” and collectively the “Lenders”) and Royal Bank of Canada, as administrative agent (in such
capacity, the “Administrative Agent”), and collateral agent (in such capacity, the “Collateral
Agent”), the Lenders agreed to make Loans for the account of the Debtor;

     WHEREAS, the Original Credit Agreement was amended and restated in its entirety by an Amended
and Restated Credit Agreement dated January 18, 2006 among Debtor, as Borrower, Royal Bank of
Canada, individually and as Administrative Agent and Collateral Agent, and the Lenders party
thereto (as amended, supplemented and restated, the “Amended and Restated Credit Agreement”);

     WHEREAS, the Amended and Restated Credit Agreement was amended and restated in its entirety by
a Second Amended and Restated Credit Agreement of even date herewith among Debtor, as Borrower,
Royal Bank of Canada, individually and as Administrative Agent and Collateral Agent, and the
Lenders party thereto, providing for an aggregate credit facility of $62,000,000 (as the same may
hereafter be amended, supplemented and restated, the “Credit Agreement”);

     WHEREAS, the Debtor has duly authorized the execution, delivery and performance of this
Security Agreement;

     WHEREAS, this Security Agreement is integral to the transactions contemplated by the Loan
Documents, and the execution and delivery of this Security Agreement is a condition precedent to
the Lenders’ obligations to extend credit under the Loan Documents.

     ACCORDINGLY, for valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor and Secured Party hereby agree as follows:

     1. REFERENCE TO CREDIT AGREEMENT. The terms, conditions, and provisions of the Credit
Agreement are incorporated herein by reference, the same as if set forth herein verbatim, which
terms, conditions, and provisions shall continue to be in full force and effect hereunder so long
as the

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Lenders are obligated to lend under the Credit Agreement and thereafter until the Obligations
are paid and performed in full.

     2. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the context hereof otherwise
requires, each term defined in the Credit Agreement or in the UCC is used in this Security
Agreement with the same meaning; provided that, if the definition given to such term in the Credit
Agreement conflicts with the definition given to such term in the UCC, the definition in the Credit
Agreement shall control to the extent legally allowable; and if any definition given to such term
in Chapter 9 of the UCC conflicts with the definition given to such term in any other chapter of
the UCC, the Chapter 9 definition shall prevail. As used herein, the following terms have the
meanings indicated:

     Collateral has the meaning set forth in Paragraph 4 hereof.

     Collateral Note Security has the meaning set forth in Paragraph 4 hereof.

     Collateral Notes has the meaning set forth in Paragraph 4 hereof.

     Control Agreement means, with respect to any Collateral consisting of investment
property, Deposit Accounts, electronic chattel paper, and letter-of-credit rights, an
agreement evidencing that Secured Party has “control” (as defined in the UCC) of such
Collateral.

     Copyrights has the meaning set forth in Paragraph 4 hereof.

     Credit Agreement has the meaning set forth in the first recital.

     Deposit Accounts has the meaning set forth in Paragraph 4 hereof.

     Intellectual Property has the meaning set forth in Paragraph 4 hereof.

     Lender means, individually, or Lenders means, collectively, on any date of
determination, the Administrative Agent and Lenders, and their permitted successors and
assigns.

     Material Agreements has the meaning set forth in Paragraph 4 hereof.

     Obligations means, collectively, (a) the Obligations as such term is defined in the
Credit Agreement, and (b) all indebtedness, liabilities, and obligations of Debtor arising
under this Security Agreement; it being the intention and contemplation of Debtor and
Secured Party that future advances will be made by one or more Lenders to the Debtor for a
variety of purposes.

     Obligor means any Person obligated with respect to any of the Collateral, whether as an
account debtor, obligor on an instrument, issuer of securities, or otherwise.

     Partnerships/Limited Liability Companies shall mean (a) those partnerships and limited
liability companies listed on Annex B-1 attached hereto and incorporated herein by
reference, as such partnerships or limited liability companies exist or may hereinafter be
restated, amended, or restructured; (b) any partnership, joint venture, or limited liability
company in which Debtor shall, at any time, become a limited or general partner, venturer,
or member; or (c) any

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partnership, joint venture, or corporation formed as a result of the restructure,
reorganization, or amendment of the Partnerships/Limited Liability Companies.

     Partnership/Limited Liability Company Agreements shall mean (a) those agreements listed
on Annex B-1 attached hereto and incorporated herein by reference (together with any
modifications, amendments, or restatements thereof); and (b) partnership agreements, joint
venture agreements, or organizational agreements for any of the partnerships, joint
ventures, or limited liability companies described in clause (b) of the definition of
“Partnerships/Limited Liability Companies” above (together with any modifications,
amendments or restatements thereof), and “Partnership/Limited Liability Company Agreement”
means any one of the Partnership/Limited Liability Company Agreements.

     Partnership/Limited Liability Company Interests shall mean all of Debtor’s Rights,
title and interest now or hereafter accruing under the Partnership/Limited Liability Company
Agreements with respect to all distributions, allocations, proceeds, fees, preferences,
payments, or other benefits, which Debtor now is or may hereafter become entitled to receive
with respect to such interests in the Partnerships/Limited Liability Companies and with
respect to the repayment of all loans now or hereafter made by Debtor to the
Partnerships/Limited Liability Companies.

     Patents has the meaning set forth in Paragraph 4 hereof.

     Pledged Securities means, collectively, the Pledged Shares and any other Collateral
constituting securities.

     Pledged Shares has the meaning set forth in Paragraph 4 hereof.

     Rights means rights, remedies, powers, privileges and benefits.

     Security Interest means the security interest granted and the pledge and assignment
made under Paragraph 3 hereof.

     Trademarks has the meaning set forth in Paragraph 4 hereof.

     UCC means the Uniform Commercial Code, including each such provision as it may
subsequently be renumbered, as enacted in the State of Texas or other applicable
jurisdiction, as amended at the time in question.

     3. SECURITY INTEREST. In order to secure the full and complete payment and performance of the
Obligations when due, Debtor hereby grants to Secured Party a Security Interest in all of Debtor’s
Rights, titles, and interests in and to the Collateral and pledges, collaterally transfers, and
assigns the Collateral to Secured Party, all upon and subject to the terms and conditions of this
Security Agreement. Such Security Interest is granted and pledge and assignment are made as
security only and shall not subject Secured Party to, or transfer or in any way affect or modify,
any obligation of Debtor with respect to any of the Collateral or any transaction involving or
giving rise thereto. If the grant, pledge, or collateral transfer or assignment of any specific
item of the Collateral is expressly prohibited by any contract, license, law or regulation, then
the Security Interest created hereby nonetheless remains

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effective to the extent allowed by the UCC or other applicable Law, but is otherwise limited
by that prohibition.

     4. COLLATERAL. As used herein, the term “Collateral” means the following items and types of
property, wherever located, now owned or in the future existing or acquired by Debtor, and all
proceeds and products thereof, and any substitutes or replacements therefor:

     (a) All personal property and fixture property of every kind and nature including,
without limitation, all accounts, chattel paper (whether tangible or electronic), goods
(including inventory, equipment, and any accessions thereto), software, instruments,
investment property, documents, deposit accounts, money, commercial tort claims, letters of
credit or letter-of-credit rights, supporting obligations, Tax refunds, and general
intangibles (including payment intangibles);

     (b) All Rights, titles, and interests of Debtor in and to all outstanding stock,
equity, or other investment securities owned by Debtor, including, without limitation, all
capital stock of each Subsidiary of the Debtor set forth on Annex B-1 (“Pledged Shares”);
provided, with respect to outstanding stock, equity, or other investment securities directly
owned by Debtor in any Foreign Subsidiary, the Collateral shall be limited to 65% of the
issued and outstanding common stock or other equity interests of each Foreign Subsidiary;

     (c) All Rights, titles, and interests of Debtor in and to all promissory notes and
other instruments payable to Debtor, including, without limitation, all inter-company notes
from Subsidiaries and those set forth on Annex B-1 (“Collateral Notes”) and all Rights,
titles, interests, and Liens Debtor may have, be, or become entitled to under all present
and future loan agreements, security agreements, pledge agreements, deeds of trust,
mortgages, guarantees, or other documents assuring or securing payment of or otherwise
evidencing the Collateral Notes, including, without limitation, those set forth on Annex B-1
(“Collateral Note Security”);

     (d) The Partnership/Limited Liability Company Interests and all Rights of Debtor with
respect thereto, including, without limitation, all Partnership/Limited Liability Company
Interests set forth on Annex B-1 and all of Debtor’s distribution rights, income rights,
liquidation interest, accounts, contract rights, general intangibles, notes, instruments,
drafts, and documents relating to the Partnership/Limited Liability Company Interests;

     (e) (i) All copyrights (whether statutory or common law, registered or unregistered),
works protectable by copyright, copyright registrations, copyright licenses, and copyright
applications of Debtor, including, without limitation, all of Debtor’s Right, title, and
interest in and to all copyrights registered in the United States Copyright Office or
anywhere else in the world and also including, without limitation, the copyrights set forth
on Annex B-2; (ii) all renewals, extensions, and modifications thereof, (iii) all income,
licenses, royalties, damages, profits, and payments relating to or payable under any of the
foregoing; (iv) the Right to sue for past, present, or future infringements of any of the
foregoing; and (v) all other rights and benefits relating to any of the foregoing throughout
the world; in each case, whether now owned or hereafter acquired by Debtor (“Copyrights”);

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     (f) (i) All patents, patent applications, patent licenses, and patentable inventions of
Debtor, including, without limitation, registrations, recordings, and applications thereof
in the United States Patent and Trademark Office or in any similar office or agency of the
United States, any state thereof or any other country or any political subdivision thereof,
including, without limitation, those set forth on Annex B-2, and all of the inventions and
improvements described and claimed therein; (ii) all continuations, divisions, renewals,
extensions, modifications, substitutions, reexaminations, continuations-in-part, or reissues
of any of the foregoing; (iii) all income, royalties, profits, damages, awards, and payments
relating to or payable under any of the foregoing; (iv) the right to sue for past, present,
and future infringements of any of the foregoing; and (v) all other rights and benefits
relating to any of the foregoing throughout the world; in each case, whether now owned or
hereafter acquired by Debtor (“Patents”);

     (g) (i) All trademarks, trademark licenses, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks, certification
marks, collective marks, logos, other business identifiers, all registrations, recordings,
and applications thereof, including, without limitation, registrations, recordings, and
applications in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any state thereof or any other country or any political
subdivision thereof, including, without limitation, those set forth on Annex B-2; (ii) all
reissues, extensions, and renewals thereof; (iii) all income, royalties, damages, and
payments now or hereafter relating to or payable under any of the foregoing, including,
without limitation, damages or payments for past or future infringements of any of the
foregoing; (iv) the right to sue for past, present, and future infringements of any of the
foregoing; (v) all rights corresponding to any of the foregoing throughout the world; and
(vi) all goodwill associated with and symbolized by any of the foregoing, in each case,
whether now owned or hereafter acquired by Debtor (“Trademarks”, and collectively with the
Copyrights and the Patents, the “Intellectual Property”);

     (h) (i) All of Debtor’s Rights, titles, and interests in, to, and under those contracts
pursuant to which a default in or breach of the performance or observance of any provision
could result in a Material Adverse Effect (the “Material Agreements”), including, without
limitation, all Rights of Debtor to receive moneys due and to become due under or pursuant
to the Material Agreements, (ii) all rights of Debtor to receive proceeds of any insurance,
indemnity, warranty, or guaranty with respect to the Material Agreements, (iii) all claims
of Debtor for damages arising out of or for breach of or default under the Material
Agreements, and (iv) all rights of Debtor to compel performance and otherwise exercise all
rights and remedies under the Material Agreements;

     (i) All present and future automobiles, trucks, truck tractors, trailers,
semi-trailers, or other motor vehicles or rolling stock, now owned or hereafter acquired by
such Debtor (collectively, the “Vehicles”);

     (j) Any and all material deposit accounts, bank accounts, investment accounts, or
securities accounts, now owned or hereafter acquired or opened by Debtor, including, without
limitation, any such accounts maintained by Debtor with Wells Fargo Bank, N.A. set forth on
Annex B-1, and any account which is a replacement or substitute for any of such accounts,
together with all monies, instruments, certificates, checks, drafts, wire transfer receipts,
and other property deposited therein and all balances therein (the “Deposit Accounts”);

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     (k) All permits, licenses and other authorizations (“Authorizations”) issued by any
governmental authority, to the extent and only to the extent that the grant of a security
interest in any such Authorization does not result in the forfeiture of, or default under,
any such Authorization;

     (l) All present and future distributions, income, increases, profits, combinations,
reclassifications, improvements, and products of, accessions, attachments, and other
additions to, tools, parts, and equipment used in connection with, and substitutes and
replacements for, all or part of the Collateral described above;

     (m) All present and future accounts, contract rights, general intangibles, chattel
paper, documents, instruments, cash and noncash proceeds, and other Rights arising from or
by virtue of, or from the voluntary or involuntary sale or other disposition of, or
collections with respect to, or insurance proceeds payable with respect to, or proceeds
payable by virtue of warranty or other claims against the manufacturer of, or claims against
any other Person with respect to, all or any part of the Collateral heretofore described in
this clause or otherwise; and

     (n) All present and future security for the payment to Debtor or any Subsidiary of any
of the Collateral described above and goods which gave or will give rise to any such
Collateral or are evidenced, identified, or represented therein or thereby.

The description of the Collateral contained in this Paragraph 4 shall not be deemed to permit any
action prohibited by this Security Agreement or by the terms incorporated in this Security
Agreement.

     5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Secured Party that:

     (a) Credit Agreement. Certain representations and warranties in the Credit
Agreement are applicable to the Debtor or its assets or operations, and each such
representation and warranty is true and correct,

     (b) Binding Obligation/Perfection. This Security Agreement creates a legal,
valid, and binding Lien in and to the Collateral in favor of Secured Party and enforceable
against Debtor. For Collateral in which the Security Interest may be perfected by the filing
of Financing Statements pursuant to Article 9 of the UCC, once those Financing Statements
have been properly filed in the jurisdictions described on Annex A hereto, the Security
Interest in that Collateral will be fully perfected and the Security Interest will
constitute a first-priority Lien on such Collateral, subject only to Permitted Liens. With
respect to Collateral consisting of investment property (other than Pledged Securities
covered by Paragraph 5(j)), Deposit Accounts (limited to those maintained by Debtor with
Wells Fargo Bank, N.A. described on

 Annex B-1), electronic chattel paper, letter-of-credit
rights, and instruments, upon the delivery of such Collateral to Secured Party or delivery
of an executed Control Agreement with respect to such Collateral, the Security Interest in
that Collateral will be fully perfected and the Security Interest will constitute a
first-priority Lien on such Collateral, subject only to Permitted Liens. None of the
Collateral has been delivered nor control with respect thereto given to any Person other
than the Administrative Agent. Other than the Financing Statements and Control Agreements
with respect to this Security Agreement, there are no other financing statements or

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control agreements covering any Collateral, other than those evidencing Permitted
Liens. The creation of the Security Interest does not require the consent of any Person that
has not been obtained.

     (c) Debtor Information. Debtor’s exact legal name, mailing address,
jurisdiction of organization, type of entity, and state issued organizational identification
number are as set forth on Annex A hereto.

     (d) Location. Debtor’s place of business and chief executive office is where
Debtor is entitled to receive notices hereunder; the present and foreseeable location of
debtor’s books and records concerning any of the Collateral that is accounts is as set forth
on Annex A hereto, and the location of all other Collateral, including, without limitation,
Debtor’s inventory and equipment is as set forth on Annex A hereto; and, except as noted on
Annex A hereto, all such books, records, and Collateral are in Debtor’s possession.

     (e) Governmental Authority. Other than the filing of Financing Statements
contemplated hereby and appropriate filings to perfect the Security Interest in the
Intellectual Property, no Authorization, approval, or other action by, and no notice to or
filing with, any Governmental Authority is required either (i) for the pledge by Debtor of
the Collateral pursuant to this Security Agreement or for the execution, delivery, or
performance of this Security Agreement by Debtor, or (ii) for the exercise by Secured Party
of the voting or other Rights provided for in this Security Agreement or the remedies in
respect of the Collateral pursuant to this Security Agreement (except as may be required in
connection with the disposition of the Pledged Securities by Laws affecting the offering and
sale of securities generally).

     (f) Maintenance of Collateral. All tangible Collateral which is useful in and
necessary to Debtor’s business is in good repair and condition, ordinary wear and tear
excepted, and none thereof is a fixture except as specifically referred to herein in
Paragraph 5(d) hereof.

     (g) Liens. Debtor owns, leases or has valid rights to use all presently
existing Collateral, and will acquire or lease all hereafter-acquired Collateral, free and
clear of all Liens, except Permitted Liens.

     (h) Collateral. Annex B-1 accurately lists all Collateral Notes, Collateral
Note Security, Pledged Shares, Partnership/Limited Liability Company Interests, commercial
tort claims, and Deposit Accounts (but in the case of Deposit Accounts, only those
maintained by Debtor with Wells Fargo Bank, N.A), and Annex E accurately lists all Material
Agreements in which Debtor has any Rights, titles, or interest (but such failure of such
description to be accurate or complete shall not impair the Security Interest in such
Collateral).

     (i) Instruments, Chattel Paper, Collateral Notes, and Collateral Note Security.
All instruments and chattel paper, including, without limitation, the Collateral Notes, have
been delivered to Secured Party, together with corresponding endorsements duly executed by
Debtor in favor of Secured Party, and such endorsements have been duly and validly executed
and are binding and enforceable against Debtor in accordance with their terms. Each
Collateral Note and the documents evidencing the Collateral Note Security are in full force
and effect; there have been no renewals or extensions of, or amendments, modifications, or
supplements to, any thereof

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about which the Secured Party has not been advised in writing; and no “default” or
“event of default” has occurred and is continuing under any such Collateral Note or
documents evidencing the Collateral Note Security. Debtor has good title to the Collateral
Notes and Collateral Note Security, and such Collateral Notes and Collateral Note Security
are free from any claim for credit, deduction, or allowance of an Obligor and free from any
defense, condition, dispute, setoff, or counterclaim, and there is no extension or
indulgence with respect thereto.

     (j) Pledged Securities, Pledged Shares. All Collateral that is Pledged Shares
is duly authorized, validly issued, fully paid, and non-assessable, and the transfer thereof
is not subject to any restrictions, other than restrictions imposed hereunder and by
applicable securities and corporate Laws. The Pledged Securities securing the Obligations as
defined in the Credit Agreement include 100% of the issued and outstanding common stock or
other equity interests of each Domestic Subsidiary of the Debtor (and in the case of Foreign
Subsidiaries directly owned by Debtor, constitute 65% of the issued and outstanding common
stock or other equity interests of each Foreign Subsidiary). Debtor has good title to the
Pledged Securities, free and clear of all Liens and encumbrances thereon (except for the
Security Interest created hereby), and has delivered to Secured Party (i) all stock
certificates, or other instruments or documents representing or evidencing the Pledged
Securities (or in the case of Pledged Securities consisting of stock of Foreign Subsidiaries
directly owned by Debtor, certificates or other instruments or documents representing or
evidencing 65% of such stock), together with corresponding assignment or transfer powers
duly executed in blank by Debtor, and such powers have been duly and validly executed and
are binding and enforceable against Debtor in accordance with their terms or (ii) to the
extent such Pledged Securities are uncertificated, an executed Acknowledgment of Pledge with
respect to such Pledged Securities. The pledge of the Pledged Securities in accordance with
the terms hereof creates a valid and perfected first priority security interest in the
Pledged Securities securing payment of the Obligations.

     (k) Partnership/Limited Liability Company Interests. Each Partnership/Limited
Liability Company issuing a Partnership/Limited Liability Company Interest, is duly
organized, currently existing, and in good standing under all applicable Laws; there have
been no amendments, modifications, or supplements to any agreement or certificate creating
any Partnership/Limited Liability Company or any material contract relating to the
Partnerships/Limited Liability Companies, of which Secured Party has not been advised in
writing; no event of default, default, breach, or potential default has occurred and is
continuing under any Partnership/Limited Liability Company Agreement; and no approval or
consent of the partners of any Partnership/Limited Liability Company is required as a
condition to the validity and enforceability of the Security Interest created hereby or the
consummation of the transactions contemplated hereby which has not been duly obtained by
Debtor. Debtor has good title to the Partnership/Limited Liability Company Interests free
and clear of all Liens and encumbrances (except for the Security Interest granted hereby).
The Partnership/Limited Liability Company Interests are validly issued, fully paid, and
nonassessable and are not subject to statutory, contractual, or other restrictions governing
their transfer, ownership, or control, except as set forth in the applicable
Partnership/Limited Liability Company Agreements or applicable securities Laws. All capital
contributions required to be made by the terms of the Partnership/Limited Liability Company
Agreements for each Partnership/Limited Liability Company have been made. No limited
liability company interests are evidenced by certificates.

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     (1) Accounts. All Collateral that is accounts, contract rights, chattel paper,
instruments, payment intangibles, or general intangibles is free from any claim for credit,
deduction, or allowance of an Obligor, from any defense, condition, dispute, setoff, or
counterclaim (collectively “Deductions”), and there is no extension or indulgence with
respect thereto, except to the extent such Deductions, extensions and indulgences could not
reasonably be expected to have a Material Adverse Effect.

     (m) Material Agreements. Each Material Agreement is in full force and effect;
there have been no amendments, modifications, or supplements to any Material Agreement of
which Secured Party has not been advised in writing; and no event of default, default,
breach, or potential default by Debtor or, to Debtor’s knowledge, by any other party thereto
has occurred and is continuing under any Material Agreement, except as disclosed on Annex E
hereto.

     (n) Deposit Accounts. With respect to the Deposit Accounts maintained by Debtor
with Wells Fargo Bank, N.A. described on 

Annex B-1, (i) Debtor maintains each Deposit
Account with such bank, (ii) upon request by the Administrative Agent, Debtor shall use its
best efforts to, within thirty (30) days of such request, cause each such bank to
acknowledge to Secured Party that each such Deposit Account is subject to the Security
Interest and Liens herein created, that the pledge of such Deposit Account has been recorded
in the books and records of such bank, and that Secured Party shall have “control” (as
defined in the UCC) over such Deposit Account, and (iii) Debtor has the legal Right to
pledge and assign to Secured Party the funds deposited and to be deposited in each such
Deposit Account.

     (o) Intellectual Property.

     (i) All of the Intellectual Property is subsisting, valid, and enforceable. The
information contained on Annex B-2 hereto is true, correct and complete. All issued
Patents, Patent applications, registered Trademarks, Trademark applications,
registered Copyrights, and Copyright applications of Debtor are identified on Annex
B-2 hereto.

     (ii) Debtor is the sole and exclusive owner of the entire and unencumbered
Right, title, and interest in and to the Intellectual Property (other than
off-the-shelf software) free and clear of any Liens, including, without limitation,
any pledges, assignments, licenses, user agreements, and covenants by Debtor not to
sue third Persons, other than Permitted Liens or licenses permitted by Paragraph
8(c).

     (iii) To Debtor’s knowledge, no third party is infringing any of Debtor’s
Rights under the Intellectual Property.

     (iv) Debtor has performed and will continue to perform all acts and has paid
and will continue to pay all required fees and Taxes to maintain each material item
of the Intellectual Property in full force and effect throughout the world, as
applicable.

     (v) Each of the Patents and Trademarks identified on Annex B-2 hereto, to the
extent required in Debtor’s reasonable business judgment, has been properly
registered with the United States Patent and Trademark Office and in corresponding
offices throughout the world (where appropriate) and each of the Copyrights
identified on

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Annex B-2 hereto has been properly registered with the United States Copyright
Office and in corresponding offices throughout the world (where appropriate).

     (vi) To Debtor’s knowledge, no claims with respect to the Intellectual Property
have been asserted and are pending (i) to the effect that the sale, licensing,
pledge, or use of any of the products of Debtor’s business infringes any other
party’s valid copyright, trademark, service mark, trade secret, or other
intellectual property Right, (ii) against the use by Debtor of any Intellectual
Property used in the Debtor’s business as currently conducted, or (iii) challenging
the ownership or use by Debtor of any of the Intellectual Property that Debtor
purports to own or use, nor, to Debtor’s knowledge, is there a valid basis for such
a claim described in this Paragraph 5(o)(vi).

The foregoing representations and warranties will be true and correct in all respects with respect
to any additional Collateral or additional specific descriptions of certain Collateral delivered to
Secured Party in the future by Debtor. The failure of any of these representations or warranties or
any description of Collateral therein to be accurate or complete shall not impair the Security
Interest in any such Collateral.

     6. COVENANTS. So long as any Lenders are committed to make Credit Extensions under the Credit
Agreement, and until the Obligations are paid and performed in full, Debtor covenants and agrees
with Secured Party that Debtor will:

     (a) Credit Agreement. (i) Comply with, perform, and be bound by all covenants
and agreements in the Credit Agreement that are applicable to it, its assets, or its
operations, each of which is hereby ratified and confirmed.

     (b) Information/Record of Collateral. Maintain, at the place where Debtor is
entitled to receive notices under the Loan Documents, a current record of where all
Collateral is located, permit representatives of Secured Party at any time during normal
business hours to inspect and make abstracts from such records, and furnish to Secured
Party, at such intervals as Secured Party may request, such documents, lists, descriptions,
certificates, and other information as may be necessary or proper to keep Secured Party
informed with respect to the identity, location, status, condition, and value of the
Collateral. In addition, from time to time at the request of Secured Party deliver to
Secured Party such information regarding Debtor as Secured Party may reasonably request.

     (c) Annexes. Together with the delivery of compliance certificates pursuant to
Section 6.02(a) of the Credit Agreement, update all annexes hereto if any information
therein shall become inaccurate or incomplete. Notwithstanding any other provision herein,
Debtor’s failure to describe any Collateral required to be listed on any annex hereto shall
not impair Secured Party’s Security Interest in the Collateral.

     (d) Perform Obligations. Fully perform all of Debtor’s duties under and in
connection with each transaction to which the Collateral, or any part thereof, relates, so
that the amounts thereof shall actually become payable in their entirety to Secured Party.
Furthermore, notwithstanding anything to the contrary contained herein, (i) Debtor shall
remain liable under the contracts, agreements, documents, and instruments included in the
Collateral to the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this

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Security Agreement had not been executed, (ii) the exercise by Secured Party of any of
its Rights or remedies hereunder shall not release Debtor from any of its duties or
obligations under the contracts, agreements, documents, and instruments included in the
Collateral, and (iii) Secured Party shall not have any indebtedness, liability, or
obligation under any of the contracts, agreements, documents, and instruments included in
the Collateral by reason of this Security Agreement, and Secured Party shall not be
obligated to perform any of the obligations or duties of debtor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.

     (e) Notices. (i) Except as may be otherwise expressly permitted under the terms
of the Credit Agreement, promptly notify Secured Party of (A) any material change in the
nature of the Collateral, (B) any material damage to or loss of Collateral, and (C) the
occurrence of any other event or condition (including, without limitation, matters as to
Lien priority) that could reasonably be expected to have a material adverse effect on the
Collateral (taken as a whole) or the Security Interest created hereunder; and (ii) give
Secured Party thirty (30) days written notice before any proposed (A) relocation of its
principal place of business or chief executive office, (B) change of its name, identity, or
corporate structure, (C) relocation of the place where its books and records concerning its
accounts are kept, (D) relocation of any Collateral (other than delivery of inventory in the
ordinary course of business to third party contractors for processing and sales of inventory
in the ordinary course of business or as permitted by the Credit Agreement) to a location
not described on the attached Annex A, (E) relocation of any Collateral outside the
continental United States for any reason or for any period of time, and (F) change of its
jurisdiction of organization or organizational identification number, as applicable. Prior
to making any of the changes contemplated in clause (ii) preceding, Debtor shall execute and
deliver all such additional documents and perform all additional acts as Secured Party, in
its sole discretion, may request in order to continue or maintain the existence and priority
of the Security Interests in all of the Collateral.

     (f) Collateral in Trust. Hold in trust (and not commingle with other assets of
Debtor) for Secured Party all Collateral that is chattel paper, instruments, Collateral
Notes, Pledged Securities, or documents at any time received by Debtor, and promptly deliver
same to Secured Party, unless Secured Party at its option (which may be evidenced only by a
writing signed by Secured Party stating that Secured Party elects to permit Debtor to so
retain) permits Debtor to retain the same, but any chattel paper, instruments, Collateral
Notes, Pledged Securities, or documents so retained shall be marked to state that they are
assigned to Secured Party; each such instrument shall be endorsed to the order of Secured
Party (but the failure of same to be so marked or endorsed shall not impair the Security
Interest thereon).

     (g) Control. Execute all documents and take any action required by Secured
Party in order for Secured Party to obtain “control” (as defined in the UCC) with respect to
Collateral consisting of Deposit Accounts, investment property, uncertificated Pledged
Securities, and letter-of-credit rights. If Debtor at any time holds or acquires an interest
in any electronic chattel paper or any “transferable record,” as that term is defined in the
federal Electronic Signatures in Global and National Commerce Act, or in the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction, promptly notify
Secured Party thereof and, at the request of Secured Party, take such action as Secured
Party may reasonably request to vest in Secured Party control under the UCC of such
electronic chattel paper or control under the federal Electronic Signatures

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in Global and National Commerce Act or, as the case may be, the Uniform Electronic
Transactions Act, as so in effect in such jurisdiction, of such transferable record.

     (h) Further Assurances. At Debtor’s expense and Secured Party’s request, before
or after a Default or Event of Default: (1) file or cause to be filed such applications and
take such other actions as Secured Party may request to obtain the consent or approval of
any Governmental Authority to Secured Party’s Rights hereunder including, without
limitation, the Right to sell all the Collateral upon an Event of Default without additional
consent or approval from such Governmental Authority (and, because Debtor agrees that
Secured Party’s remedies at Law for failure of Debtor to comply with this provision would be
inadequate and that such failure would not be adequately compensable in damages, Debtor
agrees that its covenants in this provision may be specifically enforced); (ii) from time to
time promptly execute and deliver to Secured Party all such other assignments, certificates,
supplemental documents, and financing statements, and do all other acts or things as Secured
Party may reasonably request in order to more fully create, evidence, perfect, continue, and
preserve the priority of the Security Interest and to carry out the provisions of this
Security Agreement; and (iii) pay all filing fees in connection with any financing,
continuation, or termination statement or other instrument with respect to the Security
Interests.

     (i) Encumbrances. Not create, permit, or suffer to exist, and shall defend the
Collateral against, any Lien or other encumbrance on the Collateral, other than Permitted
Liens, and shall defend Debtor’s Rights in the Collateral and Secured Party’s Security
Interest in the Collateral against the claims and demands of all Persons except those
holding or claiming Permitted Liens. Debtor shall do nothing to impair the Rights of Secured
Party in the Collateral.

     (j) Intentionally Deleted.

     (k) Intentionally Deleted.

     (1) Certificates of Title. Upon the request of Secured Party, if certificates
of title are issued or outstanding with respect to any of the Vehicles or other Collateral,
cause the Security Interest to be properly noted thereon.

     (m) Warehouse Receipts Non-Negotiable. If any warehouse receipt or receipt in
the nature of a warehouse receipt is issued in respect of any of the Collateral, agree that
such warehouse receipt or receipt in the nature thereof shall not be “negotiable” (as such
term is used in Section 7-104 of the UCC) unless such warehouse receipt or receipt in the
nature thereof is delivered to Secured Party.

     (n) Impairment of Collateral. Not use any of the Collateral, or permit the same
to be used, for any unlawful purpose, in any manner that is reasonably likely to adversely
impair the value or usefulness of the Collateral, or in any manner inconsistent with the
provisions or requirements of any policy of insurance thereon nor affix or install any
accessories, equipment, or device on the Collateral or on any component thereof if such
addition will impair the original intended function or use of the Collateral or such
component.

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     (o) Collateral Notes and Collateral Note Security. Without the prior written
consent of Secured Party not (i) modify or substitute, or permit the modification or
substitution of, any Collateral Note or any document evidencing the Collateral Note Security
or (ii) release any Collateral Note Security unless paid in full or otherwise specifically
required by the terms thereof.

     (p) Securities. Except as permitted by the Credit Agreement, not sell,
exchange, or otherwise dispose of, or grant any option, warrant, or other Right with respect
to, any of the Pledged Securities; to the extent any issuer of any Pledged Securities is
controlled by Debtor and/or its Affiliates, not permit such issuer to issue any additional
            shares of stock or other securities in addition to or in substitution for the Pledged
Securities, except issuances to Debtor on terms acceptable to Secured Party; pledge
hereunder, immediately upon Debtor’s acquisition (directly or indirectly) thereof, any and
all additional shares of stock or other securities of each Domestic Subsidiary of Debtor;
and take any action necessary, required, or requested by Secured Party to allow Secured
Party to fully enforce its Security Interest in the Pledged Securities including, without
limitation, the filing of any claims with any court, liquidator, trustee, custodian,
receiver, or other like person or party.

     (q) Partnerships/Limited Liability Companies and Partnership/Limited Liability
Company Interests. (i) Promptly perform, observe, and otherwise comply with each and
every covenant, agreement, requirement, and condition set forth in the contracts and
agreements creating or relating to any Partnership/Limited Liability Company; (ii) do or
cause to be done all things necessary or appropriate to keep the Partnerships/Limited
Liability Companies in full force and effect and the Rights of Debtor and Secured Party
thereunder unimpaired; (iii) except as expressly permitted by the Credit Agreement, not
consent to any Partnership/Limited Liability Company selling, leasing, or disposing of
substantially all of its assets in a single transaction or a series of transactions; (iv)
notify Secured Party of the occurrence of any event of default, default, breach, or
potential default under any contract or agreement creating or relating to the
Partnerships/Limited Liability Companies; (v) except as expressly permitted by the Credit
Agreement, not consent to the amendment, modification, surrender, impairment, forfeiture,
cancellation, dissolution, or termination of any Partnership/Limited Liability Company, or
material agreement relating thereto if the effect thereof would materially and adversely
affect the value of the Collateral or the Secured Party’s security interest in the
Collateral; (vi) except as permitted by the Credit Agreement, not transfer, sell, or assign
any of the Partnership/Limited Liability Company Interests or any part thereof; (vii) to the
extent any Partnership/Limited Liability Company is controlled by Debtor and/or its
Affiliates, cause such Partnership/Limited Liability Company to refrain from granting any
Partnership/Limited Liability Company Interests in addition to or in substitution for the
Partnership/Limited Liability Company Interests granted by the Partnerships/Limited
Liability Companies, except to Debtor; (viii) pledge hereunder, immediately upon Debtor’s
acquisition (directly or indirectly) thereof, any and all additional Partnership/Limited
Liability Company Interests of any Domestic Partnership/Limited Liability Company granted to
Debtor; and any and all additional shares of stock or other securities of each; (ix) deliver
to Secured Party a fully-executed Acknowledgment of Pledge, substantially in the form of
Annex D, for each Partnership/Limited Liability Company Interest; and (x) take any action
necessary, required, or requested by Secured Party to allow Secured Party to fully enforce
its Security Interest in the Partnership/Limited Liability Company Interests including,
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limitation, the filing of any claims with any court, liquidator, trustee, custodian,
receiver, or other like person or party.

     (r) Material Agreements. (i) Promptly perform, observe, and otherwise comply
with each and every covenant, agreement, requirement, and condition set forth in the
Material Agreements, except to the extent non-compliance could not reasonably be expected to
have a Material Adverse Effect; (ii) do or cause to be done all things necessary or
appropriate to keep the Material Agreements in full force and effect and the Rights of
Debtor and Secured Party thereunder unimpaired, except to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect; (iii) notify Secured
Party of the occurrence of any default, breach or event of default under any Material
Agreement; and (iv) without the prior written consent of Secured Party, not consent to the
amendment, modification, surrender, impairment, forfeiture, cancellation, dissolution, or
termination of any Material Agreement, other than (A) cancellation or termination in
accordance with the terms thereof, and (B) any amendment, modification, surrender,
impairment, forfeiture, cancellation, dissolution, or termination that could not reasonably
be expected to have a Material Adverse Effect.

     (s) Depository Bank. With respect to any Deposit Account maintained by Debtor
with Wells Fargo Bank, N.A. described on Annex B-1): (i) maintain such Deposit Account at
such bank (the “depository bank”) described on Annex B-1; (ii) upon request of the Secured
Party, deliver to the depository bank a letter in the form of Annex C hereto with respect to
Secured Party’s Rights in such Deposit Account and use commercially reasonable efforts to
(provided however, that if a Default or Event of Default has occurred and is continuing,
Debtor shall) obtain the execution of such letter by such depository bank that the pledge of
such Deposit Account has been recorded in the books and records of such bank and that
Secured Party shall have dominion and control over such Deposit Account; (iii) upon request
of the Secured Party, deliver to Secured Party all certificates or instruments, if any, now
or hereafter representing or evidencing such Deposit Account, accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance reasonably
satisfactory to Secured Party.

     (t) Marking of Chattel Paper. At the request of Secured Party, not create any
chattel paper without placing a legend on the chattel paper acceptable to Secured Party
indicating that Secured Party has a security interest in the chattel paper.

     (u) Modification of Accounts. In accordance with prudent business practices,
endeavor to collect or cause to be collected from each account debtor under its accounts, as
and when due, any and all amounts owing under such accounts. Except in the ordinary course
of business consistent with prudent business practices and industry standards, without the
prior written consent of Secured Party, Debtor shall not (i) grant any extension of time for
any payment with respect to any of its accounts if the effect of such extension would be to
materially and adversely affect the aggregate value of all accounts or materially and
adversely affect the Debtor’s cash flow, (ii) compromise, compound, or settle any of the
accounts for less than the full amount thereof if the effect thereof would be to materially
and adversely affect the aggregate value of all accounts, (iii) release, in whole or in
part, any Person liable for payment of any of the accounts if the effect thereof would be to
materially and adversely affect the aggregate value of all accounts, (iv) allow any credit
or discount for payment with respect to any account other than trade discounts granted in
the ordinary course of business if the effect thereof would be to

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materially and adversely affect the aggregate value of all accounts, (v) release any
Lien or guaranty securing any account if the effect thereof would be to materially and
adversely affect the aggregate value of all accounts, or (vi) modify or substitute, or
permit the modification or substitution of, any contract to which any of the Collateral
which is accounts relates if the effect thereof would be to materially and adversely affect
the aggregate value of all accounts.

     (v) Intellectual Property.

     (i) Prosecute diligently all applications in respect of Intellectual Property,
now or hereafter pending;

     (ii) Except to the extent not required in Debtor’s reasonable business
judgment, make federal applications on all of its unpatented but patentable
inventions and all of its registrable but unregistered Copyrights and Trademarks;

     (iii) Preserve and maintain all of its material Rights in the Intellectual
Property and protect the Intellectual Property from infringement, unfair
competition, cancellation, or dilution by all appropriate action necessary in
Debtor’s reasonable business judgment including, without limitation, the
commencement and prosecution of legal proceedings to recover damages for
infringement and to defend and preserve its rights in the Intellectual Property;

     (iv) Not abandon any of the Intellectual Property necessary to the conduct of
its business in the exercise of Debtor’s reasonable business judgment;

     (v) (A) Not sell or assign any of its interest in any of the Intellectual
Property other than in the ordinary course of business for full and fair
consideration without the prior written consent of Secured Party; (B) not grant any
license or sublicense with respect to any of the Intellectual Property other than as
permitted by Paragraph 8(c) hereof without the prior written consent of Secured
Party; and (C) maintain the quality of any and all products and services with
respect to which the Intellectual Property is used;

     (vi) Not enter into any agreement including, but not limited to any licensing
agreement, that is or may be inconsistent with Debtor’s obligations under this
Security Agreement or any of the other Loan Documents;

     (vii) Give Secured Party prompt written notice if Debtor shall obtain Rights to
or become entitled to the benefit of any Intellectual Property not identified on
Annex B-2 hereto; and

     (viii) If a Default or Event of Default exists, use its reasonable efforts to
obtain any consents, waivers, or agreements necessary to enable Secured Party to
exercise its rights and remedies with respect to the Intellectual Property.

     7. DEFAULT; REMEDIES. If an Event of Default exists, Secured Party may, at its election (but
subject to the terms and conditions of the Credit Agreement), exercise any and all Rights available
to a secured party under the UCC and other applicable law, in addition to any and all other

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Rights afforded by the Loan Documents, at law, in equity, or otherwise, including, without
limitation, (a) requiring Debtor to assemble all or part of the Collateral and make it available to
Secured Party at a place to be designated by Secured Party which is reasonably convenient to Debtor
and Secured Party, (b) to the extent permitted by Debtor’s insurance carrier, surrendering any
policies of insurance on all or part of the Collateral and receiving and applying the unearned
premiums as a credit on the Obligations, (c) applying by appropriate judicial proceedings for
appointment of a receiver for all or part of the Collateral (and Debtor hereby consents to any such
appointment), and (d) applying to the Obligations any cash held by Secured Party under this
Security Agreement, including, without limitation, any cash in the Cash Collateral Account (defined
in Section 8(h)).

     (a) Notice. Reasonable notification of the time and place of any public sale of
the Collateral, or reasonable notification of the time after which any private sale or other
intended disposition of the Collateral is to be made, shall be sent to Debtor and to any
other Person entitled to notice under the UCC; provided that, if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold on a recognized
market, Secured Party may sell or otherwise dispose of the Collateral without notification,
advertisement, or other notice of any kind. It is agreed that notice sent or given not less
than ten Business Days prior to the taking of the action to which the notice relates is
reasonable notification and notice for the purposes of this subparagraph.

     (b) Condition of Collateral; Warranties. Secured Party has no obligation to
clean-up or otherwise prepare the Collateral for sale. Secured Party may sell the Collateral
without giving any warranties as to the Collateral. Secured Party may specifically disclaim
any warranties of title or the like. This procedure will not be considered to affect
adversely the commercial reasonableness of any sale of the Collateral.

     (c) Compliance with Other Laws. Secured Party may comply with any applicable
state or federal law requirements in connection with a disposition of the Collateral and
compliance will not be considered to adversely affect the commercial reasonableness of any
sale of the Collateral.

     (d) Sales of Pledged Securities.

     (i) Debtor agrees that, because of the Securities Act of 1933, as amended, or
the rules and regulations promulgated thereunder (collectively, the “Securities
Act”), or any other Laws or regulations, and for other reasons, there may be legal
or practical restrictions or limitations affecting Secured Party in any attempts to
dispose of certain portions of the Pledged Securities and for the enforcement of its
Rights. For these reasons, Secured Party is hereby authorized by Debtor, but not
obligated, upon the occurrence and during the continuation of an Event of Default,
to sell all or any part of the Pledged Securities at private sale, subject to
investment letter or in any other manner which will not require the Pledged
Securities, or any part thereof, to be registered in accordance with the Securities
Act or any other Laws or regulations, at a reasonable price at such private sale or
other distribution in the manner mentioned above. Debtor understands that Secured
Party may in its discretion approach a limited number of potential purchasers and
that a sale under such circumstances may yield a lower price for the Pledged
Securities, or any part thereof, than would otherwise be obtainable if such

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Collateral were either offered to a larger number of potential purchasers,
registered under the Securities Act, or sold in the open market. Debtor agrees that
any such private sale made under this Paragraph 7(d) shall be deemed to have been
made in a commercially reasonable manner, and that Secured Party has no obligation
to delay the sale of any Pledged Securities to permit the issuer thereof to register
it for public sale under any applicable federal or state securities Laws.

     (ii) Secured Party is authorized, in connection with any such sale, (A) to
restrict the prospective bidders on or purchasers of any of the Pledged Securities
to a limited number of sophisticated investors who will represent and agree that
they are purchasing for their own account for investment and not with a view to the
distribution or sale of any of such Pledged Securities, and (B) to impose such other
limitations or conditions in connection with any such sale as Secured Party
reasonably deems necessary in order to comply with applicable Law. Debtor covenants
and agrees that it will execute and deliver such documents and take such other
action as Secured Party reasonably deems necessary in order that any such sale may
be made in compliance with applicable Law. Upon any such sale Secured Party shall
have the Right to deliver, assign, and transfer to the purchaser thereof the Pledged
Securities so sold. Each purchaser at any such sale shall hold the Pledged
Securities so sold absolutely free from any claim or Right of Debtor of whatsoever
kind, including any equity or Right of redemption of Debtor. Debtor, to the extent
permitted by applicable Law, hereby specifically waives all Rights of redemption,
stay, or appraisal which it has or may have under any Law now existing or hereafter
enacted.

     (iii) Debtor agrees that ten days’ written notice from Secured Party to Debtor
of Secured Party’s intention to make any such public or private sale or sale at a
broker’s board or on a securities exchange shall constitute reasonable notice under
the UCC. Such notice shall (A) in case of a public sale, state the time and place
fixed for such sale, (B) in case of sale at a broker’s board or on a securities
exchange, state the board or exchange at which such a sale is to be made and the day
on which the Pledged Securities, or the portion thereof so being sold, will first be
offered to sale at such board or exchange, and (C) in the case of a private sale,
state the day after which such sale may be consummated. Any such public sale shall
be held at such time or times within ordinary business hours and at such place or
places as Secured Party may fix in the notice of such sale. At any such sale, the
Pledged Securities may be sold in one lot as an entirety or in separate parcels, as
Secured Party may reasonably determine. Secured Party shall not be obligated to make
any such sale pursuant to any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be adjourned
from time to time by announcement at the time and place fixed for the sale, and such
sale may be made at any time or place to which the same may be so adjourned.

     (iv) In case of any sale of all or any part of the Pledged Securities on credit
or for future delivery, the Pledged Securities so sold may be retained by Secured
Party until the selling price is paid by the purchaser thereof, but Secured Party
shall not incur any liability in case of the failure of such purchaser to take up
and pay for the Pledged Securities so sold and in case of any such failure, such
Pledged Securities may again be sold upon like notice. Secured Party, instead of
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conferred upon it, may proceed by a suit or suits at Law or in equity to
foreclose the Security Interests and sell the Pledged Securities, or any portion
thereof, under a judgment or decree of a court or courts of competent jurisdiction.

     (v) Without limiting the foregoing, or imposing upon Secured Party any
obligations or duties not required by applicable Law, Debtor acknowledges and agrees
that, in foreclosing upon any of the Pledged Securities, or exercising any other
Rights or remedies provided Secured Party hereunder or under applicable Law, Secured
Party may, but shall not be required to, (A) qualify or restrict prospective
purchasers of the Pledged Securities by requiring evidence of sophistication or
creditworthiness, and requiring the execution and delivery of confidentiality
agreements or other documents and agreements as a condition to such prospective
purchasers’ receipt of information regarding the Pledged Securities or participation
in any public or private foreclosure sale process, (B) provide to prospective
purchasers business and financial information regarding Debtor and its Subsidiaries
available in the files of Secured Party at the time of commencing the foreclosure
process, without the requirement that Secured Party obtain, or seek to obtain, any
updated business or financial information or verify, or certify to prospective
purchasers, the accuracy of any such business or financial information, or (C) offer
for sale and sell the Pledged Securities with or without first employing an
appraiser, investment banker, or broker with respect to the evaluation of the
Pledged Securities, the solicitation of purchasers for Pledged Securities, or the
manner of sale of Pledged Securities.

     (e) Application of Proceeds. Secured Party shall apply the proceeds of any sale
or other disposition of the Collateral under this Paragraph 7 in the following order: first,
to the payment of all expenses incurred in retaking, holding, and preparing any of the
Collateral for sale(s) or other disposition, in arranging for such sale(s) or other
disposition, and in actually selling or disposing of the same (all of which are part of the
Obligations); second, toward repayment of amounts expended by Secured Party under Paragraph
8; and third, toward payment of the balance of the Obligations in the order and manner
specified in the Credit Agreement. Any surplus remaining shall be delivered to Debtor or as
a court of competent jurisdiction may direct. If the proceeds are insufficient to pay the
Obligations in full, Debtor shall remain liable for any deficiency.

     (f) Sales on Credit. If Secured Party sells any of the Collateral upon credit,
Debtor will be credited only with payments actually made by the purchaser, received by the
Secured Party, and applied to the indebtedness of the purchaser. In the event the purchaser
fails to pay for the Collateral, Secured Party may resell the Collateral and Debtor shall be
credited with the proceeds of the sale.

     8. OTHER RIGHTS OF SECURED PARTY.

     (a) Performance. If Debtor fails to keep the Collateral in good repair, working
order, and condition, as required by the Loan Documents, or fails to pay when due all Taxes
on any of the Collateral in the manner required by the Loan Documents, or fails to preserve
the priority of the Security Interest in any of the Collateral, or fails to keep the
Collateral insured as required by the Loan Documents, or otherwise fails to perform any of
its obligations under the Loan

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Documents with respect to the Collateral, then Secured Party may, at its option, but
without being required to do so, make such repairs, pay such Taxes, prosecute or defend any
suits in relation to the Collateral, or insure and keep insured the Collateral in any amount
deemed appropriate by Secured Party, or take all other action which Debtor is required, but
has failed or refused, to take under the Loan Documents. Any sum which may be expended or
paid by Secured Party under this subparagraph (including, without limitation, court costs
and reasonable attorneys’ fees) shall bear interest from the dates of expenditure or payment
at the Default Rate until paid and, together with such interest, shall be payable by Debtor
to Secured Party upon demand and shall be part of the Obligations.

     (b) Collection. If an Event of Default exists and upon notice from Secured
Party, each Obligor with respect to any payments on any of the Collateral (including,
without limitation, dividends and other distributions with respect to the Pledged Securities
and Partnership/Limited Liability Company Interests, payments on Collateral Notes, insurance
proceeds payable by reason of loss or damage to any of the Collateral, or payments or
distributions with respect to Deposit Accounts) is hereby authorized and directed by Debtor
to make payment directly to Secured Party, regardless of whether Debtor was previously
making collections thereon. Subject to Paragraph 8(f) hereof, until such notice is given,
Debtor is authorized to retain and expend all payments made on Collateral. If an Event of
Default exists, Secured Party shall have the Right in its own name or in the name of Debtor
to compromise or extend time of payment with respect to all or any portion of the Collateral
for such amounts and upon such terms as Secured Party may determine; to demand, collect
receive, receipt for, sue for, compound, and give acquittances for any and all amounts due
or to become due with respect to Collateral; to take control of cash and other proceeds of
any Collateral; to endorse the name of Debtor on any notes, acceptances, checks, drafts,
money orders, or other evidences of payment on Collateral that may come into the possession
of Secured Party; to sign the name of Debtor on any invoice or bill of lading relating to
any Collateral, on any drafts against Obligors or other Persons making payment with respect
to Collateral, on assignments and verifications of accounts or other Collateral and on
notices to Obligors making payment with respect to Collateral; to send requests for
verification of obligations to any Obligor; and to do all other acts and things necessary to
carry out the intent of this Security Agreement. If an Event of Default exists and any
Obligor fails or refuses to make payment on any Collateral when due, Secured Party is
authorized, in its sole discretion, either in its own name or in the name of Debtor, to take
such action as Secured Party shall deem appropriate for the collection of any amounts owed
with respect to Collateral or upon which a delinquency exists. Regardless of any other
provision hereof, however, Secured Party shall never be liable for its failure to collect,
or for its failure to exercise diligence in the collection of, any amounts owed with respect
to Collateral, nor shall it be under any duty whatsoever to anyone except Debtor to account
for funds that it shall actually receive hereunder. Without limiting the generality of the
foregoing, Secured Party shall have no responsibility for ascertaining any maturities,
calls, conversions, exchanges, offers, tenders, or similar matters relating to any
Collateral, or for informing Debtor with respect to any of such matters (irrespective of
whether Secured Party actually has, or may be deemed to have, knowledge thereof). The
receipt of Secured Party to any Obligor shall be a full and complete release, discharge, and
acquittance to such Obligor, to the extent of any amount so paid to Secured Party.

     (c) Intellectual Property. For purposes of enabling Secured Party to exercise
its Rights and remedies under this Security Agreement and enabling Secured Party and its
successors

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and assigns to enjoy the full benefits of the Collateral, Debtor hereby grants to
Secured Party an irrevocable, nonexclusive license (exercisable without payment of royalty
or other compensation to Debtor) to use, license, or sublicense any of the Intellectual
Property. Debtor shall provide Secured Party with reasonable access to all media in which
any of the Intellectual Property may be recorded or stored and all computer programs used
for the completion or printout thereof. This license shall also inure to the benefit of all
successors, assigns, and transferees of Secured Party. Upon the occurrence of an Event of
Default, Secured Party may require that Debtor assign all of its Right, title, and interest
in and to the Intellectual Property or any part thereof to Secured Party or such other
Person as Secured Party may designate pursuant to documents satisfactory to Secured Party.
If no Default or Event of Default exists, Debtor shall have the exclusive, non-transferable
Right and license to use the Intellectual Property in the ordinary course of business and
the exclusive Right to grant to other Persons licenses and sublicenses with respect to the
Intellectual Property for full and fair consideration.

     (d) Record Ownership of Securities. If an Event of Default exists, Secured
Party at any time may have any Collateral that is Pledged Securities and that is in the
possession of Secured Party, or its nominee or nominees, registered in its name, or in the
name of its nominee or nominees, as Secured Party; and, as to any Collateral that is Pledged
Securities so registered, Secured Party shall execute and deliver (or cause to be executed
and delivered) to Debtor all such proxies, powers of attorney, dividend coupons or orders,
and other documents as Debtor may reasonably request for the purpose of enabling Debtor to
exercise the voting Rights and powers which it is entitled to exercise under this Security
Agreement or to receive the dividends and other distributions and payments in respect of
such Collateral that is Pledged Securities or proceeds thereof which it is authorized to
receive and retain under this Security Agreement.

     (e) Voting of Securities. As long as no Event of Default exists, Debtor is
entitled to exercise all voting Rights pertaining to any Pledged Securities and
Partnership/Limited Liability Company Interests; provided however, that no vote shall be
cast or consent, waiver, or ratification given or action taken without the prior written
consent of Secured Party which would (x) be inconsistent with or violate any provision of
this Security Agreement or any other Loan Document or (y) amend, modify, or waive any term,
provision or condition of the certificate of incorporation, bylaws, certificate of
formation, or other charter document, or other agreement relating to, evidencing, providing
for the issuance of, or securing any Collateral if such amendment, modification or waiver
could reasonably be expected to have a Material Adverse Effect on the value of the
Collateral or any part thereof; and provided further that Debtor shall give Secured Party at
least five Business Days’ prior written notice in the form of an officers’ certificate of
the manner in which it intends to exercise, or the reasons for refraining from exercising,
any voting or other consensual Rights pertaining to the Collateral or any part thereof which
might have a Material Adverse Effect on the value of the Collateral or any part thereof. If
an Event of Default exists and if Secured Party elects to exercise such Right, the Right to
vote any Pledged Securities shall be vested exclusively in Secured Party. To this end,
Debtor hereby irrevocably constitutes and appoints Secured Party the proxy and
attorney-in-fact of Debtor, with full power of substitution, to vote, and to act with
respect to, any and all Collateral that is Pledged Securities standing in the name of Debtor
or with respect to which Debtor is entitled to vote and act, subject to the understanding
that such proxy may not be exercised unless an Event of Default exists. The proxy herein
granted is coupled with an interest, is irrevocable, and shall continue until the
Obligations have been paid and performed in full.

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     (f) Certain Proceeds. Notwithstanding any contrary
provision herein, any and all

     (i) dividends, interest, or other distributions paid or payable other than in
cash in respect of, and instruments and other property received, receivable, or
otherwise distributed in respect of, or in exchange for, any Collateral;

     (ii) dividends, interest, or other distributions hereafter paid or payable in
cash in respect of any Collateral in connection with a partial or total liquidation
or dissolution, or in connection with a reduction of capital, capital surplus, or
paid-in-surplus;

     (iii) cash paid, payable, or otherwise distributed in redemption of, or in
exchange for, any Collateral; and

     (iv) dividends, interest, or other distributions paid or payable in violation
of the Loan Documents,

shall be part of the Collateral hereunder, and shall if received by Debtor, in the case of
items described in clause (f)(iii) above, be subject to the provisions of Section 2.03(b) of
the Credit Agreement, and in the case of items described in clauses (f)(i), (ii) and (iv)
above, shall be held in trust for the benefit of Secured Party, and shall forthwith be
delivered to Secured Party (accompanied by proper instruments of assignment and/or stock
and/or bond powers executed by Debtor in accordance with Secured Party’s instructions) to be
held subject to the terms of this Security Agreement. Any cash proceeds of Collateral which
come into the possession of Secured Party on and after the occurrence of an Event of Default
(including, without limitation, insurance proceeds) may, at Secured Party’s option, be
applied in whole or in part to the Obligations (to the extent then due), be released in
whole or in part to or on the written instructions of Debtor for any general or specific
purpose, or be retained in whole or in part by Secured Party as additional Collateral. Any
cash Collateral in the possession of Secured Party may be invested by Secured Party in
certificates of deposit issued by Secured Party (if Secured Party issues such certificates)
or by any state or national bank having combined capital and surplus greater than
$100,000,000 with a rating from Moody’s and S&P of P-1 and A-1+, respectively, or in
securities issued or guaranteed by the United States or any agency thereof Secured Party
shall never be obligated to make any such investment and shall never have any liability to
Debtor for any loss which may result therefrom. All interest and other amounts earned from
any investment of Collateral may be dealt with by Secured Party in the same manner as other
cash Collateral. The provisions of this subparagraph are applicable whether or not a Default
or Event of Default exists.

     (g) Use and Operation of Collateral. Should any Collateral come into the
possession of Secured Party, Secured Party may use or operate such Collateral for the
purpose of preserving it or its value pursuant to the order of a court of appropriate
jurisdiction or in accordance with any other Rights held by Secured Party in respect of such
Collateral. Debtor covenants to promptly reimburse and pay to Secured Party, at Secured
Party’s request, the amount of all reasonable expenses (including, without limitation, the
cost of any insurance and payment of Taxes or other charges) incurred by Secured Party in
connection with its custody and preservation of Collateral, and all such expenses, costs,
Taxes, and other charges shall bear interest at the Default Rate until repaid and, together
with such interest, shall be payable by Debtor to Secured Party upon demand

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and shall become part of the Obligations. However, the risk of accidental loss or
damage to, or diminution in value of, Collateral is on Debtor, and Secured Party shall have
no liability whatever for failure to obtain or maintain insurance, nor to determine whether
any insurance ever in force is adequate as to amount or as to the risks insured. With
respect to Collateral that is in the possession of Secured Party, Secured Party shall have
no duty to fix or preserve Rights against prior parties to such Collateral and shall never
be liable for any failure to use diligence to collect any amount payable in respect of such
Collateral, but shall be liable only to account to Debtor for what it may actually collect
or receive thereon. The provisions of this subparagraph are applicable whether or not an
Event of Default exists.

     (h) Cash Collateral Account. If an Event of Default exists and is continuing,
Secured Party shall have, and Debtor hereby grants to Secured Party, the Right and authority
to transfer all funds on deposit in the Deposit Accounts to a Cash Collateral Account
(herein so called) maintained with a depository institution acceptable to Secured Party and
subject to the exclusive direction, domain, and control of Secured Party, and no
disbursements or withdrawals shall be permitted to be made by Debtor from such Cash
Collateral Account. Such Cash Collateral Account shall be subject to the Security Interest
and Liens in favor of Secured Party herein created, and Debtor hereby grants a security
interest to Secured Party on behalf of Lenders in and to, such Cash Collateral Account and
all checks, drafts, and other items ever received by Debtor for deposit therein.
Furthermore, if an Event of Default exists, Secured Party shall have the Right, at any time
in its discretion without notice to Debtor, (i) to transfer to or to register in the name of
Secured Party or any Lender or nominee any certificates of deposit or deposit instruments
constituting Deposit Accounts and shall have the Right to exchange such certificates or
instruments representing Deposit Accounts for certificates or instruments of smaller or
larger denominations and (ii) to take and apply against the Obligations any and all funds
then or thereafter on deposit in the Cash Collateral Account or otherwise constituting
Deposit Accounts.

     (i) Power of Attorney. Debtor hereby irrevocably constitutes and appoints
Secured Party and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the name of Debtor
or in its own name, to take after the occurrence and during the continuance of an Event of
Default and from time to time thereafter, any and all action and to execute any and all
documents and instruments which Secured Party at any time and from time to time deems
necessary or desirable to accomplish the purposes of this Security Agreement and, without
limiting the generality of the foregoing, Debtor hereby gives Secured Party the power and
Right on behalf of Debtor and in its own name to do any of the following after the
occurrence and during the continuance of an Event of Default and from time to time
thereafter, without notice to or the consent of Debtor:

     (i) to transfer any and all funds on deposit in the Deposit Accounts to the
Cash Collateral Account as set forth in herein;

     (ii) to receive, endorse, and collect any drafts or other instruments or
documents in connection with clause (b) above and this 

clause (i);

     (iii) to use the Intellectual Property or to grant or issue any exclusive (if
Debtor has exclusive rights to such Intellectual Property) or non-exclusive license
under the Intellectual Property to anyone else, and to perform any act necessary for
the Secured

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Party to assign, pledge, convey, or otherwise transfer title in or dispose of
the Intellectual Property to any other Person;

     (iv) to demand, sue for, collect, or receive, in the name of Debtor or in its
own name, any money or property at any time payable or receivable on account of or
in exchange for any of the Collateral and, in connection therewith, endorse checks,
notes, drafts, acceptances, money orders, documents of title or any other
instruments for the payment of money under the Collateral or any policy of
insurance;

     (v) to pay or discharge taxes, Liens, or other encumbrances levied or placed on
or threatened against the Collateral;

     (vi) to notify post office authorities to change the address for delivery of
Debtor to an address designated by Secured Party and to receive, open, and dispose
of mail addressed to Debtor; and

     (vii) (A) to direct account debtors and any other parties liable for any
payment under any of the Collateral to make payment of any and all monies due and to
become due thereunder directly to Secured Party or as Secured Party shall direct;
(B) to receive payment of and receipt for any and all monies, claims, and other
amounts due and to become due at any time in respect of or arising out of any
Collateral; (C) to sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments, proxies,
stock powers, verifications, and notices in connection with accounts and other
documents relating to the Collateral; (D) to commence and prosecute any suit,
action, or proceeding at Law or in equity in any court of competent jurisdiction to
collect the Collateral or any part thereof and to enforce any other Right in respect
of any Collateral; (E) to defend any suit, action, or proceeding brought against
Debtor with respect to any Collateral; (F) to settle, compromise, or adjust any
suit, action, or proceeding described above and, in connection therewith, to give
such discharges or releases as Secured Party may deem appropriate; (G) to exchange
any of the Collateral for other property upon any merger, consolidation,
reorganization, recapitalization, or other readjustment of the issuer thereof and,
in connection therewith, deposit any of the Collateral with any committee,
depositary, transfer agent, registrar, or other designated agency upon such terms as
Secured Party may determine; (H) to add or release any guarantor, endorser, surety,
or other party to any of the Collateral; (I) to renew, extend, or otherwise change
the terms and conditions of any of the Collateral; (J) to endorse Debtor’s name on
all applications, documents, papers, and instruments necessary or desirable in order
for Secured Party to use or maintain any of the Intellectual Property; (K) to make,
settle, compromise or adjust any claims under or pertaining to any of the Collateral
(including claims under any policy of insurance); (L) to execute on behalf of Debtor
any financing statements or continuation statements with respect to the Security
Interests created hereby, and to do any and all acts and things to protect and
preserve the Collateral, including, without limitation, the protection and
prosecution of all Rights included in the Collateral; and (M) to sell, transfer,
pledge, convey, make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though Secured Party were the absolute owner
thereof for all purposes, and to do, at Secured Parry’s option and Debtor’s expense,
at any time, or from time to time,

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all acts and things which Secured Party deems necessary to protect, preserve,
maintain, or realize upon the Collateral and Secured Party’s security interest
therein.

This power of attorney is a power coupled with an interest and shall be irrevocable. Secured
Party shall be under no duty to exercise or withhold the exercise of any of the Rights,
powers, privileges, and options expressly or implicitly granted to Secured Party in this
Security Agreement, and shall not be liable for any failure to do so or any delay in doing
so. Neither Secured Party nor any Person designated by Secured Party shall be liable for any
act or omission or for any error of judgment or any mistake of fact or Law. This power of
attorney is conferred on Secured Party solely to protect, preserve, maintain, and realize
upon its Security Interest in the Collateral. Secured Party shall not be responsible for any
decline in the value of the Collateral and shall not be required to take any steps to
preserve rights against prior parties or to protect, preserve, or maintain any Lien given to
secure the Collateral.

     (j) Purchase Money Collateral. To the extent that Secured Party or any Lender
has advanced or will advance funds to or for the account of Debtor to enable Debtor to
purchase or otherwise acquire Rights in Collateral, Secured Party or such Lender, at its
option, may pay such funds (i) directly to the Person from whom Debtor will make such
purchase or acquire such Rights, or (ii) to Debtor, in which case Debtor covenants to
promptly pay the same to such Person, and forthwith furnish to Secured Party evidence
satisfactory to Secured Party that such payment has been made from the funds so provided.

     (k) Subrogation. If any of the Obligations are given in renewal or extension or
applied toward the payment of indebtedness secured by any Lien, Secured Party shall be, and
is hereby, subrogated to all of the Rights, titles, interests, and Liens securing the
indebtedness so renewed, extended, or paid.

     (1) Indemnification. Debtor hereby assumes all liability for the Collateral,
for the Security Interest, and for any use, possession, maintenance, and management of, all
or any of the Collateral, including, without limitation, any Taxes arising as a result of,
or in connection with, the transactions contemplated herein, and agrees to assume liability
for, and to indemnify and hold Secured Party and each Lender harmless from and against, any
and all claims, causes of action, or liability, for injuries to or deaths of Persons and
damage to property, howsoever arising from or incident to such use, possession, maintenance,
and management, whether such Persons be agents or employees of Debtor or of third parties,
or such damage be to property of Debtor or of others. Debtor agrees to indemnify, save, and
hold Secured Party and each Lender harmless from and against, and covenants to defend
Secured Party and each Lender against, any and all losses, damages, claims, costs,
penalties, liabilities, and expenses (collectively, “Claims”), including, without
limitation, court costs and attorneys’ fees, and any of the foregoing arising from the
negligence of Secured Party or any Lender, or any of their respective officers, employees,
agents, advisors, employees, or representatives, howsoever arising or incurred because of,
incident to, or with respect to Collateral or any use, possession, maintenance, or
management thereof; provided however, that the indemnity set forth in this Paragraph 8(l)
will not apply to Claims caused by the gross negligence or willful misconduct of Secured
Party or any Lender.

     9. MISCELLANEOUS.

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     (a) Continuing Security Interest. This Security Agreement creates a continuing
security interest in the Collateral and shall (i) remain in full force and effect until the
termination of the obligations of Lenders to make Credit Extensions under the Loan Documents
and the payment in full of the Obligations; and (ii) inure to the benefit of and be
enforceable by Secured Party, Lenders, and their respective successors, transferees, and
assigns. Without limiting the generality of the foregoing clause (ii), Secured Party and
Lenders may assign or otherwise transfer any of their respective Rights under this Security
Agreement to any other Person in accordance with the terms and provisions of Section 10.07
of the Credit Agreement, and to the extent of such assignment or transfer such Person shall
thereupon become vested with all the Rights and benefits in respect thereof granted herein
or otherwise to Secured Party or Lenders, as the case may be. Upon payment in full of the
Obligations, Debtor shall be entitled to the return, upon its request and at its expense, of
such of the Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof.

     (b) Reference to Miscellaneous Provisions. This Security Agreement is one of the “Loan
Documents” referred to in the Credit Agreement, and all provisions relating to Loan
Documents set forth in Article X of the Credit Agreement are incorporated herein by
reference, the same as if set forth herein verbatim.

     (c) Term; Release of Liens. Upon the later of (i) the termination of Lenders’
commitments to fund Borrowing under the Credit Agreement, and (ii) the full and final
payment and performance of the Obligations, the Administrative Agent shall release the liens
created by this Security Agreement in accordance with Section 10.01(d) of the Credit
Agreement; provided that no Obligor, if any, on any of the Collateral shall ever be
obligated to make inquiry as to the termination of this Security Agreement, but shall be
fully protected in making payment directly to Secured Party until actual notice of such
total payment of the Obligations is received by such Obligor. At such time as the Liens
created by this Security Agreement are to be released pursuant to this paragraph, Secured
Party shall, at the request and expense of the Debtor following such termination, promptly
deliver to the Debtor any Collateral held by the Secured Party hereunder, and promptly
execute and deliver to such Debtor such documents and instruments as the Debtor shall
reasonably request to evidence such termination and release as provided in the Credit
Agreement. In addition, if any of the Collateral shall be sold, transferred, assigned or
otherwise disposed of by the Debtor in a transaction permitted by the Credit Agreement, then
the Secured Party, at the request and expense of the Debtor, shall promptly execute and
deliver releases as provided in the Credit Agreement.

     (d) Actions Not Releases. The Security Interest and Debtor’s obligations and
Secured Party’s Rights hereunder shall not be released, diminished, impaired, or adversely
affected by the occurrence of any one or more of the following events: (i) the taking or
accepting of any other security or assurance for any or all of the Obligations; (ii) any
release, surrender, exchange, subordination, or loss of any security or assurance at any
time existing in connection with any or all of the Obligations; (iii) the modification of,
amendment to, or waiver of compliance with any terms of any of the other Loan Documents
without the notification or consent of Debtor, except as required therein (the Right to such
notification or consent being herein specifically waived by Debtor); (iv) the insolvency,
bankruptcy, or lack of corporate or trust power of any party at any time liable for the
payment of any or all of the Obligations, whether now existing or hereafter occurring; (v)
any renewal, extension, or rearrangement of the payment of any or all of the

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Obligations, either with or without notice to or consent of debtor, or any adjustment,
indulgence, forbearance, or compromise that may be granted or given by Secured Party or any
Lender to Debtor; (vi) any neglect delay, omission, failure, or refusal of Secured Party or
any Lender to take or prosecute any action in connection with any other agreement, document,
guaranty, or instrument evidencing, securing, or assuring the payment of all or any of the
Obligations; (vii) any failure of Secured Party or any Lender to notify Debtor of any
renewal, extension, or assignment of the Obligations or any part thereof, or the release of
any Collateral or other security, or of any other action taken or refrained from being taken
by Secured Party or any Lender against Debtor or any new agreement between or among Secured
Party or one or more Lenders and Debtor, it being understood that except as expressly
provided herein, neither Secured Party nor any Lender shall be required to give Debtor any
notice of any kind under any circumstances whatsoever with respect to or in connection with
the Obligations, including, without limitation, notice of acceptance of this Security
Agreement or any Collateral ever delivered to or for the account of Secured Party hereunder;
(viii) the illegality, invalidity, or unenforceability of all or any part of the Obligations
against any party obligated with respect thereto by reason of the fact that the Obligations,
or the interest paid or payable with respect thereto, exceeds the amount permitted by Law,
the act of creating the Obligations, or any part thereof, is ultra vires, or the officers,
partners, or trustees creating same acted in excess of their authority, or for any other
reason; or (ix) if any payment by any party obligated with respect thereto is held to
constitute a preference under applicable Laws or for any other reason Secured Party or any
Lender is required to refund such payment or pay the amount thereof to someone else,

     (e) Waivers. Except to the extent expressly otherwise provided herein or in
other Loan Documents and to the fullest extent permitted by applicable Law, Debtor waives
(i) any Right to require Secured Party or any Lender to proceed against any other Person, to
exhaust its Rights in Collateral, or to pursue any other Right which Secured Party or any
Lender may have; (ii) with respect to the Obligations, presentment and demand for payment,
protest, notice of protest and nonpayment, and notice of the intention to accelerate; and
(iii) all Rights of marshaling in respect of any and all of the Collateral.

     (f) Financing Statement; Authorization. Secured Party shall be entitled at any
time to file this Security Agreement or a carbon, photographic, or other reproduction of
this Security Agreement, as a financing statement, but the failure of Secured Party to do so
shall not impair the validity or enforceability of this Security Agreement. Debtor hereby
irrevocably authorizes Secured Party at any time and from time to time to file in any UCC
jurisdiction any initial or other financing statements and amendments thereto (without the
requirement for Debtor’s signature thereon) that (i) indicate the Collateral (A) as “all
assets of Debtor” or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the UCC of the state or
such jurisdiction or whether such assets are included in the Collateral hereunder, or (B) as
being of an equal or lesser scope or with greater detail, and (ii) contain any other
information required by Article 9 of the UCC of the state or such jurisdiction for the
sufficiency or filing office acceptance of any financing statement or amendment, including
(A) whether the Debtor is an organization, the type of organization, and any organization
identification number issued to Debtor and, (B) in the case of a financing statement filed
as a fixture filing or indicating Collateral as-extracted collateral or timber to be cut, a
sufficient

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description of real property to which the Collateral relates. Debtor agrees to furnish
any such information to Secured Party promptly upon request.

     (g) Amendments. This Security Agreement may be amended only by an instrument in
writing executed jointly by Debtor and Secured Party, and supplemented only by documents
delivered or to be delivered in accordance with the express terms hereof.

     (h) Multiple Counterparts. This Security Agreement has been executed in a
number of identical counterparts, each of which shall be deemed an original for all purposes
and all of which constitute, collectively, one agreement; but, in making proof of this
Security Agreement, it shall not be necessary to produce or account for more than one such
counterpart.

     (i) Parties Bound; Assignment. This Security Agreement shall be binding on
Debtor and Debtor’s heirs, legal representatives, successors, and assigns and shall inure to
the benefit of Secured Party and Secured Party’s successors and assigns.

     (i) Secured Party is the agent for each Lender under the Credit Agreement and
each Affiliate of a Lender party to any Lender Hedging Agreement, the Security
Interest and all Rights granted to Secured Party hereunder or in connection herewith
are for the ratable benefit of each Lender and each such Affiliate, and Secured
Party may, without the joinder of any Lender or any such Affiliate, exercise any and
all Rights in favor of Secured Party or Lenders or any such Affiliates hereunder,
including, without limitation, conducting any foreclosure sales hereunder, and
executing full or partial releases hereof, amendments or modifications hereto, or
consents or waivers hereunder. The Rights of each Lender or any such Affiliate
vis-à-vis Secured Party and each other Lender or any such Affiliate may be subject
to one or more separate agreements between or among such parties, but Debtor need
not inquire about any such agreement or be subject to any terms thereof unless
Debtor specifically joins therein; and consequently, neither Debtor nor Debtor’s
legal representatives, successors, and assigns shall be entitled to any benefits or
provisions of any such separate agreements or be entitled to rely upon or raise as a
defense, in any manner whatsoever, the failure or refusal of any party thereto to
comply with the provisions thereof.

     (ii) Debtor may not, without the prior written consent of Secured Party, assign
any Rights, duties, or obligations hereunder.

     (j) Governing Law. The substantive laws of the State of Texas, except to
the extent the laws of another jurisdiction govern the creation, perfection, validity, or
enforcement of liens under this Security Agreement, and the applicable federal laws of the
United States, shall govern the validity, construction, enforcement and interpretation of
this security agreement and all of the other loan documents.

     (k) The provisions of Section 10.10 of the Credit Agreement are incorporated herein as
if set forth herein.

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     (1) All notices given pursuant hereto shall be given in the manner set forth in the
Credit Agreement, if to Secured Party, to the address of Secured Party therein set forth and
if to Debtor, to the following address:

5075 Westheimer, Suite 890

Houston, Texas 77056

Attn: General Counsel

Facsimile: (713) 369-0555

Telephone: (713) 369-0550

     THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Remainder of page Intentionally Blank

Signature Page to Follow.

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     IN WITNESS WHEREOF, the Debtor has caused this Security Agreement to be duly executed and
delivered by an officer duly authorized as of the date first above written.

	 	 	 	 	 
	 	ALLIS-CHALMERS ENERGY INC.,

a Delaware corporation

 	 
	 	By:  	/s/ Victor M. Perez
 	 
	 	 	Victor M. Perez 	 
	 	 	Chief Financial Officer 	 
	 

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ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.

	 	Exact Legal Name of Debtor:
	 	Allis-Chalmers Energy Inc.
	 
	 	 	 	 
	B.

	 	Mailing Address of Debtor:
	 	5075 Westheimer
	 

	 	 	 	Suite 890
	 

	 	 	 	Houston, Texas 77056
	 
	 	 	 	 
	C.

	 	Type of Entity:
	 	corporation
	 
	 	 	 	 
	D.

	 	Jurisdiction of Organization:
	 	Delaware
	 
	 	 	 	 
	E.

	 	State Issued Organizational	 	 
	 

	 	Identification Number:
	 	0035223
	 
	 	 	 	 
	F.

	 	Tax ID Number:
	 	39-0126090
	 
	 	 	 	 
	G.

	 	Location of Books and Records:
	 	5075 Westheimer
	 

	 	 	 	Suite 890
	 

	 	 	 	Houston, Texas 77056
	 
	 	 	 	 
	H.

	 	Location of Collateral:
	 	5075 Westheimer
	 

	 	 	 	Suite 890
	 

	 	 	 	Houston, Texas 77056
	 
	 	 	 	 
	I.

	 	Location of Real Property:
	 	N/A.
	 
	 	 	 	 
	J.

	 	Jurisdiction(s) for Filing	 	 
	 

	 	Financing Statements: 	 	Delaware
	 
	 	 	 	 
	 	 	Fixture filings in the relevant counties in which the properties are located: None.

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ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: None.
	 
	B.	 	Pledged Shares:
	 
	 	 	100% of the common stock of Allis-Chalmers Production Services, Inc.
	 
	 	 	100% of the common stock of Allis-Chalmers Rental Services, Inc.
	 
	 	 	100% of the common stock of Allis-Chalmers Tubular Services, Inc.
	 
	 	 	100% of the common stock of Oilquip Rentals, Inc.
	 
	 	 	100% of the common stock of Petro-Rentals, Inc.
	 
	 	 	100% of the common stock of Strata Directional Technology, Inc.
	 
	 	 	65% of the common stock of DLS Drilling Logistics and Services, Corp.
	 
	C.	 	Partnership/Limited Liability Company Interests:
	 
	 	 	100% of the membership interest in AirComp L.L.C.

100% of the membership interest Allis-Chalmers GP, LLC

100% of the membership interest Allis-Chalmers LP, LLC
	 
	D.	 	Agreements:

	 	1.	 	Limited Liability Company Agreement of Allis-Chalmers GP, LLC dated December
28, 2005
	 
	 	2.	 	Limited Liability Company Agreement of Allis-Chalmers LP, LLC dated December
28, 2005

	E.	 	Commercial Tort Claims: None.
	 
	F.	 	Deposit Accounts (including name of bank address and account number).

	 	 	 	 	 	 	 
	 

	 	Allis-Chalmers Energy Inc.
	 	Wells Fargo
	 	4496856592

Allis-Chalmers Energy

Amended & Restated Pledge

and Security Agreement

Annex B-1 — Page 1

 

 

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. None.
	 
	2.	 	Issued Patents and Patent Applications.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Previous
	 	 	 	 	 	 	 	 	 	 	Assignment
	 	 	 	 	Serial No./	 	Filing Date/	 	Real/Frame
	Title	 	Country	 	Patent No.	 	Grant Date	 	(if any)
	Method and
Apparatus for the
Disassembly of
Drill Pipe

	 	USA
	 	 	6,148,924	 	 	November 21, 2000
	 	009592/0120
	 
	 	 	 	 	 	 	 	 	 	 
	Drilling Rig, Pipe
and Support
Apparatus

	 	USA
	 	 	6,349,764	 	 	February 26, 2002
	 	011112/0144
	 
	 	 	 	 	 	 	 	 	 	 
	Drill Pipe Handling 

Apparatus

	 	USA
	 	 	6,364,012	 	 	April 2, 2002
	 	011112/0122
	 
	 	 	 	 	 	 	 	 	 	 
	Method of Landing
Items at a Well
Location

	 	USA
	 	 	6,378,614	 	 	April 30, 2002
	 	011108/0312
	 
	 	 	 	 	 	 	 	 	 	 
	Method of Landing
Items at a Well
Location

	 	USA
	 	 	6,644,413	 	 	November 11, 2003
	 	012675/0941
	 
	 	 	 	 	 	 	 	 	 	 
	Apparatus for, and
Method of, Landing
Items at a Well
Location

	 	USA
	 	 	7,025,147	 	 	April 11, 2006
	 	014249/0389
	 
	 	 	 	 	 	 	 	 	 	 
	Apparatus for, and
Method of, Landing
Items at a Well
Location

	 	USA
	 	 	11/402,302	 	 	April 10, 2006	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Pipe Handling
Apparatus and
Method of Landing
Items at a Well
Location

	 	EPO
	 	 	129506	 	 	April 12, 2006
*designated
France, Germany and
the United Kingdom	 	 

Allis-Chalmers Energy

Amended & Restated Pledge

and Security Agreement

Annex B-2 — Page 1

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Previous
	 	 	 	 	 	 	 	 	 	 	Assignment
	 	 	 	 	Serial No./	 	Filing Date/	 	Real/Frame
	Title	 	Country	 	Patent No.	 	Grant Date	 	(if any)
	Drilling Rig,
Pipe and Support
Apparatus, Pipe
Handling Apparatus
and Method of
Landing Items at a
Well Location

	 	Canada
	 	 	2,410,574	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Drilling Rig, Pipe
and Support
Apparatus, Pipe
Handling Apparatus
and Method of
Landing Items at a
Well Location

	 	Mexico
	 	PA/a/2002011876
	 	 	 	 

	3.	 	Registered Trademarks and Trademark Applications. None.

Allis-Chalmers Energy

Amended & Restated Pledge

and Security Agreement

Annex B-2 — Page 2

 

 

ANNEX C TO SECURITY AGREEMENT

DEPOSIT ACCOUNT CONTROL AGREEMENT

                                       
 , 20__

	 	 	 
	 

	 	 
	 

	 	 
	 

	 	 

Ladies and Gentlemen:

This letter is to notify you (the “Depository Bank”) that, pursuant to that certain Amended and
Restated Pledge and Security Agreement dated as of
                    , 200___ (as amended, modified,
supplemented, or restated from time to time, the “Security Agreement”),
                                        
, a
company organized under the laws of                      (the “Pledgor”), has granted to Royal Bank of
Canada as Administrative Agent and Collateral Agent (“Pledgee”) a first priority security interest
in and lien upon, (a) Account No.                      (the “Account”) maintained by Pledgor with you, (b)
any extensions or renewals of the Account if the Account is one which may be extended or renewed,
and (c) all of Pledgor’s right, title, and interest (whether now existing or hereafter created or
arising) in and to the Account, all sums from time to time on deposit therein, credited thereto, or
payable thereon, all instruments, documents, certificates, and other writings evidencing the
Account, and any and all proceeds of any thereof (the items described in clauses (a), (b) and (c)
being herein collectively called the “Collateral”),

In connection therewith, the parties hereto agree (which agreement by Pledgor will be construed as
instructions to the Depository Bank):

	1.	 	The Depository Bank is instructed to register the pledge on its books and hold the Collateral
in a pledged status account.

	2.	 	The Depository Bank is instructed to deliver to Pledgee copies of monthly statements on the
account(s) identified below:
	 
	3.	 	The Account will be styled:

	4.	 	All dividends, interest, gains, and other profits on the Collateral will be reported in the
name and tax identification number of Pledgor.

	5.	 	If so notified by Pledgee, the Depository Bank will not, without the prior written consent of
Pledgee, allow any of the Collateral or any interest therein to be sold, transferred, or
withdrawn by or for the benefit of Pledgor.

	6.	 	This letter agreement gives Pledgee “control” of the Account and the Collateral. The
Depository Bank agrees to comply with any order or instruction from Pledgee as to the
withdrawal or disposition of any funds from time to time credited to the Account, or as to any
other matters relating to the Collateral, without the further consent of Pledgor. The
Depository Bank shall be

Allis-Chalmers Energy

Amended & Restated Pledge

and Security Agreement

Annex C — Page 1

 

 

	 	 	fully entitled to rely upon such instructions from Pledgee even if such instructions are
contrary to any instructions or demands that Pledgor may give to the Depository Bank.

	7.	 	Pledgee agrees to indemnify and hold the Depository Bank, its officers and employees,
harmless from and against any and all claims, causes of action, liabilities, lawsuits,
demands, and/or damages, including, without limitation any and all costs, including court
costs and reasonable attorneys’ fees, that may arise or result from the Depository Bank
complying with the instructions and orders of Pledgee given in connection with Pledgee’s
exercise of its control over and secured rights in the Account and the Collateral except to
the extent that such claims, causes of action, liabilities, lawsuits, demands, and/or damages
are found in a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Depository Bank.

	8.	 	Pledgor agrees to indemnify and hold the Depository Bank, its officers and employees,
harmless from and against any and all claims, causes of action, liabilities, lawsuits,
demands, and/or damages, including, without limitation, any and all costs, including court
costs and reasonable attorneys’ fees, that may arise or result from the Depository Bank
entering into and performing its obligations under this letter agreement except to the extent
that such claims, causes of action, liabilities, lawsuits, demands, and/or damages are found
in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from
the gross negligence or willful misconduct of the Depository Bank.

	9.	 	The Depository Bank represents that it has not received notice regarding any lien,
encumbrance, or other claim to the Account or the Collateral from any person other than
pursuant to this letter agreement and has not entered into another agreement with any other
party to act on such party’s instructions with respect to the Account. The Depository Bank
further agrees not to enter into any such agreement with any other party.

	10.	 	The Depository Bank subordinates’ to the security interest of Pledgee any right of recoupment
or set-off, or to assert any security interest or other lien, that it may at any time have
against or in any of the Collateral on account of any credit or other obligations owed to the
Depository Bank by Pledgor or any other person. The Depository Bank may, however, from time to
time debit the Account for any of its customary charges in maintaining the Account or for
reimbursement for the reversal of any provisional credits granted by the Depository Bank to
the Account, to the extent, in each case, that Pledgor has not separately paid or reimbursed
Depository Bank therefor.

	11.	 	To the extent a conflict exists between the terms of this letter agreement and any account
agreement between Pledgor and the Depository Bank, the terms of this letter agreement will
control.

	12.	 	The terms of this letter agreement will in no way be modified except by a writing signed by
all parties hereto.

	13.	 	Each of the parties executing this letter agreement represents that he has the proper
authority to execute this letter agreement.

[Remainder of page intentionally blank. Signature page follows.]

Allis-Chalmers Energy

Amended & Restated Pledge

and Security Agreement

Annex C — Page 2

 

 

     IN WITNESS WHEREOF, Pledgor and Pledgee have agreed to the terms of this letter agreement as
of the date first indicated above.

Pledgor:

[NAME OF ENTITY]

	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Pledgee:	 	 
	 
	 	 	 	 	 	 
	ROYAL BANK OF CANADA,

as Administrative Agent and Collateral Agent	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Acknowledged and Agreed on
                                        
, 200_:

	 	 	 	 	 	 	 
	Depository Bank:	 	 
	 
	 	 	 	 	 	 
	[NAME OF ENTITY]	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Allis-Chalmers Energy

Amended & Restated Pledge

and Security Agreement

Annex C — Page 3

 

 

ANNEX D TO SECURITY AGREEMENT

ACKNOWLEDGMENT OF PLEDGE

PARTNERSHIP/LIMITED LIABILITY COMPANY:
                                        
                    

INTEREST OWNER:
                                        
                    

     BY THIS ACKNOWLEDGMENT OF PLEDGE, dated as of
                                        
, 200_,
                                        
                     (the “Partnership/Limited Liability Company”) hereby acknowledges the
pledge in favor of Royal Bank of Canada (“Pledgee”), in its capacity as Administrative Agent and
Collateral Agent for certain Lenders and as Secured Party under that certain Amended and Restated
Pledge and Security Agreement dated as of
                    , 200___ (as amended, modified, supplemented,
or restated from time to time, the “Security Agreement”; capitalized terms used but not defined
herein having the meanings given them in the Security Agreement), against, and a security interest
in favor of Pledgee in, all Rights of
                                        
 (the “Interest Owner”) in
connection with any partnership/limited liability company interest in the Partnership/Limited
Liability Company now and hereafter owned by the Interest Owner (“Partnership/Limited Liability
Company Interest”).

     A. Pledge Records. The Partnership/Limited Liability Company has identified Pledgee’s
interest in all of the Interest Owner’s Right, title, and interest in and to all of the Interest
Owner’s Partnership/Limited Liability Company Interest as subject to a pledge and security interest
in favor of Pledgee in the Partnership/Limited Liability Company Records.

     B. Partnership/Limited Liability Company Distributions, Accounts, and Correspondence.
The Partnership/Limited Liability Company hereby acknowledges that (i) all proceeds, distributions,
and other amounts payable to the Interest Owner, including, without limitation, upon the
termination, liquidation, and dissolution of the Partnership/Limited Liability Company shall be
paid and remitted to the Pledgee upon demand, (ii) all funds in deposit accounts shall be held for
the benefit of Pledgee, and (iii) all future correspondence, accountings of distributions, and tax
returns of the Partnership/Limited Liability Company shall be provided to the Pledgee. The
Partnership/Limited Liability Company acknowledges and accepts such direction and hereby agrees
that it shall, upon the written demand by the Administrative Agent, pay directly to the
Administrative Agent at its offices at Royal Bank Plaza, 200 Bay Street, 12th Floor,
South Tower, Toronto, Ontario, M5J 2W7 Canada any and all distributions, income, and cash flow
arising from the Partnership/Limited Liability Company Interests whether payable in cash, property
or otherwise, subject to and in accordance with the terms and conditions of the Partnership/Limited
Liability Company Agreement. The Pledgee may from time to time notify the Partnership/Limited
Liability Company of any change of address to which such amounts are to be paid.

Remainder of Page Intentionally Blank.

Signature Page to Follow.

Allis-Chalmers Energy

Amended & Restated Pledge

and Security Agreement

Annex D
— Page 1

 

 

     EXECUTED as of the date first stated in this Acknowledgment of Pledge.

	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

	 	 	 	 	 	 	 
	 	 	[PARTNERSHIP/LIMITED LIABILITY

COMPANY]
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 

Allis-Chalmers Energy

Amended & Restated Pledge

and Security Agreement

Annex D — Page 2

 

 

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

	1.	 	Indenture among the Debtor, its Subsidiaries party thereto and Wells Fargo Bank, N.A., as
trustee, dated January 18, 2006 pursuant to which the 9.0% senior notes due 2014 of the Debtor
were issued

	2.	 	Indenture among the Debtor, its Subsidiaries party thereto and Wells Fargo Bank, N.A., as
trustee, dated January 29, 2007 pursuant to the 8.5% senior notes due 2017 of the Debtor were
issued

	3.	 	Stock Purchase Agreement among Bridas International Holdings Ltd., Bridas Central Company,
Ltd., Associated Petroleum Investors Limited and Debtor

	4.	 	Strategic Agreement with Pan American Energy (pursuant to which a majority of DLS’ revenues
are received)

Annex E — Page 1

 

 

SCHEDULE TO EXHIBIT 10.3

The agreements listed below have been omitted pursuant to Instruction 2 to Item 601 of Regulation
S-K.

	 	1.	 	Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
AIRCOMP L.L.C., a Delaware limited liability company, for the benefit of Royal Bank of
Canada, as administrative agent and collateral agent for the lenders named thereto.
	 
	 	2.	 	Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
Allis-Chalmers GP, LLC, a Delaware limited liability company, for the benefit of Royal Bank
of Canada, as administrative agent and collateral agent for the lenders named thereto.
	 
	 	3.	 	Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
Allis-Chalmers LP, LLC, a Delaware limited liability company, for the benefit of Royal Bank
of Canada, as administrative agent and collateral agent for the lenders named thereto.
	 
	 	4.	 	Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
Allis-Chalmers Management, LP, a Delaware limited partnership, for the benefit of Royal
Bank of Canada, as administrative agent and collateral agent for the lenders named thereto.
	 
	 	5.	 	Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
Allis-Chalmers Production Services, Inc., a Texas corporation, for the benefit of Royal
Bank of Canada, as administrative agent and collateral agent for the lenders named thereto.
	 
	 	6.	 	Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
Allis-Chalmers Rental Services, Inc., a Texas corporation, for the benefit of Royal Bank of
Canada, as administrative agent and collateral agent for the lenders named thereto.
	 
	 	7.	 	Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
Allis-Chalmers Tubular Services, Inc., a Texas corporation, for the benefit of Royal Bank
of Canada, as administrative agent and collateral agent for the lenders named thereto.
	 
	 	8.	 	Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
Mountain Compressed Air, Inc., a Texas corporation, for the benefit of Royal Bank of
Canada, as administrative agent and collateral agent for the lenders named thereto.
	 
	 	9.	 	Pledge and Security Agreement, dated as of April 26, 2007, by Petro-Rentals, Inc., a
Louisiana corporation, for the benefit of Royal Bank of Canada, as administrative agent and
collateral agent for the lenders named thereto.
	 
	 	10.	 	Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
OilQuip Rentals, Inc., a Delaware corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.
	 
	 	11.	 	Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
Strata Directional Technology, Inc., a Texas corporation, for the benefit of Royal Bank of
Canada, as administrative agent and collateral agent for the lenders named thereto.

Schedule 10.3 - Page 1 

 

Material details in which the agreements listed above differ from the agreement filed herewith are
as follows:

1. The following language is contained in all of the above listed agreements at the end of Section
6(a):

“(INCLUDING, WITHOUT LIMITATION, THE INDEMNIFICATION AND RELATED PROVISIONS IN SECTION 10.05 OF THE
CREDIT AGREEMENT); AND (ii) CONSENT TO AND APPROVE THE VENUE, SERVICE OF PROCESS, AND WAIVER OF
JURY TRIAL PROVISIONS OF SECTIONS 10.16 AND 10. 17 OF THE CREDIT AGREEMENT.”

2. Annexes A, B-1, B-2 and E for each of the above listed agreements are set forth below:

Schedule 10.3 - Page 2 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by AIRCOMP L.L.C.,
a Delaware limited liability company, for the benefit of Royal Bank of Canada, as administrative
agent and collateral agent for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	AirComp L.L.C.
	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	C.
	 	Type of Entity:	 	limited liability company
	 
	D.
	 	Jurisdiction of Organization:	 	Delaware
	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	3657139
	 
	 	 	 	 
	F.
	 	Tax ID Number:	 	01-0784140
	 
	G.
	 	Location of Books and Records:	 	1034 Regional Park Drive, Houston, TX  77060
	 
	 	 	 	 
	H.
	 	Location of Collateral:	 	1034 Regional Park Drive, Houston, TX  77060
	 
	 	 	 	 
	 
	 	 	 	1200 17th Street, Suite 1000, Denver, CO 80202
	 
	 	 	 	 
	 
	 	 	 	1215 Mission Avenue, Farmington, NM 87401
	 
	 	 	 	 
	 
	 	 	 	702 Railroad Avenue, Fort Stockton, TX 79735
	 
	 	 	 	 
	 
	 	 	 	2896 I-70 Business Loop, Grand Junction, CO 81501
	 
	 	 	 	 
	 
	 	 	 	1205 Highway 2 North, Wilburton, OK 74548
	 
	 	 	 	 
	 
	 	 	 	1400 Commerce Drive, Carlsbad, NM  88220
	 
	 	 	 	 
	 
	 	 	 	4202 Old Christoval Road, San Angelo, TX 76903
	 
	 	 	 	 
	 
	 	 	 	1169 Hwy 227 South
	 
	 	 	 	Sonora, Texas  76950
	 
	 	 	 	 
	 
	 	 	 	5509 Old Grandbury Road
	 
	 	 	 	Grandbury, Texas  76049
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	N/A.
	 
	J.
	 	Jurisdiction(s) for Filing	 	 
	 
	 	Financing Statements:	 	Delaware
	 
	 	 	 	 
	 	 	Fixture filings in the relevant counties in which the properties are located: None.

Schedule 10.3 - Page 3 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by AIRCOMP L.L.C.,
a Delaware limited liability company, for the benefit of Royal Bank of Canada, as administrative
agent and collateral agent for the lenders named thereto.

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: None.
	 
	B.	 	Pledged Shares: None.
	 
	C.	 	Partnership/Limited Liability Company Interests: None.
	 
	D.	 	Agreements: None.
	 
	E.	 	Commercial Tort Claims: None.
	 
	F.	 	Deposit Accounts (including name of bank address and account number).

	 	 	 	 	 
	AirComp LLC
	 	Wells Fargo
	 	4945074375

Schedule 10.3 - Page 4 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by AIRCOMP L.L.C.,
a Delaware limited liability company, for the benefit of Royal Bank of Canada, as administrative
agent and collateral agent for the lenders named thereto.

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. None.
	 
	2.	 	Issued Patents and Patent Applications. None.
	 
	3.	 	Registered Trademarks and Trademark Applications. None.

Schedule 10.3 - Page 5 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by AIRCOMP L.L.C.,
a Delaware limited liability company, for the benefit of Royal Bank of Canada, as administrative
agent and collateral agent for the lenders named thereto.

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

NONE

Schedule 10.3 - Page 6 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
GP, LLC, a Delaware limited liability company, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	Allis-Chalmers GP, LLC
	 
	 	 	 	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	 	 	 	 
	C.
	 	Type of Entity:	 	limited liability company
	 
	 	 	 	 
	D.
	 	Jurisdiction of Organization:	 	Delaware
	 
	 	 	 	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	4085493
	 
	 	 	 	 
	F.
	 	Tax ID Number:	 	20-4002547
	 
	 	 	 	 
	G.
	 	Location of Books and Records:	 	5075 Westheimer, Suite 890, Houston, TX  77056
	 
	 	 	 	 
	H.
	 	Location of Collateral:	 	5075 Westheimer, Suite 890, Houston, TX  77056
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	None.
	 
	 	 	 	 
	J.
	 	Jurisdiction(s) for Filing	 	 
	 
	 	Financing Statements:	 	Delaware
	 
	 	 	 	 
	 
	 	Fixture filings in the relevant counties	 	 
	 
	 	in which the properties are located:	 	N/A

Schedule 10.3 - Page 7 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
GP, LLC, a Delaware limited liability company, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: NONE.
	 
	B.	 	Pledged Shares: NONE.
	 
	C.	 	Partnership/Limited Liability Company Interests:
	 
	 	 	100% of the general partnership interest in Allis-Chalmers Management, LP, a Texas limited
partnership
	 
	D.	 	Agreements:
	 
	 	 	Agreement of Limited Partnership of Allis-Chalmers Management, LP dated December 28, 2005.
	 
	E.	 	Commercial Tort Claims: NONE.
	 
	F.	 	Deposit Accounts (including name of bank address and account number): NONE.

Schedule 10.3 - Page 8 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
GP, LLC, a Delaware limited liability company, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. NONE.
	 
	2.	 	Issued Patents and Patent Applications. NONE.
	 
	3.	 	Registered Trademarks and Trademark Applications. NONE.

Schedule 10.3 - Page 9 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
GP, LLC, a Delaware limited liability company, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

NONE.

Schedule 10.3 - Page 10 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
Allis-Chalmers LP, LLC, a Delaware limited liability company, for the benefit of Royal Bank of
Canada, as administrative agent and collateral agent for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	Allis-Chalmers LP, LLC
	 
	 	 	 	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	 	 	 	 
	C.
	 	Type of Entity:	 	limited liability company
	 
	 	 	 	 
	D.
	 	Jurisdiction of Organization:	 	Delaware
	 
	 	 	 	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	4085497
	 
	 	 	 	 
	F.
	 	Tax ID Number:	 	20-4002534
	 
	 	 	 	 
	G.
	 	Location of Books and Records:	 	5075 Westheimer, Suite 890, Houston, TX  77056
	 
	 	 	 	 
	H.
	 	Location of Collateral:	 	5075 Westheimer, Suite 890, Houston, Texas  77056
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	None.
	 
	 	 	 	 
	J.
	 	Jurisdiction(s) for Filing	 	 
	 
	 	Financing Statements:	 	Delaware
	 
	 	 	 	 
	 
	 	Fixture filings in the relevant counties	 	 
	 
	 	in which the properties are located:	 	N/A.

Schedule 10.3 - Page 11 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
LP, LLC, a Delaware limited liability company, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: NONE.
	 
	B.	 	Pledged Shares: NONE.
	 
	C.	 	Partnership/Limited Liability Company Interests:
	 
	 	 	100% of the limited partnership interest in Allis-Chalmers Management, LP, a Texas limited
partnership
	 
	D.	 	Agreements:
	 
	 	 	Agreement of Limited Partnership of Allis-Chalmers Management, LP dated December 28, 2005.
	 
	E.	 	Commercial Tort Claims: NONE.
	 
	F.	 	Deposit Accounts (including name of bank address and account number): NONE.

Schedule 10.3 - Page 12 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
LP, LLC, a Delaware limited liability company, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. NONE.
	 
	2.	 	Issued Patents and Patent Applications. NONE.
	 
	3.	 	Registered Trademarks and Trademark Applications. NONE.

Schedule 10.3 - Page 13 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
LP, LLC, a Delaware limited liability company, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

NONE.

Schedule 10.3 - Page 14 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Management, LP, a Delaware limited partnership, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	Allis-Chalmers Management, LP
	 
	 	 	 	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	 	 	 	 
	C.
	 	Type of Entity:	 	limited partnership
	 
	 	 	 	 
	D.
	 	Jurisdiction of Organization:	 	Texas
	 
	 	 	 	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	800591175
	 
	 	 	 	 
	F.
	 	Tax ID Number:	 	20-4002561
	 
	 	 	 	 
	G.
	 	Location of Books and Records:	 	5075 Westheimer, Suite 890, Houston, TX  77056
	 
	 	 	 	 
	H.
	 	Location of Collateral:	 	5075 Westheimer, Suite 890, Houston, TX  77056
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	None.
	 
	 	 	 	 
	J.
	 	Jurisdiction(s) for Filing Financing	 	 
	 
	 	Statements:	 	Texas
	 
	 	 	 	 
	 
	 	Fixture filings in the relevant counties	 	 
	 
	 	in which the properties are located:	 	None.

Schedule 10.3 - Page 15 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Management, LP, a Delaware limited partnership, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: NONE.
	 
	B.	 	Pledged Shares: NONE.
	 
	C.	 	Partnership/Limited Liability Company Interests: NONE.
	 
	D.	 	Agreements: NONE.
	 
	E.	 	Commercial Tort Claims: NONE.
	 
	F.	 	Deposit Accounts (including name of bank address and account number).

	 	 	 	 	 	 	 
	 
	 	Depositor’s Name	 	Depository Bank	 	Account No.
	 
	 	 	 	 	 	 
	 
	 	Allis-Chalmers Management, LP	 	Wells Fargo Bank, National	 	4121243190
	 
	 	 	 	Association	 	 
	 
	 	 	 	1000 Louisiana Street	 	 
	 
	 	 	 	9th Floor	 	 
	 
	 	 	 	Houston, Texas  77002	 	 

Schedule 10.3 - Page 16 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Management, LP, a Delaware limited partnership, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. NONE.
	 
	2.	 	Issued Patents and Patent Applications. NONE.
	 
	3.	 	Registered Trademarks and Trademark Applications. NONE.

Schedule 10.3 - Page 17 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Management, LP, a Delaware limited partnership, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

None.

Schedule 10.3 - Page 18 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Production Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	Allis-Chalmers Production Services, Inc.
	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	C.
	 	Type of Entity:	 	corporation
	 
	D.
	 	Jurisdiction of Organization:	 	Texas
	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	800000213
	 
	F.
	 	Tax ID Number:	 	75-2956148
	 
	G.
	 	Location of Books and Records:	 	301 Cargill Road
	 
	 	 	 	Kilgore, Texas  75662
	 
	H.
	 	Location of Collateral:	 	301 Cargill Road
	 
	 	 	 	Kilgore, Texas 75663
	 
	 	 	 	 
	 
	 	 	 	6997 Highway 42 North
	 
	 	 	 	Suite 4D
	 
	 	 	 	Kilgore, Texas  75662
	 
	 	 	 	 
	 
	 	 	 	1800 South Midkiff
	 
	 	 	 	Midland, Texas 79706
	 
	 	 	 	 
	 
	 	 	 	1110 CR 202
	 
	 	 	 	Carthage, Texas 75663
	 
	 	 	 	 
	 
	 	 	 	1112 FM 517
	 
	 	 	 	Alvin, Texas  77512
	 
	 	 	 	 
	 
	 	 	 	322 Omaha
	 
	 	 	 	Corpus Christi, TX  78408
	 
	 	 	 	 
	 
	 	 	 	5997 Hwy. 80
	 
	 	 	 	Arcadia, Louisiana  71001
	 
	 	 	 	 
	 
	 	 	 	1933 Hwy. 89
	 
	 	 	 	Broussard, Louisiana  70518
	 
	 	 	 	 
	 
	 	 	 	RR2 Box 27
	 
	 	 	 	Cordell, Oklahoma  73632
	 
	 	 	 	 
	 
	 	 	 	2134 Bayou Blue Rd.

Schedule 10.3 - Page 19 

 

	 	 	 	 	 
	 
	 	 	 	Houma, Louisiana  70364
	 
	 	 	 	 
	 
	 	 	 	Debtor has one capillary unit located in Mexico and
	 
	 	 	 	one capillary unit in the UAE, Sharjah.
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	1933 Hwy. 89
	 
	 	 	 	Broussard, Louisiana  70518
	 
	 	 	 	 
	J.
	 	Jurisdiction(s) for Filing	 	 
	 
	 	 	 	 
	 
	 	Financing Statements:	 	Texas
	 
	 	 	 	 
	 	 	Fixture filings in the relevant counties in which the properties are located: None.

Schedule 10.3 - Page 20 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Production Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: None.
	 
	B.	 	Pledged Shares:
	 
	 	 	 100 shares of the common stock of Petro-Rentals, Incorporated
	 
	C.	 	Partnership/Limited Liability Company Interests: None.
	 
	D.	 	Agreements: None.
	 
	E.	 	Commercial Tort Claims: None.
	 
	F.	 	Deposit Accounts (including name of bank address and account number).
	 
	 	 	Allis-Chalmers Production Systems, Inc.                 Wells Fargo                
4121095426
Previously Downhole Injection Systems account

Schedule 10.3 - Page 21 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Production Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. None.
	 
	2.	 	Issued Patents and Patent Applications. None.
	 
	3.	 	Registered Trademarks and Trademark Applications. None.

Schedule 10.3 - Page 22 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Production Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

NONE

Schedule 10.3 - Page 23 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by
Allis-Chalmers Rental Services, Inc., a Texas corporation, for the benefit of Royal Bank of
Canada, as administrative agent and collateral agent for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	Allis-Chalmers Rental Services, Inc.
	 
	 	 	 	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	 	 	 	 
	C.
	 	Type of Entity:	 	corporation
	 
	 	 	 	 
	D.
	 	Jurisdiction of Organization:	 	Texas
	 
	 	 	 	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	46281400
	 
	 	 	 	 
	F.
	 	Tax ID Number:	 	74-2005637
	 
	 	 	 	 
	G.
	 	Location of Books and Records:	 	21131 Hardy
	 
	 	 	 	Houston, Texas  77073
	 
	 	 	 	 
	H.
	 	Location of Collateral:	 	16740 Hardy Road
	 
	 	 	 	Houston, Texas 77037
	 
	 	 	 	 
	 
	 	 	 	1235 Evangelene Throughway
	 
	 	 	 	Broussard, Louisiana 70518
	 
	 	 	 	 
	 
	 	 	 	1401 Westgate Road
	 
	 	 	 	Highway 93
	 
	 	 	 	Lafayette, Louisiana 7050-1821
	 
	 	 	 	 
	 
	 	 	 	208 Bon Crest Avenue
	 
	 	 	 	Broussard, Louisiana 70518
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	N/A
	 
	 	 	 	 
	J.
	 	Jurisdiction(s) for Filing	 	 
	 
	 	Financing Statements:	 	Texas.
	 
	 	 	 	 
	 	 	Fixture filings in the relevant counties in which the properties are located: None.

Schedule 10.3 - Page 24 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Rental Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: None.
	 
	B.	 	Pledged Shares: None.
	 
	C.	 	Partnership/Limited Liability Company Interests: None.
	 
	D.	 	Agreements: None.
	 
	E.	 	Commercial Tort Claims: None.
	 
	F.	 	Deposit Accounts (including name of bank address and account number).
	 
	 	 	Allis-Chalmers Rental Services, Inc.           Wells Fargo                 529962680
	 
	 	 	Allis-Chalmers Rental Services, Inc.            Wells Fargo                 4121126528
(former Delta Rentals
account)

Schedule 10.3 - Page 25 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Rental Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. None.
	 
	2.	 	Issued Patents and Patent Applications. None.
	 
	3.	 	Registered Trademarks and Trademark Applications. None.

Schedule 10.3 - Page 26 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Rental Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

NONE.

Schedule 10.3 - Page 27 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Tubular Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	Allis-Chalmers Tubular Service, Inc.
	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	C.
	 	Type of Entity:	 	corporation
	 
	D.
	 	Jurisdiction of Organization:	 	Texas
	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	588803300
	 
	 	 	 	 
	F.
	 	Tax ID Number:	 	74-2212869
	 
	G.
	 	Location of Books and Records:	 	212 Flat road
	 
	 	 	 	Corpus Christi, Texas  78405
	 
	H.
	 	Location of Collateral:	 	5205 West University Drive
	 
	 	 	 	Edinburg, Texas 78540
	 
	 	 	 	 
	 
	 	 	 	1907 Hwy. 182
	 
	 	 	 	Houma, Louisiana  70364
	 
	 	 	 	 
	 
	 	 	 	2 Mile North Highway 81
	 
	 	 	 	Pearsall, Texas 78061
	 
	 	 	 	 
	 
	 	 	 	212 Flat Road
	 
	 	 	 	Corpus Christi, Texas  78405
	 
	 	 	 	 
	 
	 	 	 	1530 St. Etienne Road
	 
	 	 	 	Broussard, Louisiana 70518
	 
	 	 	 	 
	 
	 	 	 	3000 Hwy. 42 North
	 
	 	 	 	Kilgore, Texas  75663
	 
	 	 	 	 
	 
	 	 	 	In addition, Debtor has approximately $15M of fair
	 
	 	 	 	market value equipment located in Mexico under lease
	 
	 	 	 	to Maytep.
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	5205 West University Drive
	 
	 	 	 	Edinburg, Texas  78540
	 
	 	 	 	 
	J.
	 	Jurisdiction(s) for Filing	 	 
	 
	 	Financing Statements:	 	Texas
	 
	 	 	 	 
	 	 	Fixture filings in the relevant counties in which the properties are located: Hidalgo County, TX.

Schedule 10.3 - Page 28 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Tubular Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: None.
	 
	B.	 	Pledged Shares: None.
	 
	C.	 	Partnership/Limited Liability Company Interests: None.
	 
	D.	 	Agreements: Maytep Lease Agreement.
	 
	E.	 	Commercial Tort Claims: None.
	 
	F.	 	Deposit Accounts (including name of bank address and account number).
	 
	 	 	Allis-Chalmers Tubular Services, Inc.            Wells Fargo            
          4171374481
	 
	 	 	Allis-Chalmers Tubular Services, Inc.            Bank One, n/k/a                7001412195
	 
	 	 	(former Rogers Oil Tool Services,                   JPMorgan Chase Bank, N.A.
	 
	 	 	Inc. account)

Schedule 10.3 - Page 29 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Tubular Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. None.
	 
	2.	 	Issued Patents and Patent Applications. None.
	 
	3.	 	Registered Trademarks and Trademark Applications. None.

Schedule 10.3 - Page 30 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Allis-Chalmers
Tubular Services, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

	 	1.	 	Lease Agreement between Jens’ Oil Field Service, Inc. and Materiales y Equipo Petroleo,
S.A. de C.V.

Schedule 10.3 - Page 31 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Mountain
Compressed Air, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	Mountain Compressed Air, Inc.
	 
	 	 	 	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	 	 	 	 
	C.
	 	Type of Entity:	 	corporation
	 
	 	 	 	 
	D.
	 	Jurisdiction of Organization:	 	Texas
	 
	 	 	 	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	161385000
	 
	 	 	 	 
	F.
	 	Tax ID Number:	 	51-0006522
	 
	 	 	 	 
	G.
	 	Location of Books and Records:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	 	 	 	 
	H.
	 	Location of Collateral:	 	N/A
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	N/A
	 
	 	 	 	 
	J.
	 	Jurisdiction(s) for Filing	 	 
	 
	 	Financing Statements:	 	Texas
	 
	 	 	 	 
	 	 	Fixture filings in the relevant counties in which the properties are located: None.

Schedule 10.3 - Page 32 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Mountain
Compressed Air, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: None.
	 
	B.	 	Pledged Shares: None.
	 
	C.	 	Partnership/Limited Liability Company Interests: Owns 100% of AirComp limited liability
company interests.
	 
	D.	 	Agreements: None
	 
	E.	 	Commercial Tort Claims: None.
	 
	F.	 	Deposit Accounts (including name of bank address and account number). None.

Schedule 10.3 - Page 33 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Mountain
Compressed Air, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. None.
	 
	2.	 	Issued Patents and Patent Applications. None.
	 
	3.	 	Registered Trademarks and Trademark Applications. None.

Schedule 10.3 - Page 34 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Mountain
Compressed Air, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

	1.	 	Business Venture Agreement dated June 27, 2003 by and between Mountain Compressed Air,
Inc. and M-I L.L.C.

Schedule 10.3 - Page 35 

 

Pledge and Security Agreement, dated as of April 26, 2007, by Petro-Rentals, Inc., a Louisiana
corporation, for the benefit of Royal Bank of Canada, as administrative agent and collateral agent
for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	Petro-Rentals, Incorporated
	 
	 	 	 	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	 	 	 	 
	C.
	 	Type of Entity:	 	corporation
	 
	 	 	 	 
	D.
	 	Jurisdiction of Organization:	 	Louisiana
	 
	 	 	 	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	0009787906
	 
	 	 	 	 
	F.
	 	Tax ID Number:	 	72-1121087
	 
	 	 	 	 
	G.
	 	Location of Books and Records:	 	5075 Westheimer, Suite 890, Houston, TX  77056
	 
	 	 	 	 
	H.
	 	Location of Collateral:	 	1112 FM 517
	 
	 	 	 	Alvin, Texas  77512
	 
	 	 	 	 
	 
	 	 	 	1933 Hwy. 89
	 
	 	 	 	Broussard, Louisiana  70518
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	None
	 
	 	 	 	 
	J.
	 	Jurisdiction(s) for Filing	 	 
	 
	 	Financing Statements:	 	Louisiana.
	 
	 	 	 	 
	 
	 	Fixture filings in the relevant counties	 	 
	 
	 	in which the properties are located:	 	None

Schedule 10.3 - Page 36 

 

Pledge and Security Agreement, dated as of April 26, 2007, by Petro-Rentals, Inc., a Louisiana
corporation, for the benefit of Royal Bank of Canada, as administrative agent and collateral agent
for the lenders named thereto.

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: None.
	 
	B.	 	Pledged Shares: None.
	 
	C.	 	Partnership/Limited Liability Company Interests: None
	 
	D.	 	Agreements: None.
	 
	E.	 	Commercial Tort Claims: None.
	 
	F.	 	Deposit Accounts (including name of bank address and account number).
	 
	 	 	Depositor’s Name                          Depository
Bank            Account No.
	 
	 	 	Petro-Rentals, Incorporated                               
                               

Schedule 10.3 - Page 37 

 

Pledge and Security Agreement, dated as of April 26, 2007, by Petro-Rentals, Inc., a Louisiana
corporation, for the benefit of Royal Bank of Canada, as administrative agent and collateral agent
for the lenders named thereto.

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. None.
	 
	2.	 	Issued Patents and Patent Applications. None.
	 
	3.	 	Registered Trademarks and Trademark Applications. None.

Schedule 10.3 - Page 38 

 

Pledge and Security Agreement, dated as of April 26, 2007, by Petro-Rentals, Inc., a Louisiana
corporation, for the benefit of Royal Bank of Canada, as administrative agent and collateral agent
for the lenders named thereto.

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

NONE

Schedule 10.3 - Page 39 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by OilQuip Rentals,
Inc., a Delaware corporation, for the benefit of Royal Bank of Canada, as administrative agent and
collateral agent for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	Oilquip Rentals Inc.
	 
	 	 	 	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	 	 	 	 
	C.
	 	Type of Entity:	 	corporation
	 
	 	 	 	 
	D.
	 	Jurisdiction of Organization:	 	Delaware
	 
	 	 	 	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	3170954
	 
	 	 	 	 
	F.
	 	Tax ID Number:	 	76-0632145
	 
	 	 	 	 
	G.
	 	Location of Books and Records:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	 	 	 	 
	H.
	 	Location of Collateral:	 	N/A
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	N/A
	 
	 	 	 	 
	J.
	 	Jurisdiction(s) for Filing	 	 
	 
	 	Financing Statements:	 	Delaware.
	 
	 	 	 	 
	 	 	Fixture filings in the relevant counties in which the properties are located: None.

Schedule 10.3 - Page 40 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by OilQuip Rentals,
Inc., a Delaware corporation, for the benefit of Royal Bank of Canada, as administrative agent and
collateral agent for the lenders named thereto.

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: None.
	 
	B.	 	Pledged Shares:
	 
	 	 	OilQuip owns 8,030,000 shares of common stock of Mountain Compressed Air, Inc. (“MCA”).
There is a warrant issued to Houlihan, Lokey, Howard & Zukin Inc. for 620,000 shares of
common stock of MCA at a purchase price of $.01 per share.
	 
	C.	 	Partnership/Limited Liability Company Interests: None.
	 
	D.	 	Agreements: None.
	 
	E.	 	Commercial Tort Claims: None.
	 
	F.	 	Deposit Accounts (including name of bank address and account number).
	 
	 	 	None.

Schedule 10.3 - Page 41 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by OilQuip Rentals,
Inc., a Delaware corporation, for the benefit of Royal Bank of Canada, as administrative agent and
collateral agent for the lenders named thereto.

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. None
	 
	2.	 	Issued Patents and Patent Applications. None.
	 
	3.	 	Registered Trademarks and Trademark Applications. None.

Schedule 10.3 - Page 42 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by OilQuip Rentals,
Inc., a Delaware corporation, for the benefit of Royal Bank of Canada, as administrative agent and
collateral agent for the lenders named thereto.

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

NONE

Schedule 10.3 - Page 43 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Strata
Directional Technology, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX A TO SECURITY AGREEMENT

DEBTOR INFORMATION AND LOCATION OF COLLATERAL

	 	 	 	 	 
	A.
	 	Exact Legal Name of Debtor:	 	Strata Directional Technology, Inc.
	 
	B.
	 	Mailing Address of Debtor:	 	5075 Westheimer
	 
	 	 	 	Suite 890
	 
	 	 	 	Houston, Texas  77056
	 
	C.
	 	Type of Entity:	 	corporation
	 
	D.
	 	Jurisdiction of Organization:	 	Texas
	 
	E.
	 	State Issued Organizational	 	 
	 
	 	Identification Number:	 	138384700
	 
	 	 	 	 
	F.
	 	Tax ID Number:	 	76-0490913
	 
	G.
	 	Location of Books and Records:	 	1034 Regional Park Drive
	 
	 	 	 	Houston, Texas 77060
	 
	H.
	 	Location of Collateral:	 	1034 Regional Park Drive
	 
	 	 	 	Houston, Texas 77060
	 
	 	 	 	 
	 
	 	 	 	1125 Regional Park Drive
	 
	 	 	 	Houston, Texas  77060
	 
	 	 	 	 
	 
	 	 	 	100 Asma Blvd.
	 
	 	 	 	Suite 203
	 
	 	 	 	Lafayette, Louisiana  70508
	 
	 	 	 	 
	 
	 	 	 	500 N. Water St.
	 
	 	 	 	South Tower , Suite 404
	 
	 	 	 	Corpus Christi, Texas
	 
	 	 	 	 
	 
	 	 	 	8601 N.W. Expressway
	 
	 	 	 	Suite 714W
	 
	 	 	 	Oklahoma City. Oklahoma  73112
	 
	 	 	 	 
	I.
	 	Location of Real Property:	 	None.
	 
	J.
	 	Jurisdiction(s) for Filing	 	 
	 
	 	Financing Statements: 	 	Texas
	 
	 	 	 	 
	 	 	Fixture filings in the relevant counties in which the properties are located: None.

Schedule 10.3 - Page 44 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Strata
Directional Technology, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

	A.	 	Collateral Notes and Collateral Note Security: None.
	 
	B.	 	Pledged Shares: None.
	 
	C.	 	Partnership/Limited Liability Company Interests: None.
	 
	D.	 	Agreements: None
	 
	E.	 	Commercial Tort Claims: None.
	 
	F.	 	Deposit Accounts (including name of bank address and account number).
	 
	 	 	Strata Wells                Fargo                 4588527473

Schedule 10.3 - Page 45 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Strata
Directional Technology, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX B-2 TO SECURITY AGREEMENT

INTELLECTUAL PROPERTY

	1.	 	Registered Copyrights and Copyright Applications. None.
	 
	2.	 	Issued Patents and Patent Applications. None.
	 
	3.	 	Registered Trademarks and Trademark Applications. None.

Schedule 10.3 - Page 46 

 

Amended and Restated Pledge and Security Agreement, dated as of April 26, 2007, by Strata
Directional Technology, Inc., a Texas corporation, for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named thereto.

ANNEX E TO SECURITY AGREEMENT

MATERIAL AGREEMENTS

NONE.

Schedule 10.3 - Page 47exv10w1

 

Exhibit 10.1

EMPLOYMENT
AND NONCOMPETITION AGREEMENT

     THIS AGREEMENT is made and effective this 1st day of January, 2004 between SCI Executive
Services, Inc., a Delaware corporation (the “Company”), and James M. Shelger (the “Employee”):

ARTICLE I

EMPLOYMENT

     1.1 Employment Term. The Company agrees to employ the Employee and the Employee agrees to
accept such employment, in accordance with the terms and conditions of this Agreement, for the
period beginning on the date of this Agreement and ending as of the close of business on December
31, 2004 (such period together with all extensions thereof are referred to hereinafter as the
“Employment Term”); provided, however, that commencing on January 1, 2005, and on each January 1
thereafter (each such date shall be hereinafter referred to as a “Renewal Date”), the Employment
Term shall be extended so as to terminate one year from such Renewal Date if (i) the Company
notifies the Employee in writing of such extension at least thirty days prior to such Renewal Date
and (ii) the Employee has not previously given the Company written notice that the Employment Term
shall not be so extended. In the event that the Company gives the Employee written notice at any
time of its intention not to renew the Employment Term, then the Employment Term shall terminate on
December 31 of the year in which such notice of non-renewal is given and shall not thereafter be
further extended. If the Company fails to notify the Employee at least thirty days prior to a
Renewal Date either of its intention to extend the Employment Term as provided above or its
intention not to so extend the Employment Term, then the Employment Term shall not be extended and
shall terminate as of the day prior to such Renewal Date.

     1.2 Duties. The Employee shall serve the Company in an executive or managerial capacity and
shall hold such title as may be authorized from time to time by the Board of Directors of Service
Corporation International (“SCI”). The Employee shall have the duties, powers and authority
consistent therewith and such other powers as are delegated to him in writing from time to time by
the Board of Directors of SCI. If the Employee is elected to any office or other position with the
Company during the term of this Agreement, the Employee will serve in such capacity or capacities
without further compensation unless the Compensation Committee (the “Compensation Committee”) of
the Board of Directors of SCI authorizes additional compensation. The Employee’s title and duties
may be changed from time to time at the discretion of the Company. The Employee also agrees to
perform, without additional compensation, such other services for the Company and for any
subsidiary or affiliated corporations of the Company or for any partnerships in which the Company
has an interest, as the Company shall from time to time specify. The term “Company” as used
hereinafter shall be deemed to include and refer to subsidiaries and affiliated corporations and
partnerships. Employee agrees and acknowledges that he owes, and will comply with, a fiduciary duty
of loyalty, fidelity and allegiance to act at all times in the best interests of the Company and to
take no action or fail to take action if such action or failure to act would injure the Company’s
business, its interests or its reputation.

     1.3 Extent of Service. During the Employment Term, the Employee shall devote his full time,
attention and energy to the business of the Company, and, except as may be specifically permitted
by the Company, shall not be engaged in any other business activity during the term of this
Agreement. The foregoing shall not be construed as preventing the Employee from making

 

 

passive investments in other businesses or enterprises, provided, however, that such investments
will not: (1) require services on the part of the Employee which would in any way impair the
performance of his duties under this Agreement, or (2) in any manner significantly interfere with
Employee’s responsibilities as an Employee of the Company in accordance with this Agreement.

     1.4 Compensation

          (a) Salary. The Company shall pay to the Employee a salary at the rate in effect for Employee
at the date of this Agreement. Such salary is to be payable in installments in accordance with the
payroll policies of the Company in effect from time to time during the term of this Agreement. The
Company may (but is not required to) make such upward adjustments to the Employee’s salary as it
deems appropriate from time to time.

          (b) Incentive Compensation. In addition to the above salary, the Employee shall be eligible
annually for incentive compensation at the discretion of the Compensation Committee.

          (c) Other Benefits. The Employee shall be reimbursed in accordance with the Company’s normal
expense reimbursement policy for all of the actual and reasonable costs and expenses accrued by
Employee in the performance of his or her services and duties hereunder, including but not limited
to, travel and entertainment expenses. The Employee shall be entitled to participate in all
insurance, stock options, retirement plans and other benefit plans or programs as may be from time
to time specifically adopted and approved by the Company for its employees, in accordance with the
eligibility requirements and any other terms and conditions of such plans. It is understood and
agreed between the parties hereto that the Company reserves the right, at its sole discretion, to
modify, amend or terminate such plans, programs or benefits at any time.

     1.5 Termination

          (a) Death. If the Employee dies during the term of this Agreement and while in the employ of
the Company, this Agreement shall automatically terminate and the Company shall have no further
obligation to the Employee or his estate except that (i) the Company shall continue to pay the
Employee’s estate the Employee’s salary in installments through the end of the Employment Term
which was in effect immediately prior to Employee’s death, and (ii) the Company shall pay the
Employee’s estate any applicable Pro Rated Bonus (defined hereinbelow).

          (b) Disability. If during the term of this Agreement, the Employee shall be prevented from
performing his duties hereunder by reason of disability, then the Company, on 30 days’ prior notice
to the Employee, may terminate Employee’s employment under this Agreement. For purposes of this
Agreement, the Employee shall be deemed to have become disabled when the Company, upon the advice
of a qualified physician, shall have determined that the Employee has become physically or mentally
incapable (excluding infrequent and temporary absences due to ordinary illness) of performing his
duties under this Agreement. In the event of a termination pursuant to this paragraph 1.5(b), the
Company shall be relieved of all of its obligations under this Agreement, except that the Company
shall pay to the Employee (or his estate, in the event of his subsequent death), (i) the Employee’s
salary in installments through the end of the Employment Term which was in effect immediately prior
to Employee’s disability, and (ii) any applicable Pro Rated Bonus. Before making any termination
decision pursuant to this Section 1.5(b), the Company shall determine whether there is any
reasonable accommodation (within the meaning of the Americans With Disabilities Act) which would
enable the Employee to perform

2

 

the essential functions of the Employee’s position under this Agreement despite the existence of
any such disability. If such a reasonable accommodation is possible, the Company shall make that
accommodation and shall not terminate the Employee’s employment hereunder during the Employment
Term based on such disability.

          (c) Certain Discharges. Prior to the end of the Employment Term, the Company may discharge the
Employee for Cause and terminate Employee’s employment hereunder without notice and without any
further liability hereunder to Employee or his estate. For purposes of this Agreement, “Cause”
shall mean a determination by the Company that Employee: (i) has been convicted of a crime
involving moral turpitude; (ii) has regularly failed or refused to follow policies or directives
established by the Company or the Board of Directors of SCI; (iii) has willfully and persistently
failed to attend to his duties; (iv) has committed acts amounting to gross negligence or willful
misconduct to the detriment of the Company or its affiliates; (v) has violated any of his
obligations under Articles II or III of this Agreement; or (vi) has otherwise breached any of the
terms or provisions of this Agreement.

          (d) Without Cause. Prior to the end of the Employment Term, the employment of the Employee
with the Company may be terminated by the Company other than for Cause, death or disability. If
such event occurs prior to a Change of Control (defined hereinbelow), the Company shall have no
further obligation to Employee or his estate except that the Company shall pay or provide to the
Employee (or his estate, in the event of his subsequent death), (i) the Employee’s salary as in
effect immediately prior to Employee’s termination in installments for a period ending two years
from such date of termination, provided that the Company at its sole option may prepay all or any
portion of such payments at any time, (ii) any applicable Pro Rated Bonus and (iii) continuation of
Employee’s Group Health and Dental coverage and Exec-U-Care program (including pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1986 (“Cobra”) to the extent applicable) for a
period of twenty-four months beginning the month following such date of termination, with Employee
paying such amount of premiums as would have been applicable if Employee had remained an employee
of the Company.

          (e) Voluntary Termination by Employee. If during the term of this Agreement, the Employee
voluntarily terminates his employment with the Company prior to any Change of Control, the Company
shall be relieved of all of its obligations under this Agreement, except that the Company shall pay
the Employee (or his estate, in the event of his subsequent death) (i) the Employee’s salary
through the date of Employee’s termination, and (ii) any incentive compensation under Section
1.4(b) determined by the Compensation Committee for any fiscal period ended prior to the date of
Employee’s termination which had not been paid at the time of his termination. All such payments to
the Employee or his estate shall be made in the same manner and at the same times as the Employee’s
salary or incentive compensation would have been paid to the Employee had he not terminated his
employment.

          (f) Change of Control. If (i) a Change of Control occurs during the Employment Term and (ii)
within twenty four months after such Change of Control the Employee’s employment is (x) terminated
by the Company other than for Cause, death or disability, or (y) terminated by Employee after an
occurrence of any Good Reason (except under circumstances which would be grounds for termination of
Employee by the Company for Cause), then the Company shall be relieved of all of its obligations
under this Agreement, except that the Company shall pay or provide the Employee (or his estate, in
the event of his subsequent death) the following amounts:

3

 

     (1) Three, multiplied by the sum of Employee’s most recently set Target Bonus plus his
annual salary in effect immediately prior to the Change of Control, which amount will be paid in a
lump sum in cash within 30 days after the Employee’s date of termination; and

     (2) Partial Bonus, to be paid within 30 days after the Employee’s date of termination;
and

     (3) Continuation of Employee’s Group Health and Dental coverage and Exec-U-Care program
(including pursuant to COBRA to the extent applicable) for a period of thirty-six months beginning
the month following such date of termination, with Employee paying such amount of premiums as would have been applicable if Employee had remained an employee of the Company.

     In addition, Company shall pay to Employee an amount that, on an after-tax basis (including
federal income, employment, excise and social security taxes, state and local income and employment
taxes, and any other applicable taxes), equals any excise tax that is determined to be payable by
Employee pursuant to Section 4999 (or any successor provision) of the Internal Revenue Code of
1986, as amended (and any interest or penalties related to the imposition of such excise tax) at
any time, by reason of both entitlements under this Agreement (including any and all payments under
this Section 1.5(f)) and entitlements outside of this Agreement that are described in Section
280G(b)(2)(A)(i) of the Code (or any successor provision) with reference to Company. For purposes
of this paragraph, Employee shall be deemed to pay federal, state and local income taxes at the
highest marginal rate of taxation. Such amount will be made payable by Company or its successor
within thirty (30) days after Employee delivers a written request for reimbursement accompanied by
a statement from a nationally recognized legal, consulting or accounting firm as may be agreed to
by the parties setting forth the amount owed pursuant to this paragraph. Company shall pay all fees
and costs incurred by Employee related to the preparation, delivery and resolution of such written
request for reimbursement.

     The obligations of the Company under this Section 1.5(f) shall remain in effect for
twenty-four months after any Change of Control that occurs during the Employment Term
notwithstanding the fact that such twenty four month period may extend beyond the expiration of the
Employment Term.

     (g) Post Employment Term Matters. In the event the Employment Term terminates because it is
not extended or renewed pursuant to Section 1.1, then the Company shall be relieved of all of its
obligations under this Agreement and Employee will thereafter be an employee “at will” of the
Company.

ARTICLE II

INFORMATION

     2.1 Nondisclosure of Information. The Employee acknowledges that in the course of his
employment by the Company he will receive certain trade secrets, which may include, but are not
limited to, programs, lists of acquisition or disposition prospects and knowledge of acquisition
strategy, financial information and reports, lists of customers or potential customers and other
confidential information and knowledge concerning the business of the Company (hereinafter
collectively referred to as “Information”) which the Company desires to protect. The Employee
understands that the Information is confidential and agrees not to reveal the Information to anyone
outside the Company so long as the confidential or secret nature of the

4

 

Information shall continue, unless compelled to do so by any federal or state regulatory agency or
by a court order. If Employee becomes aware that disclosure of any Information is being sought by
such an agency or through a court order, Employee will immediately notify the Company. The Employee
further agrees that he will at no time use the Information in competing with the Company. Upon
termination of Employee’s employment with the Company, the Employee shall surrender to the Company
all papers, documents, writings and other property produced by him or coming into his possession by
or through his employment or relating to the Information, and the Employee agrees that all such
materials are and will at all times remain the property of the Company and to the extent the
Employee has any rights therein, he hereby irrevocably assigns such rights to the Company.

     2.2 Disclosure of Information, Ideas, Concepts, Improvements, Discoveries and Inventions. As
part of the Employee’s fiduciary duties to the Company, Employee agrees that during his employment
by the Company, and for a period of six months after the termination of the employment relationship
for any reason, Employee shall promptly disclose in writing to the Company all information, ideas,
concepts, improvements, discoveries and inventions, whether patentable or not, and whether or not
reduced to practice, which are conceived, developed, made or acquired by Employee, either
individually or jointly with others, and which relate to the business, products or services of the
Company or any of its subsidiaries or affiliates, irrespective of whether Employee utilized the
Company’s time or facilities and irrespective of whether such information, idea, concept,
improvement, discovery or invention was conceived, developed, discovered or acquired by the
Employee on the job, at home, or elsewhere. This obligation extends to all types of information,
ideas and concepts, including information, ideas and concepts relating to new types of services,
corporate opportunities, acquisition prospects, the identity of key representatives within
acquisition prospect organizations, prospective names or service marks for the Company’s business
activities, and the like.

     2.3 Ownership of Information, Ideas, Concepts, Improvements, Discoveries and Inventions and
All Original Works of Authorship.

          (a) All information, ideas, concepts, improvements, discoveries and inventions, whether
patentable or not, which are conceived, made, developed or acquired by Employee or which are
disclosed or made known to Employee, individually or in conjunction with others, during Employee’s
employment by the Company and which relate to the Company’s business, products or services
(including but not limited to all such information relating to corporate opportunities, research,
financial and sales data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the identity of key
contacts within the customer’s organization or within the organization of acquisition prospects, or
marketing and merchandising techniques, prospective names and marks), are and shall be the sole and
exclusive property of the Company. Moreover, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts, improvements, discoveries
and inventions are and shall be the sole and exclusive property of the Company.

          (b) In particular, Employee hereby specifically sells, assigns and transfers to the Company
all of his worldwide right, title and interest in and to all such information, ideas, concepts,
improvements, discoveries or inventions described in Section 2.3 (a) above, and any United States
or foreign applications for patents, inventor’s certificates or other industrial rights that may be
filed thereon, including divisions, continuations, continuations-in-part, reissues

5

 

and/or extensions thereof, and applications for registration of such names and marks. Both during
the period of Employee’s employment by the Company and thereafter, Employee shall assist the
Company and its nominees at all times in the protection of such information, ideas, concepts,
improvements, discoveries or inventions both in the United States and all foreign countries,
including but not limited to the execution of all lawful oaths and all assignment documents
requested by the Company or its nominee in connection with the preparation, prosecution, issuance
or enforcement of any applications for United States or foreign letters patent, including
divisions, continuations, continuations-in-part, reissues, and/or extensions thereof, and any
application for the registration of such names and marks.

          (c) Moreover, if during Employee’s employment by the Company, Employee creates any original
work of authorship fixed in any tangible medium of expression which is the subject matter of
copyright (such as videotapes, written presentations on acquisitions, computer programs, drawing,
maps, architectural renditions, models, manuals, brochures or the like) relating to the Company’s
business, products, or services, whether such work is created solely by Employee or jointly with
others, the Company shall be deemed the author of such work if the work is prepared by Employee in
the scope of his or her employment; or, if the work is not prepared by Employee within the scope of
his or her employment but is specially ordered by Company as a contribution to a collective work,
as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work,
as a compilation or as an instructional text, then the work shall be considered to be work made for
hire and the Company shall be considered the author of the work. In the event such work is neither
prepared by the Employee within the scope of his or her employment or is not a work specially
ordered and deemed to be a work made for hire, then Employee hereby agrees to assign, and by these
presents, does assign, to the Company all of Employee’s worldwide right, title and interest in and
to the work and all rights of copyright therein. Both during the period of Employee’s employment by
the Company and thereafter, Employee agrees to assist the Company and its nominee, at any time, in
protection of the Company’s worldwide right, title and interest in and to the work and all rights
of copyright therein, including but not limited to, the execution of all formal assignment
documents requested by the Company or its nominees and the execution of all lawful oaths and
applications for registration of copyright in the United States and foreign countries.

ARTICLE III

NONCOMPETITION

     3.1 Noncompetition. During the Employment Term (and for a period of one or two years
thereafter if the Company exercises its options under Section 3.2 hereof), Employee shall not,
acting alone or in conjunction with others, directly or indirectly, in any market in which the
Company or any of its affiliated companies conducts business, work for or engage in any business in
competition with the business conducted by the Company or any of its affiliated companies, whether
for his own account or by soliciting, canvassing or accepting any business or transaction for or
from any other company or business in competition with such business of the Company or any of its
affiliated companies. In the event that a court should determine that any restriction herein is
unenforceable, the parties hereto agree that the obligations under this paragraph shall be
enforceable for the maximum term and maximum geographical area allowable by law.

     3.2 Extension. The Company shall have the option to extend Employee’s obligations under
Section 3.1 for one additional year (the “First Extension Term”) beyond the end of the Employment
Term. If the Company exercises such option, it shall be required to pay Employee

6

 

an amount equal to one year’s salary, based on Employee’s salary rate as of the date his employment
with the Company ceased (the “Noncompetition Payment”). Such Noncompetition Payment shall be made
in 12 equal monthly installments (each installment being an amount equal to 1/12th of such annual
salary) commencing on the date which is thirty (30) days after the last day of the Employment Term.
Subsequent payments shall be made on the same day of each succeeding month until 12 payments have
been made. If the Employee breaches his noncompetition obligations, the Company shall be entitled
to cease making such monthly payments. The purpose of this paragraph is to make the noncompetition
obligation of the Employee more reasonable from the Employee’s point of view. The amounts to be
paid by the Company are not intended to be liquidated damages or an estimate of the actual damages
that would be sustained by the Company if the Employee breaches his post-employment noncompetition
obligation. If the Employee breaches his post-employment noncompetition obligation, the Company
shall be entitled to all of its remedies at law or in equity for damages and injunctive relief. The
Company may exercise the option conferred by this paragraph at any time within 30 days after the
last day of the Employment Term by mailing written notice of such exercise to Employee.

     If the Company exercises its option to extend Employee’s obligations as set forth in the
preceding paragraph, then the Company shall have the option to extend Employee’s obligations under
Section 3.1 for one additional year (the “Second Extension Term”) beyond the end of the First
Extension Term. If the Company exercises its option to extend Employee’s obligations for the Second
Extension Term, the rights and obligations of the parties set forth in the preceding paragraph
shall be applicable during the Second Extension Term. The Company may exercise the option conferred
by this paragraph at any time within 30 days after the last day of the First Extension Term by
mailing written notice of such exercise to Employee.

     3.3 Termination For Cause or Termination By Employee. Notwithstanding anything to the contrary
in this Agreement, in the event that Employee’s employment hereunder is terminated for Cause
pursuant to Section 1.5 (c) hereof, or in the event Employee voluntarily terminates the employment
relationship for any reason other than a material breach of this Agreement by the Company, the
noncompetition obligations of Employee described in Section 3.1 above shall automatically continue
for a period of two years from the date the employment relationship ceases, and the Company shall
not be required to (i) make any payments to Employee in consideration for such obligations, or (ii)
provide any notice to Employee. Notwithstanding the foregoing this Section 3.3 shall not be
applicable in the event Employee voluntarily terminates the employment relationship for Good Reason
within twenty four months after a Change of Control that occurs during the Employment Term;
provided however, the first clause of this sentence shall be null and void if such termination
referenced therein occurs under circumstances which would be grounds for termination of Employee by
the Company for Cause.

     3.4 Obligations to Refrain From Competing Unfairly. In addition to the other obligations
agreed to by Employee in this Agreement, Employee agrees that during the Employment Term and for
five (5) year(s) thereafter, he shall not at any time, directly or indirectly for the benefit or
any other party than the Company or any of its affiliated companies, (a) induce, entice, or solicit
any employee of the Company or any of its affiliated companies to leave his employment, or (b)
contact, communicate or solicit any customer of the Company or any of its affiliated companies
derived from any customer list, customer lead, mail, printed matter or other information secured
from the Company or any of its affiliated companies or their present or past employees, or (c) in
any other manner use any customer lists or customer leads, mail, telephone numbers, printed
material or material of the Company or any of its affiliated companies relating thereto.

7

 

     3.5 Acknowledgement. Employee acknowledges that Employee’s compliance with the provisions of
this Article III is necessary to protect the existing goodwill and other proprietary rights of the
Company, as well as all goodwill and relationships that may be acquired or enhanced during the
course of Employee’s employment with the Company, and all confidential information which may come
into existence or to which Employee may have access during his employment with the Company.
Employee further acknowledges that Employee will become familiar with certain of the Company’s
affairs, operations, customers and confidential information and data by means of his employment
with the Company, and that failure to comply with the provisions of this Article III will result in
irreparable and continuing damage to the Company for which there will be no adequate remedy at law.
The Company shall be entitled to all of its remedies at law or in equity for damages and injunctive
relief in the event of any violation of this Article III by Employee.

ARTICLE IV

MISCELLANEOUS

     4.1 Notices. All notices, requests, consents and other communications under this Agreement
shall be in writing and shall be deemed to have been delivered on the date personally delivered or
on the date mailed, postage prepaid, by certified mail, return receipt requested, or telegraphed
and confirmed if addressed to the respective parties as follows:

If to the Employee:

   
            
           
            
           
           

  
            
          
           
           
              

  
            
          
           
           
              

If to the Company:

General Counsel

c/o SCI Executive Services, Inc.

1929 Allen Parkway

Houston, Texas 77019

Attention: Legal Department

     Either party hereto may designate a different address by providing written notice of such new
address to the other party hereto.

     4.2 Entire Agreement. This Agreement replaces and merges all previous agreements and
discussions relating to the same or similar subject matters between Employee and the Company (or
any of its affiliates) and constitutes the entire agreement between the Employee and the Company
(and any of its affiliates) with respect to the subject matter of this Agreement. Any existing
employment agreement between the Employee and the Company (or any of its affiliates) is hereby
terminated, effective immediately. This Agreement may not be modified in any respect by any verbal
statement, representation or agreement made by an employee, officer, or representative of the
Company or by any written agreement unless signed by an officer of the Company who is expressly
authorized by the Company to execute such document.

8

 

     4.3 Specific Performance. The Employee acknowledges that a remedy at law for any breach of
Article II or III of this Agreement will be inadequate, agrees that the Company shall be entitled
to specific performance and injunctive and other equitable relief in case of any such breach or
attempted breach, and further agrees to waive any requirement for the securing or posting of any
bond in connection with the obtaining of any such injunctive or any other equitable relief.

     4.4 Severability. Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid or unenforceable under applicable law, such provision
shall be ineffective to the extent of such prohibition, invalidity or unenforceability without
invalidating the remainder of such provision or the remaining provisions of this Agreement.

     4.5 Assignment. This Agreement may not be assigned by the Employee. Neither the Employee, his
spouse, nor his estate shall have any right to commute, encumber or dispose of any right to receive
payments hereunder, it being understood that such payments and the right thereto are nonassignable
and nontransferable. This Agreement may be assigned by the Company.

     4.6 Binding Effect. Subject to the provisions of Section 4.5 of this Agreement, this Agreement
shall be binding upon and inure to the benefit of the parties hereto, the Employee’s heirs and
personal representatives, and the successors and assigns of the Company.

     4.7 Captions. The section and paragraph headings in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this Agreement.

     4.8 Governing Law. This Agreement shall be construed and enforced in accordance with, and
governed by, the laws of Texas.

     4.9 Counterparts. This Agreement may be executed in multiple original counterparts, each of
which shall be deemed an original, but all of which together shall constitute the same instrument.

     4.10 Survival of Certain Obligations. Employee’s obligations under Articles II and III hereof
shall survive any termination of Employee’s employment hereunder.

     4.11 Waiver. The waiver by either party of any right hereunder or of any breach of this
Agreement shall not operate as or be construed to be an amendment of this Agreement or a waiver of
any future right or breach.

     4.12 Gender. All references to the masculine pronoun herein are used for convenience and ease
of reading only and are intended and apply to the feminine gender as well.

     4.13 Dispute Resolution.

     (a) Employee and the Company agree that, except for the matters identified in Section 4.13(b)
below, all disputes relating to any aspects of Employee’s employment with the Company shall be
resolved by binding arbitration. This includes, but is not limited to, any claims against the
Company, its affiliates or their officers, directors, employees, or agents for breach of
contract, wrongful discharge, discrimination, harassment, defamation, misrepresentation, and
emotional distress, as well as any disputes pertaining to the meaning or effect of this Agreement.

9

 

     (b) It is expressly agreed that this Section 4.13 shall not govern claims for workers’
compensation or unemployment benefits, or any claim by the Company against Employee which is based
on fraud, theft or other dishonest conduct of Employee.

     (c) Any claim which either party has against the other must be presented in writing by the
claiming party to the other within one year of the date the claiming party knew or should have
known of the facts giving rise to the claim. Otherwise, the claim shall be deemed waived and
forever barred even if there is a federal or state statute of limitations which would have given
more time to pursue the claim.

     (d) Each party may retain legal counsel and shall pay its own costs and attorneys’ fees,
regardless of the outcome of the arbitration. Each party shall pay one-half of the compensation to
be paid to the arbitrators, as well as one-half of any other costs relating to the administration
of the arbitration proceeding (for example, room rental, court reporter, etc.).

     (e) An arbitrator shall be selected by mutual agreement of the parties. If the parties are
unable to agree on a single arbitrator, each party shall select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The three arbitrators so selected will
then hear and decide the matter. All arbitrators must be attorneys, judges or retired judges who
are licensed to practice law in the state where the Employee is or most recently was employed by
the Company. The arbitration proceedings shall be conducted within the county in which Employee is
or most recently was employed by the Company or at another mutually agreeable location.

     (f) Except as otherwise provided herein, the arbitration proceedings shall be conducted in
accordance with the statutes, rules or regulations governing arbitration in the state in which
Employee is or most recently was employed by the Company. In the absence of such statutes, rules or
regulations, the arbitration proceedings shall be conducted in accordance with the employment
arbitration rules of the American Arbitration Association (“AAA”); provided however, that the
foregoing reference to the AAA rules shall not be deemed to require any filing with that
organization, nor any direct involvement of that organization. In the event of any inconsistency
between this Agreement and the statutes, rules or regulations to be applied pursuant to this
paragraph, the terms of this Agreement shall apply.

     (g) The arbitrator shall issue a written award, which shall contain, at a minimum, the names
of the parties, a summary of the issues in controversy, and a description of the award issued. Upon
motion to a court of competent jurisdiction, either party may obtain a judgment or decree in
conformity with the arbitration award, and said award shall be enforced as any other judgment or
decree.

     (h) In resolving claims governed by this Section 4.13, the arbitrator shall apply the laws of
the state in which Employee is or most recently was employed by the Company, and/or federal law, if
applicable.

     (i) Employee and the Company agree and acknowledge that any arbitration proceedings between
them, and the outcome of such proceedings, shall be kept strictly confidential; provided however,
that the Company may disclose such information to the extent required by law and to its employees,
agents and professional advisors who have a legitimate need to know such

10

 

information, and the Employee may disclose such information (1) to the extent required by law, (2)
to the extent that the Employee is required to disclose same to professional persons assisting
Employee in preparing tax returns; and (3) to Employee’s legal counsel.

     4.14 Certain Definitions. The following defined terms used in this Agreement shall have the
meanings indicated:

     Change of Control. “Change of Control” means the happening of any of the following events:

     (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”),
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (A) the then outstanding shares of Common Stock of SCI (the “Outstanding SCI
Common Stock”) or (B) the combined voting power of the then outstanding voting securities of SCI
entitled to vote generally in the election of directors (the “Outstanding SCI Voting Securities”);
provided, however, that the following acquisitions shall not constitute a Change of Control under
this subsection (a): (i) any acquisition directly from SCI (excluding an acquisition by virtue of
the exercise of a conversion privilege), (ii) any acquisition by SCI, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by SCI or any corporation
controlled by SCI, or (iv) any acquisition by any corporation pursuant to a reorganization, merger
or consolidation, if, following such reorganization, merger or consolidation, the conditions
described in clauses (A), (B) and (C) of subsection (c) of this definition of “Change of Control”
are satisfied; or

     (b) Individuals who, as of the effective date hereof, constitute the Board of Directors of SCI
(the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of
Directors of SCI; provided, however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by SCI’s shareholders, was approved by (A) a vote
of at least a majority of the directors then comprising the Incumbent Board, or (B) a vote of at
least a majority of the directors then comprising the Executive Committee of the Board of Directors
of SCI at a time when such committee was comprised of at least five members and all members of such
committee were either members of the Incumbent Board or considered as being members of the
Incumbent Board pursuant to clause (A) of this subsection (b), shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board of Directors of SCI; or

     (c) Approval by the shareholders of SCI of a reorganization, merger or consolidation, in each
case, unless, following such reorganization, merger or consolidation, (A) more than 60% of,
respectively, the then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding SCI Common Stock and
Outstanding SCI Voting Securities immediately prior to such reorganization, merger or consolidation
in substantially the same proportions as their ownership, immediately prior to such reorganization,
merger or consolidation, of the Outstanding SCI Common Stock and Outstanding

11

 

SCI Voting Securities, as the case may be, (B) no Person (excluding SCI, any employee benefit plan
(or related trust) of SCI or such corporation resulting from such reorganization, merger or
consolidation, and any Person beneficially owning, immediately prior to such reorganization, merger
or consolidation, directly or indirectly, 20% or more of the Outstanding SCI Common Stock or
Outstanding SCI Voting Securities, as the case may be) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation or the combined voting power of the
then outstanding voting securities of such corporation entitled to vote generally in the election
of directors and (C) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or

     (d) Approval by the shareholders of SCI of (A) a complete liquidation or dissolution of SCI or
(B) the sale or other disposition of all or substantially all of the assets of SCI other than to a
corporation, with respect to which following such sale or other disposition, (i) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is the beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding SCI Common Stock and Outstanding SCI Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding SCI Common Stock and Outstanding SCI
Voting Securities, as the case may be, (ii) no Person (excluding SCI and any employee benefit plan
(or related trust) of SCI or such corporation, and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, 20% or more of the Outstanding SCI
Common Stock or Outstanding SCI Voting Securities, as the case may be) beneficially owns, directly
or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and (iii) at least a majority
of the members of the board of directors of such corporation were members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board of Directors of SCI
providing for such sale or other disposition of assets of SCI.

     Good Reason. “Good Reason” shall mean the occurrence of any of the following after a Change of
Control:

     (a) The Company requires the Employee to be relocated to such an extent that the Internal
Revenue Service requirements for a deductible relocation (currently 50 miles) are satisfied;

     (b) The Company materially reduces the responsibilities, authority or accountability of
Employee from the same in effect immediately prior to the Change of Control;

     (c) The Company reduces the base salary, Target Bonus or other compensation program
participation of Employee; or

     (d) The Company materially reduces the aggregate benefits of Employee.

12

 

     Partial Bonus. “Partial Bonus” shall mean a bonus equal to the product of (i) Employee’s
most recently set Target Bonus, and (ii) a fraction, the denominator of which is 365 and the
numerator of which is the number of days in the fiscal year being considered through the date of
the termination of Employee’s employment.

     Pro Rated Bonus. “Pro Rated Bonus” shall mean, a bonus equal to the product of (i) the bonus
Employee did not receive but would have received under Section 1.4(b) if he had remained an
employee through the end of the Employment Term, it being understood that the amount of such bonus
Employee would have received shall be determined by reference to the average amount of bonus
actually awarded to other officers who were at the same or comparable level of responsibility as
Employee immediately prior to his termination, and (ii) a fraction, the denominator of which is 365
and the numerator of which is the number of days in the fiscal year being considered through the
date of death, determination of disability or notice of termination of employment, whichever is
applicable. In the event that a majority of SCI officers do not receive a bonus for the fiscal year
being considered, then the Pro Rated Bonus shall not be applicable and Employee shall not be
entitled to a Pro Rated Bonus. The Pro Rated Bonus, if any, payable to Employee shall be paid
within 90 days after the date that bonuses, if any, are awarded for a majority of SCI officers for
the year being considered.

     Target Bonus. “Target Bonus” shall mean the percentage of salary or level of bonus for
Employee which is set by the Compensation Committee at the beginning of each year as an incentive
goal to be achieved (it being understood that the actual bonus eventually earned could be lesser or
greater than the Target Bonus).

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

	 	 	 	 	 
	 	“COMPANY”

SCI Executive Services, Inc.

 	 
	 	By:  	/s/ Curtis G. Briggs
 	 
	 	 	Curtis G. Briggs 	 
	 	 	Vice President 	 
	 
	 	

“EMPLOYEE”

 	 
	 	/s/ James M. Shelger
 	 
	 	 	 
	 	 	 
	 

13

 

ADDENDUM TO EMPLOYMENT

AND NONCOMPETITION AGREEMENT

     This Addendum to the Employment and Noncompetition Agreement (“Addendum”) between SCI
Executive Services, Inc., a Delaware Corporation (the “Company”) and the undersigned executive of
the Company (the “Employee”), is executed as of December 1, 2005.

     The Company and the Employee have previously entered into an Employment and Noncompetition
Agreement (“Agreement”).

     This Addendum is intended to (i) supplement and modify such Agreement in order to comply with
applicable provisions of the Internal Revenue Code Section 409A, and (ii) extend the term of the
Agreement.

     This Agreement is modified effective as of December 31, 2005 as follows:

	 	1.	 	Notwithstanding the applicable provisions of this Agreement regarding timing of
distribution of payments, the following special rules shall apply in order for this
Agreement to comply with IRC §409A: (i) to the extent any distribution is to a
“specified employee” (as defined under IRC §409A) and to the extent such applicable
provisions of IRC §409A require a delay of such distributions by a six month period
after the date of such Employee’s separation of service with the Company, the
provisions of this Agreement shall be construed and interpreted as requiring a six
month delay in the commencement of such distributions thereunder, and (ii) in the event
there are any installment payments under this Agreement that are required to be delayed
by a six month period in order to comply with IRC §409A, the monthly installments that
would have been paid during such six month delay shall be accumulated and paid to the
Employee in a single lump sum within five business days after the end of such six month
delay, and (iii) the Company shall not have the discretion to prepay any installment
payments otherwise provided under this Agreement.
	 
	 	2.	 	To the extent of any compliance issues under Internal Revenue Code Section
409A, the Agreement shall be construed in such a manner so as to comply with the
requirements of such provision so as to avoid any adverse tax consequences to the
Employee.
	 
	 	3.	 	The term of the Agreement is hereby extended to December 31, 2006.

     EXECUTED as of the date first written above.

	 	 	 	 	 	 	 
	SCI Executive Services, Inc.	 	 	 	Employee
	 
	 	 	 	 	 	 
	By:

	 	/s/ Curtis G. Briggs
	 	 	 	/s/ James M. Shelger
	 

	 	 
	 	 	 	 
	Name:

	 	Curtis G. Briggs
	 	 	 	Name: James M. Shelger
	Title:

	 	Vice President	 	 	 	 

14

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