Document:

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EXHIBIT 10.1

REGISTRATION RIGHTS AGREEMENT

by and among

Allis-Chalmers Energy Inc.

and

The Guarantors listed on Schedule A hereto

and

RBC Capital Markets Corporation

Dated as of August 14, 2006

 

 

REGISTRATION RIGHTS AGREEMENT

          This Registration Rights Agreement (this “Agreement”) is made and entered into as of August
14, 2006, by and among (i) Allis-Chalmers Energy Inc., a Delaware corporation (the “Company”), (ii)
the subsidiaries of the Company listed on Schedule A hereto (the “Guarantors”), and (iii) RBC
Capital Markets Corporation (the “Initial Purchaser”), who has agreed to purchase the Company’s
9.0% Senior Notes due 2014 (the “Initial Notes”) pursuant to the Purchase Agreement (as defined
below).

          This Agreement is made pursuant to the Purchase Agreement, dated as of August 8, 2006 (the
“Purchase Agreement”), by and among the Company, the Guarantors and the Initial Purchaser. In
order to induce the Initial Purchaser to purchase the Initial Notes, the Company and the Guarantors
have agreed to provide the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial Purchaser set forth in
Section 5(h) of the Purchase Agreement.

          The parties hereby agree as follows:

          SECTION 1. Definitions. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Indenture (as defined below), and the following capitalized
terms shall have the following meanings:

          Broker-Dealer: Any broker or dealer registered under the Exchange Act.

          Commission: The Securities and Exchange Commission.

          Company: As defined in the preamble hereto.

          Consummate: An Exchange Offer shall be deemed “Consummated” for purposes of this Agreement
upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange
Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer,
(ii) the maintenance of such Exchange Offer Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the period required pursuant to
Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of
Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Initial
Notes that were tendered by Holders thereof pursuant to the Exchange Offer.

          Effectiveness Target Date: As defined in Section 5 hereof.

          Exchange Act: The Securities Exchange Act of 1934, as amended.

          Exchange Notes: The 9.0% Senior Notes due 2014, to be issued pursuant to the Indenture: (i)
in the Exchange Offer or (ii) as contemplated by Section 4 hereof.

 

 

          Exchange Offer: The exchange and issuance by the Company of a principal amount of Exchange
Notes (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to
the outstanding principal amount of Initial Notes that are tendered by such Holders in connection
with such exchange and issuance.

          Exchange Offer Registration Statement: The Registration Statement relating to the Exchange
Offer.

          Holders: As defined in Section 2(b) hereof.

          Indenture: The Indenture, dated as of January 18, 2006, among the Company, the Guarantors and
the Trustee, pursuant to which the Initial Notes and the Exchange Notes are to be issued, as such
Indenture is amended or supplemented from time to time in accordance with the terms thereof.

          Issue Date: January 18, 2006

          Initial Placement: The issuance and sale by the Company of the Initial Notes to the Initial
Purchaser pursuant to the Purchase Agreement.

          Initial Purchaser: As defined in the preamble hereto.

          Liquidated Damages: As defined in Section 5(a) hereof.

          Prospectus: The prospectus included in a Registration Statement, as amended or supplemented
by any prospectus supplement and by all other amendments thereto, including post-effective
amendments, and all material incorporated by reference into such Prospectus.

          Purchase Agreement: As defined in the recitals hereto.

          Registration Default: As defined in Section 5 hereof.

          Registration Statement: Any registration statement of the Company and the Guarantors relating
to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for
resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is
filed pursuant to the provisions of this Agreement, in each case, including all amendments and
supplements thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.

          Securities Act: The Securities Act of 1933, as amended.

          Shelf Filing Deadline: As defined in Section 4(a) hereof.

          Shelf Registration Statement: As defined in Section 4(a) hereof.

          Transfer Restricted Securities: Each Initial Note until the earliest to occur of (a) the date
on which such Initial Note has been exchanged in the Exchange Offer by a Person other than a
Broker-Dealer for an Exchange Note entitled to be resold to the public by the Holder

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thereof without complying with the prospectus delivery requirements of the Securities Act, (b)
following the exchange by a Broker-Dealer in the Exchange Offer of an Initial Note for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser who receives from such
Broker-Dealer on or prior to the date of such sale a copy of the Prospectus contained in the
Exchange Offer Registration Statement, (c) the date on which such Initial Note has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf Registration
Statement (and the purchasers thereof have been issued Exchange Notes) or (d) the date on which
such Initial Note is distributed to the public pursuant to Rule 144.

          Trustee: Wells Fargo Bank, N.A., a nationally chartered banking association.

          Trust Indenture Act: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa 77bbbb) as in
effect on the date of the Indenture.

          Underwritten Registration or Underwritten Offering: A registration under a Shelf Registration
Statement, pursuant to which securities of the Company are sold to an underwriter for reoffering to
the public.

          SECTION 2. Securities Subject to this Agreement.

          (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement
are the Transfer Restricted Securities.

          (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer
Restricted Securities (each, a “Holder”) whenever such Person owns Transfer Restricted Securities.

          SECTION 3. Registered Exchange Offer.

          (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission
policy (after the procedures set forth in Section 6(a) hereof have been complied with), the Company
and the Guarantors shall (i) use their commercially reasonable efforts to cause to be filed with
the Commission after the Issue Date, a Registration Statement under the Securities Act relating to
the Exchange Notes and the Exchange Offer, (ii) use their commercially reasonable efforts to cause
such Registration Statement to become effective not later than 270 days after the Issue Date, (iii)
in connection with the foregoing, file (A) all pre-effective amendments to such Registration
Statement as may be necessary in order to cause such Registration Statement to become effective,
(B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A
under the Securities Act and (C) cause all necessary filings in connection with the registration
and qualification of the Exchange Notes to be made under the state securities or blue sky laws of
such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer
shall be on the appropriate form permitting (i) registration of the offer and issuance of the
Exchange Notes to be
offered in exchange for the Initial Notes that are Transfer Restricted Securities and (ii)
resales of Exchange Notes by Broker Dealers who currently hold Transfer Restricted Securities and
that were acquired for their own account as a result of market making activities or other trading

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activities (other than Initial Notes acquired directly from the Company or any of its Affiliates)
as contemplated by Section 3(c) below.

          (b) The Company and the Guarantors shall use their commercially reasonable efforts to cause
the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required under applicable federal and
state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 30 days after the date notice of the Exchange Offer is mailed to the
Holders. The Company and the Guarantors shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the Exchange Notes and the
related Guarantees shall be included in the Exchange Offer Registration Statement. The Company and
the Guarantors shall use their commercially reasonable efforts to cause the Exchange Offer to be
Consummated no later than 30 Business Days after the date the Exchange Offer Registration Statement
has become effective, or such later date as may be required by United States federal securities
laws.

          (c) The Company shall indicate in a “Plan of Distribution” section contained in the Prospectus
forming a part of the Exchange Offer Registration Statement that any Broker-Dealer who holds
Transfer Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer Restricted Securities
acquired directly from the Company), may exchange such Initial Notes pursuant to the Exchange
Offer; however, such Broker-Dealer may be deemed to be an “underwriter” within the meaning of the
Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities
Act in connection with any resales of the Exchange Notes received by such Broker-Dealer in the
Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such “Plan
of Distribution” section shall also contain all other information with respect to such resales by
Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto,
but such “Plan of Distribution” shall not name any such Broker-Dealer or disclose the amount of
Initial Notes held by any such Broker-Dealer except to the extent required by the Commission as a
result of a change in policy after the date of this Agreement.

          The Company and the Guarantors shall use their commercially reasonable efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and amended as required
by the provisions of Section 6(c) hereof to the extent necessary to ensure that it is available for
resales of Initial Notes acquired by Broker-Dealers for their own accounts as a result of
market-making activities or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Securities Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period ending on the earlier of (i) 180 days from
the date on which the Exchange Offer Registration Statement is declared effective (ii) the date on
which a Broker-Dealer is no longer required to deliver a prospectus in connection with
market-making or other trading activities and (iii) the date on which all the
Initial Notes covered by such Exchange Offer Registration Statement have been sold pursuant to
such Exchange Offer Registration Statement.

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          The Company shall provide sufficient copies of the latest version of such Prospectus to
Broker-Dealers promptly upon request at any time during such 180-day (or shorter as provided in the
foregoing sentence) period in order to facilitate such resales.

          SECTION 4. Shelf Registration.

          (a) Shelf Registration. If (i) the Company and the Guarantors are not required to file an
Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy (after the procedures set forth in
Section 6(a)(i) hereof have been complied with), (ii) for any reason the Exchange Offer is not
Consummated within 30 Business Days after the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement, or (iii) with respect to any Holder of Transfer Restricted
Securities, such holder notifies the Company prior to the 20th day following the consummation of
the Exchange Offer that (A) such Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) such Holder may not resell the Exchange Notes acquired
by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder, or (C) such Holder is a Broker-Dealer and holds Initial Notes acquired
directly from the Company or one of its Affiliates, then, upon such Holder’s request, the Company
and the Guarantors shall

     (x) use their commercially reasonable efforts to cause to be filed a shelf registration
statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the
Exchange Offer Registration Statement (in either event, the “Shelf Registration Statement”),
on or prior to 90 days after the filing obligation arises (such date being the “Shelf Filing
Deadline”), which Shelf Registration Statement shall provide for resales of all Transfer
Restricted Securities the Holders of which shall have provided the information required
pursuant to Section 4(b) hereof; and

     (y) use their commercially reasonable efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or prior to 270 days after the Shelf
Filing Deadline.

          The Company and the Guarantors shall use their commercially reasonable efforts to keep such
Shelf Registration Statement continuously effective, supplemented and amended as required by the
provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available
for resales of Initial Notes by the Holders of Transfer Restricted Securities entitled to the
benefit of this Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period until the earlier of (i) the expiration of the period
referred to in Rule 144(k) under the Securities Act (or any successor rule) with respect to
Transfer Restricted Securities, (ii) two years following the effective date of such Shelf
Registration Statement and (iii) the date on which all the Initial Notes covered by such Shelf
Registration Statement have been sold pursuant to such Shelf Registration Statement.

          (b) Provision by Holders of Certain Information in Connection with the Shelf Registration
Statement. No Holder of Transfer Restricted Securities may include any of its

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Transfer Restricted
Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor,
such information as the Company may reasonably request for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of
Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have provided all such information. Each Holder as to which any
Shelf Registration Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.

          SECTION 5. Liquidated Damages. (a) If (i) a Shelf Registration Statement is required to be
filed by this Agreement and is not filed with the Commission on or prior to the date specified for
such filing in this Agreement, (ii) any of the Registration Statements required by this Agreement
has not been declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the “Effectiveness Target Date”), (iii) the Exchange Offer has not
been Consummated within 30 Business Days after the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement
is filed and declared effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose (each such event referred to in clauses (i) through (iv), a “Registration
Default”), the Company hereby agrees to pay damages (“Liquidated Damages”) to each Holder of the
Transfer Restricted Securities in an amount equal to 0.25% per annum on the principal amount of
Transfer Restricted Securities held by such Holder during the 90-day period immediately following
the occurrence of any Registration Default and such amount shall increase by 0.25% per annum at the
end of each subsequent 90-day period, but in no event shall such increase exceed 1.00% per annum.
Following the cure of all Registration Defaults relating to any particular Transfer Restricted
Securities, the payment of Liquidated Damages shall cease; provided, however, that, if after
payment of Liquidated Damages has ceased, a different Registration Default occurs, Liquidated
Damages shall again be paid pursuant to the foregoing provisions. All accrued Liquidated Damages
shall be paid in the manner provided for the payment of interest on the Initial Notes as set forth
in the Indenture.

          (b) A Registration Default referred to in Section 5(iv) hereof shall be deemed not to have
occurred and be continuing in relation to a Shelf Registration Statement or the related Prospectus
if (i) such Registration Default has occurred solely as a result of material events with respect to
the Company and the Guarantors that would need to be described in such Shelf Registration Statement
or the related Prospectus and such event is not so described therein and (ii) the Company and the
Guarantors are proceeding promptly and in good faith to amend or supplement such Shelf Registration
Statement and related Prospectus to describe such events; provided, however, that in any case if
such Registration Default occurs for a continuous period in excess of 30 days in any 12 month
period, Liquidated Damages shall be payable in accordance
with the above paragraph from the day such Registration Default occurs until such Registration
Default is cured.

          All obligations of the Company and the Guarantors set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Security at the time such security ceases
to be a Transfer Restricted Security shall survive until such time as all such obligations with
respect to such Note shall have been satisfied in full.

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          SECTION 6. Registration Procedures.

          (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company
and the Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their
commercially reasonable efforts to effect such exchange to permit the sale of Transfer Restricted
Securities being sold in accordance with the intended method or methods of distribution thereof,
and shall comply with all of the following provisions:

     (i) If in the reasonable opinion of counsel to the Company there is a question as to
whether the Exchange Offer is permitted by applicable law, the Company and the Guarantors
hereby agree to seek a no-action letter or other favorable decision from the Commission
allowing the Company and the Guarantors to Consummate an Exchange Offer for such Initial
Notes. The Company and the Guarantors each hereby agree to pursue the issuance of such a
decision to the Commission staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy. The Company and the Guarantors
each hereby agree, however, to (A) participate in telephonic conferences with the
Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a favorable resolution
by the Commission staff of such submission.

     (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of
this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the
request of the Company, prior to the Consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no arrangement or
understanding with any Person to participate in, a distribution of the Exchange Notes to be
issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary
course of business. In addition, all such Holders of Transfer Restricted Securities shall
otherwise cooperate in the Company’s preparations for the Exchange Offer. Each Holder,
including any Holder that is a Broker-Dealer, shall acknowledge and agree that any such
Holder using the Exchange Offer to participate in a distribution of the securities to be
acquired in the Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley &
Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13,
1988), as interpreted in the
Commission’s letter to Shearman & Sterling dated July 2, 1993, and similar no-action
letters (which may include any no-action letter obtained pursuant to clause (i) above), and
(2) must comply with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction and that such a secondary resale
transaction should be covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of Regulation S-K if
the resales are of Exchange Notes obtained by such Holder in exchange for Initial Notes
acquired by such Holder directly from the Company.

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          (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, if
any, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and
shall use their commercially reasonable efforts to effect such registration to permit the sale of
the Transfer Restricted Securities being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company and the Guarantors will as promptly as
practicable prepare and file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Securities Act, which form shall be available for
the sale of the Transfer Restricted Securities in accordance with the intended method or methods of
distribution thereof.

          (c) General Provisions. In connection with any Registration Statement and any Prospectus
required by this Agreement to permit the sale or resale of Transfer Restricted Securities
(including, without limitation, any Registration Statement and the related Prospectus required to
permit resales of Initial Notes by Broker-Dealers), the Company and the Guarantors shall:

     (i) use their commercially reasonable efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements including, if required
by the Securities Act or any regulation thereunder, financial statements of the Guarantors
for the period specified in Section 3 or 4 hereof, as applicable; upon the occurrence of any
event that would cause any such Registration Statement or the Prospectus contained therein
(A) to contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period required by this
Agreement, the Company and the Guarantors shall file promptly an appropriate amendment to
such Registration Statement, in the case of clause (A), correcting any such misstatement or
omission, and, in the case of either clause (A) or (B), use their commercially reasonable
efforts to cause such amendment to be declared effective and such Registration Statement and
the related Prospectus to become usable for their intended purpose(s) as soon as practicable
thereafter;

     (ii) prepare and file with the Commission such amendments and post-effective amendments
to the applicable Registration Statement as may be necessary to keep the Registration
Statement effective for the applicable period set forth in Section 3 or 4 hereof; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the
applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and
comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement to the Prospectus;

     (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested
by such Persons, confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same

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has become effective, (B)
of any request by the Commission for amendments to the Registration Statement or amendments
or supplements to the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement under the Securities Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities for offering or sale
in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes,
(D) of the existence of any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any amendment or
supplement thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or blue sky laws, the Company and the
Guarantors shall use their commercially reasonable efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;

     (iv) furnish without charge to the Initial Purchaser, each selling Holder named in any
Shelf Registration Statement, and each of the underwriter(s), if any, before filing with the
Commission, copies of any Shelf Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such Shelf Registration
Statement), which documents will be subject to the review and comment of the Initial
Purchaser and underwriter(s), if any, in connection with such sale for a period of at least
five Business Days, and the Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration Statement or Prospectus
to which the Initial Purchaser or the underwriter(s), if any, shall reasonably object in
writing within five Business Days after the receipt thereof (such objection to be deemed
timely made upon confirmation of telecopy transmission within such period). The objection
of the Initial Purchaser or an underwriter, if any, shall be deemed to be reasonable if such
Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to
be filed, contains an untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein not misleading;

     (v) in connection with any Underwritten Offering, make available at reasonable times
for inspection by the Initial Purchaser, any managing underwriter participating in any
disposition pursuant to such Registration Statement and any attorney or accountant retained
by the Initial Purchaser or any of the underwriter(s), all financial and other records,
pertinent corporate documents and properties of the Company and the Guarantors and cause the
Company’s and the Guarantors’ officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney or accountant in connection
with such Registration Statement of any post-effective amendment thereto subsequent to the
filing thereof and prior to its effectiveness; provided, however, that such Persons first
agree in writing with the

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Company that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time of delivery of such
information will be kept confidential by such Persons, unless (A) disclosure of such
information is required by court or administrative order or is necessary to respond to
inquires of regulatory authorities, (B) disclosure of such information is required by law
(including any disclosure requirements pursuant to federal securities laws in connection
with the filing of such Shelf Registration Statement or the use of any Prospectus), (C) such
information becomes generally available to the public other than as a result of a disclosure
or failure to safeguard such information by such Person or (D) such information becomes
available to such Person from a source other than the Company and its subsidiaries and such
source is not known, after reasonable inquiry, by such Person to be bound by a
confidentiality agreement; provided further that, to the extent the foregoing investigation
is being made contemporaneously by more than two Holders, there shall be one law firm and
one accounting firm retained by all Holders to make such investigation;

     (vi) in connection with any Underwritten Offering, if requested by any selling Holders
or the underwriter(s), incorporate in any Registration Statement or Prospectus, pursuant to
a supplement or post-effective amendment if necessary, such information as such selling
Holders and underwriter(s), if any, may reasonably request to have included therein,
including, without limitation, information relating to the “Plan of Distribution” of the
Transfer Restricted Securities, information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriter(s), the purchase price being paid
therefor and any other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is notified of the matters
to be incorporated in such Prospectus supplement or post-effective amendment;

     (vii) furnish to the Initial Purchaser, each selling Holder, who so reasonably
requests, and each of the underwriter(s), if any, without charge, at least one copy of the
Shelf Registration Statement, as first filed with the Commission, and of each amendment
thereto, including financial statements and schedules and all documents incorporated by
reference therein and all exhibits (including exhibits incorporated therein by reference);

     (viii) deliver to each selling Holder and each of the underwriter(s), if any, without
charge, as many copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may request; the Company and the
Guarantors hereby consent to the use of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or supplement thereto;

     (ix) in the case of a Shelf Registration Statement involving an Underwritten Offering,
enter into, and cause the Guarantors to enter into, such agreements (including an
underwriting agreement), and make, and cause the Guarantors to make, such representations
and warranties, and take all such other actions in connection therewith in order to expedite
or facilitate the disposition of the Transfer Restricted Securities pursuant to such
Underwritten Offering, all to such extent as may be reasonably

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requested by the Initial
Purchaser or, to the extent customary for such transaction, by any Holder of Transfer
Restricted Securities or underwriter in connection with any sale or resale pursuant to such
Underwritten Offering; and the Company and the Guarantors shall:

     (A) furnish to each underwriter in such substance and scope as they may request
and as are customarily made by issuers to underwriters in primary underwritten
offerings:

     (1) a certificate, dated the date of the effectiveness of the closing
of such Underwritten Offering signed by (y) the President or any Vice
President and (z) a principal financial or accounting officer of the
Company, confirming, as of the date thereof, such matters set forth in the
underwriting agreement as such parties may reasonably and customarily
request;

     (2) an opinion, dated the date of the closing of such Underwritten
Offering of counsel for the Company and the Guarantors, covering such
matters as such parties may reasonably request; and

     (3) a customary comfort letter, dated the date of the pricing of such
Underwritten Offering, from (i) the Company’s independent accountants and
(ii) the independent accountants of any other Person for which financial
statements are included in or incorporated by reference into such Shelf
Registration Statement, in the customary form and covering matters of the
type customarily requested to be covered in comfort letters by underwriters
in connection with primary underwritten offerings;

     (B) deliver such other documents and certificates as may be reasonably
requested by such parties to evidence compliance with Section 6(c)(ix)(A) hereof and
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company or the Guarantors pursuant to this clause
(ix), if any; and

     (C) cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the state securities or blue sky laws of
such jurisdictions as the selling Holders or underwriter(s) may reasonably request
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities covered by
the Underwritten Offering pursuant to the Shelf Registration Statement; provided,
however, that neither the Company nor the Guarantors shall be required to register
or qualify as a foreign corporation where it is not then so qualified or to take any
action that would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration Statement, in
any jurisdiction where it is not then so subject;

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     (x) cooperate with, and cause the Guarantors to cooperate with, the selling Holders and
the underwriter(s), if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or the underwriter(s), if any, may
request at least two Business Days prior to any sale of Transfer Restricted Securities made
by such Holders or underwriter(s);

     (xi) use its commercially reasonable efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the underwriter(s), if any, to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in Section 6(c)(ix)(C)
hereof;

     (xii) if any fact or event contemplated by Section 6(c)(iii)(D) hereof shall exist or
have occurred, prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary in order to make the statements therein
not misleading;

     (xiii) provide a CUSIP number for all Exchange Notes not later than the effective date
of a Registration Statement covering such Exchange Notes and provide the Trustee under the
Indenture with printed certificates for the Exchange Notes, which are in a form eligible for
deposit with the Depository Trust Company;

     (xiv) cooperate and assist in any filings required to be made with the NASD and in the
performance of any due diligence investigation by any underwriter (including any “qualified
independent underwriter”) that is required to be retained in accordance with the rules and
regulations of the NASD; and use their commercially reasonable efforts to cause such
Registration Statement to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer Restricted Securities
to consummate the disposition of such Transfer Restricted Securities;

     (xv) otherwise use their commercially reasonable efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to securityholders, as
soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm
commitment or best efforts Underwritten Offering or (B) if not sold to underwriters in such
an offering, beginning with the first month of the Company’s first fiscal quarter commencing
after the effective date of the Registration Statement; and

12

 

     (xvi) cause the Indenture to be qualified under the Trust Indenture Act not later than
the effective date of the first Registration Statement required by this Agreement, and, in
connection therewith, cooperate with, and cause the Guarantors to cooperate with, the
Trustee and the Holders to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and to
execute, and cause the Guarantors to execute, and use their commercially reasonable efforts
to cause the Trustee to execute, all documents that may be required to effect such changes
and all other forms and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and

          (d) Restrictions on Holders. Each Holder agrees by acquisition of a Transfer
Restricted Security that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement
until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xii) hereof, or until it is advised in writing (the “Advice”) by the Company that the
use of the Prospectus may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus. If so directed by the Company, each
Holder will deliver to the Company (at the Company’s expense) all copies, other than permanent file
copies then in such Holder’s possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event the Company shall
give any such notice, the time period regarding the effectiveness of such Registration Statement
set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during
the period from and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xii) hereof or shall have received the Advice.

          SECTION 7. Registration Expenses.

          (a) All expenses incident to the Company’s or the Guarantors’ performance of or compliance
with this Agreement will be borne by the Company and the Guarantors, regardless of whether a
Registration Statement becomes effective, including, without limitation: (i) all registration and
filing fees and expenses (including filings made by the Initial Purchaser or Holder with the NASD
(and, if applicable, the fees and expenses of any “qualified independent
underwriter” and its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state securities or blue sky
laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be
issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and
telephone; (iv) all fees and disbursements of counsel for the Company, and the Guarantors and,
subject to Section 7(b) hereof, the Holders of Transfer Restricted Securities; and (v) all fees and
disbursements of independent certified public accountants of the Company and the Guarantors
(including the expenses of any special audit and comfort letters required by or incident to such
performance).

          The Company and the Guarantors will, in any event, bear their internal expenses (including,
without limitation, all salaries and expenses of its officers and employees performing

13

 

legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company or the Guarantors.

          (b) In connection with any Registration Statement required by this Agreement (including,
without limitation, the Exchange Offer Registration Statement and the Shelf Registration
Statement), the Company and the Guarantors will reimburse the Initial Purchaser and the Holders of
Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the
“Plan of Distribution” contained in the Exchange Offer Registration Statement or registered
pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Shearman & Sterling LLP or such other
counsel as may be chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being prepared.

          (c) Each Holder will pay all underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of such Holder’s Transfer Restricted Securities pursuant
to the Shelf Registration Statement.

          SECTION 8. Indemnification.

          (a) Each of the Company and the Guarantors, jointly and severally, agree to indemnify and hold
harmless each Holder, its directors, officers and employees, and each Person, if any, who controls
any Holder within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act against any loss, claim, damage, liability or expense, as incurred, to which such Holder or
such controlling person may become subject, under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written consent of the
Company and/or the Guarantors), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto) or any free writing prospectus or preliminary
prospectus used in any transaction contemplated hereby, or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not
misleading, and to reimburse each Holder and each such controlling person for any and all expenses
(including the fees and disbursements of counsel chosen by such Holder or such controlling person)
as such expenses are reasonably incurred by such Holder or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense (including without limitation and as
incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing, settling,
compromising, paying or defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable fees and expenses of
counsel to any such indemnified person) to the extent, but only to the extent, arising out of or
based upon any untrue statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the Company by any of the
Holders expressly for use in any Registration Statement

14

 

or Prospectus (or any amendment or supplement thereto) or any free writing prospectus or preliminary prospectus used in any
transaction contemplated hereby. The indemnity agreement set forth in this Section 8(a) shall be
in addition to any liabilities that the Company or the Guarantors may otherwise have.

          (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company,
the Guarantors and each of their respective directors, officers and employees and each Person, if
any, who controls the Company or any Guarantor within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company or the Guarantors or any such director, officer, employee or
controlling person may become subject, under the Securities Act, the Exchange Act, or other federal
or state statutory law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such Holder or such
controlling person), insofar as such loss, claim, damage, liability or expense (or actions in
respect thereof as contemplated below) (i) arises out of or is based upon any untrue or alleged
untrue statement of a material fact contained in any Registration Statement or Prospectus (or any
amendment or supplement thereto) or any free writing prospectus or preliminary prospectus used in
connection with any transaction contemplated hereby, or (ii) arises out of or is based upon the
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission or alleged omission
was made in any Registration Statement or Prospectus (or any amendment or supplement thereto) or
any free writing prospectus or preliminary prospectus used in connection with any transaction
contemplated hereby, in reliance upon and in conformity with written information furnished to the
Company by such Holder expressly for use therein; and to reimburse the Company, the Guarantors or
any such director, officer, employee or controlling person for any legal and other expenses
reasonably incurred by the Company, the Guarantors or any such director, officer, employee or
controlling person in connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action. The indemnity agreement set forth in
this Section 8(b) shall be in addition to any liabilities that such Holder may otherwise have. In
no event shall the liability of any selling Holder hereunder be greater than the dollar amount of
the proceeds received by such Holder upon the sale of the Transfer Restricted Securities giving
rise to such indemnification obligation.

          (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party under this Section 8, notify the indemnifying party in writing
of the commencement thereof, but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party for contribution or otherwise than
under the indemnity agreement contained in this Section 8 or to the extent it is not prejudiced as
a proximate result of such failure. In case any such action is brought against any indemnified
party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the

15

 

indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may
arise between the positions of the indemnifying party and the indemnified party in conducting the
defense of any such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of such indemnifying party’s election so to assume the defense of such action and
approval by the indemnified party of counsel, which such approval shall not be unreasonably
withheld, the indemnifying party will not be liable to such indemnified party under this Section 8
for any legal or other expenses subsequently incurred by such indemnified party in connection with
the defense thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of more than one separate counsel
(together with local counsel), approved by the indemnifying party, representing the indemnified
parties who are parties to such action) or (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of the action, in each of which cases the reasonable
fees and expenses of counsel shall be at the expense of the indemnifying party.

          The indemnifying party under this Section 8 shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party, unless such
settlement, compromise or consent includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such action, suit or proceeding.

          (d) If the indemnification provided for in this Section 8 is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party
shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such
proportion as is appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from the Initial Placement (which
in the case of the Company and the Guarantors shall be deemed to be equal to the total gross
proceeds to the Company and the Guarantors from the Initial Placement and the Registration
Statement) or (ii) if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the Guarantors, on the one hand,
and the Holders, on the other hand, in connection with the statements or omissions or inaccuracies
in the representations and warranties herein which resulted in such losses, claims,

16

 

damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative
fault of the Company and the Guarantors, on the one hand, and the Holders, on the other hand, shall
be determined by reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material fact or any such
inaccurate or alleged inaccurate representation or warranty relates to information supplied by the
Company or the Guarantors, on the one hand, or the Holders, on the other hand, and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such
statement or omission.

          The amount paid or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the limitations set forth in
this Section 8, any legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The provisions set forth in Section 8(c) with
respect to notice of commencement of any action shall apply if a claim for contribution is to be
made hereunder; provided, however, that no additional notice shall be required with respect to any
action for which notice has been given under Section 8(c) for purposes of indemnification.

          The Company, the Guarantors and each Holder of Transfer Restricted Securities agree that it
would not be just and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Holders were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations referred to in
this Section 8.

          Notwithstanding the provisions of this Section 8, none of the Holders (or any Person who
controls such Holder within the meaning of the Securities Act and the Exchange Act) shall be
required to contribute, in the aggregate, any amount in excess of the amount by which the net
proceeds received by such Holder from the sale of the Transfer Restricted Securities pursuant to a
Registration Statement exceeds the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 of
the Securities Act) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders’ obligations to contribute
pursuant to this Section 8(d) are several, and not joint, in proportion to the respective
principal amount of Initial Notes held by each of the Holders hereunder and not joint. For
purposes of this Section 8(d), each director, officer and employee of each Holder and each Person,
if any, who controls any Holder within the meaning of the Securities Act and the Exchange Act shall
have the same rights to contribution as such Holder, and each director, officer and employee of the
Company or any Guarantor, and each Person, if any, who controls the Company or any Guarantor within
the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution
as the Company or any Guarantor.

          SECTION 9. Rule 144A. The Company and the Guarantors each hereby agrees with each Holder, for
so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder
or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities from such

17

 

Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of
such Transfer Restricted Securities pursuant to Rule 144A under the Securities Act.

          SECTION 10. Participation in Underwritten Registrations. No Holder may participate in any
Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder’s Transfer
Restricted Securities on the basis provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and (b) completes and executes all
reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up
letters and other documents required under the terms of such underwriting arrangements.

          SECTION 11. Selection of Underwriters. The Holders of Transfer Restricted Securities covered
by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker
or investment bankers and manager or managers that will administer the offering will be selected by
the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities
included in such offering; provided, however, that such investment bankers and managers must be
reasonably satisfactory to the Company.

          SECTION 12. Miscellaneous.

          (a) Remedies. Each of the Company and the Guarantors hereby agree that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of
this Agreement and hereby agree to waive the defense in any action for specific performance that a
remedy at law would be adequate.

          (b) No Inconsistent Agreements. Each of the Company and the Guarantors will not, on or after
the date of this Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof. Neither the Company nor any of the Guarantors have previously entered into
any agreement granting any registration rights with respect to its securities to any Person
pursuant to which any such Person would have the right to include any securities in any
Registration Statement to be filed with the Commission as required under this Agreement. The rights
granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company’s securities under any agreement in effect on the date
hereof.

          (c) Adjustments Affecting the Notes. The Company and the Guarantors will not take any action,
or permit any change to occur, with respect to the Initial Notes and/or the Exchange Notes that
would materially and adversely affect their ability to Consummate the Exchange Offer.

          (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions hereof may not be given
unless the Company has obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities.

18

 

Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the rights of Holders
whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer and that
does not affect directly or indirectly the rights of other Holders whose securities are not being
tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities being tendered; provided that, with
respect to any matter that directly or indirectly affects the rights of the Initial Purchaser
hereunder, the Company shall obtain the written consent of the Initial Purchaser (which consent
shall not be unreasonably withheld) with respect to which such amendment, qualification,
supplement, waiver, consent or departure is to be effective.

          (e) Additional Guarantors. The Company shall cause any of its Restricted Subsidiaries (as
defined in the Indenture) that becomes, prior to the consummation of the Exchange Offer, a
Guarantor in accordance with the terms and provisions of the Indenture to become a party to this
Agreement as a Guarantor. It is understood and agreed that if, prior to the Exchange Offer, a
Guarantor that has executed this Agreement is no longer a Guarantor under the Indenture pursuant to
and in accordance with the provisions of the Indenture, such Guarantor shall no longer be a
Guarantor for purposes of this Agreement.

          (f) Notices. All notices and other communications provided for or permitted hereunder shall
be made in writing by hand-delivery, first-class mail (registered or certified, return receipt
requested), telex, telecopier, or air courier guaranteeing overnight delivery:

     (i) if to a Holder, at the address set forth on the records of the Registrar under the
Indenture, with a copy to the Registrar under the Indenture; and

     (ii) if to the Company or the Guarantors:

Allis-Chalmers Energy Inc.

5075 Westheimer, Suite 890

Houston, TX 77056

Facsimile: (713) 369-0555

Attention: Theodore F. Pound III, Esq.

With a copy (which shall not constitute notice) to:

Andrews Kurth LLP

600 Travis, Suite 400

Houston, TX 77002

Facsimile: (713) 238-7135

Attention: Robert V. Jewell, Esq.

     (iii) if to the Initial Purchaser:

RBC Capital Markets Corporation

1211 Avenue of the Americas, 32nd Floor

New York, NY 10036

Facsimile: (212) 703-2295

19

 

Attention: High Yield Capital Markets

With a copy (which shall not constitute notice) to:

Shearman & Sterling LLP

599 Lexington Avenue

New York, New York 10022

Facsimile: (212) 848-7179

Attention: Bruce Czachor, Esq.

          All such notices and communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.

          Copies of all such notices, demands or other communications shall be concurrently delivered by
the Person giving the same to the Trustee at the address specified in the Indenture.

          (g) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties, including without limitation and without the
need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted
Securities from such Holder.

          (h) Counterparts. This Agreement may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same agreement.

          (i) Headings. The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.

          (j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.

          (k) Severability. In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.

          (l) Entire Agreement. This Agreement is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained herein. There are
no restrictions, promises, warranties or undertakings, other than those set forth

20

 

or referred to herein with respect to the registration rights granted by the Company and the Guarantors with
respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

21

 

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

	 	 	 	 	 
	 	Very truly yours,

COMPANY:

ALLIS-CHALMERS ENERGY INC.

 	 
	 	By:  	/s/ David Wilde
 	 
	 	 	Name:  	David Wilde 	 
	 	 	Title:  	President and Chief Operating Officer 	 
	 
	 	GUARANTORS:

ALLIS-CHALMERS GP, LLC

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 
	 
	 	ALLIS-CHALMERS LP, LLC

 	 
	 	By:  	/s/ Jeffrey R. Freedman
 	 
	 	 	Name:  	Jeffrey R. Freedman 	 
	 	 	Title:  	Vice President and Secretary 	 
	 
	 	ALLIS-CHALMERS MANAGEMENT, LP

By: Allis-Chalmers GP, LLC, its sole general partner

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ALLIS-CHALMERS PRODUCTION SERVICES, INC.

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 
	 
	 	ALLIS-CHALMERS RENTAL TOOLS, INC.

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 
	 
	 	ALLIS-CHALMERS TUBULAR SERVICES, INC.

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 
	 
	 	AIRCOMP L.L.C.

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	MOUNTAIN COMPRESSED AIR, INC.

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 
	 
	 	OILQUIP RENTALS INC.

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 
	 
	 	ROGERS OIL TOOL SERVICES, INC.

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 
	 
	 	STRATA DIRECTIONAL TECHNOLOGY, INC.

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	TARGET ENERGY INC.

 	 
	 	By:  	/s/ Theodore F. Pound III
 	 
	 	 	Name:  	Theodore F. Pound III 	 
	 	 	Title:  	Vice President and Secretary 	 

 

 

	 	 	 	 	 

          The forgoing Registration Rights Agreement is hereby confirmed and accepted as of the date
first above written:

	 	 	 
	 
	 	 
	RBC CAPITAL MARKETS CORPORATION
	 
	 	 
	 
	 	 
	By:
	 	/s/ Nicholas P. Daifotis
	 

	 	 
	 

	 	Name:  Nicholas P. Daifotis
	 

	 	Title:  Managing Director

 

 

SCHEDULE A

Guarantors

Allis-Chalmers GP, LLC

Allis-Chalmers LP, LLC

Allis-Chalmers Management, LP

Allis-Chalmers Production Services, Inc.

Allis-Chalmers Rental Tools, Inc.

Allis-Chalmers Tubular Services, Inc.

Aircomp L.L.C.

Mountain Compressed Air, Inc.

OilQuip Rentals Inc.

Rogers Oil Tool Services, Inc.

Strata Directional Technology, Inc.

Target Energy Inc.exv10w3

 

EXHIBIT 10.3

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

     THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is entered
into as of August 8, 2006, among ALLIS-CHALMERS ENERGY INC., a Delaware corporation, as borrower
(the “Borrower”), the undersigned Guarantors (collectively, the “Guarantors”), ROYAL BANK OF
CANADA, as Administrative Agent for the Lenders parties to the hereinafter defined Credit Agreement
(in such capacity, the “Administrative Agent”) and the undersigned Lenders.

     Reference is made to the Amended and Restated Credit Agreement dated as of January 18, 2006
among Borrower, the Administrative Agent and the Lenders parties thereto (as amended, the “Credit
Agreement”). Unless otherwise defined in this Amendment, capitalized terms used herein shall have
the meaning set forth in the Credit Agreement; all section and schedule references herein are to
sections and schedules in the Credit Agreement; and all paragraph references herein are to
paragraphs in this Amendment.

RECITALS

     A. Subsequent to the execution of the Credit Agreement and pursuant to a Certificate of Merger
dated February 3, 2006 and filed with the Louisiana Secretary of State on February 8, 2006, a
Wholly-Owned Subsidiary of the Borrower, Delta Rental Service, Inc., a Louisiana corporation, which
executed a Guaranty and Security Agreement securing the Obligations, was merged with and into
another Wholly-Owned Subsidiary of the Borrower, Specialty Rental Tools, Inc., a Louisiana
corporation (“Specialty Rental Tools”), which executed a Guaranty and Security Agreement securing
the Obligations.

     B. Subsequent to the execution of the Credit Agreement and pursuant to a Certificate of Merger
dated February 3, 2006 and filed with the Texas Secretary of State on February 8, 2006, Specialty
Rental Tools was merged with and into another Wholly-Owned Subsidiary of the Borrower, Safco-Oil
Field Products, Inc., a Texas corporation (“Safco”), which executed a Guaranty and Security
Agreement securing the Obligations. Pursuant to Amended and Restated Articles of Incorporation of
Safco dated February 3, 2006 and filed with the Texas Secretary of State on February 9, 2006, Safco
changed its name to Allis-Chalmers Rental Tools, Inc.

     C. Subsequent to the execution of the Credit Agreement and pursuant to Articles of Merger
dated February, 2006 and filed with the Texas Secretary of State on February 15, 2006, a
Wholly-Owned Subsidiary of the Borrower, Downhole Injection Systems, LLC, a Texas limited liability
company, which executed a Guaranty and Security Agreement securing the Obligations, was merged with
and into another Wholly-Owned Subsidiary of the Borrower, Capcoil Tubing Services, Inc., a Texas
corporation (“Capcoil”), which executed a Guaranty and Security Agreement securing the Obligations.
Pursuant to Amended and Restated Articles of Incorporation of Capcoil dated February, 2006 and
filed with the Texas Secretary of State on February 15, 2006, Capcoil changed its name to
Allis-Chalmers Production Services, Inc.

     D. Subsequent to the execution of the Credit Agreement, the Borrower acquired 100% of the
common stock of Rogers Oil Tool Services, Inc., a Louisiana corporation (“ROTS”). The Lenders have
consented to such acquisition and to the Borrower’s issuance of common stock and the giving of a
promissory note in partial payment of the purchase price of ROTS and to Borrower’s entering into a
non-

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Energy Amended and Restated Credit Agreement

 

competition agreement and lease of certain real property in connection therewith pursuant to a
Consent and Waiver from the Lenders dated March 27, 2006.

     E. Subsequent to the date of the Credit Agreement, the Borrower has formed two wholly owned
limited liability company subsidiaries, Allis-Chalmers GP, LLC, a Delaware limited liability
company (“AC GP”), and Allis-Chalmers LP, LLC, a Delaware limited liability company (“AC LP”). The
Borrower has also formed Allis-Chalmers Management LP, a Texas limited partnership (“AC
Management”). AC GP is the sole general partner of AC Management. AC LP is the sole limited
partner of AC Management.

     F. The Borrower has requested certain amendments to the Credit Agreement in connection with
Borrower’s acquisition of 100% of the capital stock of DLS Drilling Logistics and Services Corp., a
British Virgin Islands corporation (“DLS”), and certain equity and debt issuances by the Borrower
to finance Borrower’s purchase of DLS.

     G. All of the Lenders and Borrower have agreed to amend the Credit Agreement as hereinafter
set forth.

     Accordingly, for adequate and sufficient consideration, the parties hereto agree, as follows:

     Paragraph 1. Amendments. Effective as of the Amendment Date, the Credit Agreement is
amended as follows:

     1.1 Definitions. Section 1.01 of the Credit Agreement is amended as follows:

     (a) Each of the following definitions is amended in its entirety to read as follows:

     “‘Agreement’ means this Credit Agreement as amended by the First Amendment.”

     “‘Consolidated Senior Debt’ means, as of any date of determination, for the
Borrower and its Subsidiaries on a consolidated basis, without duplication, the sum
of (a) the Outstanding Amount of all Revolving Loans and L/C Obligations, (b) all
secured Indebtedness owing by Borrower or any Loan Party permitted under Section
7.04, and (c) the Outstanding Amount of all obligations owed to Lenders under Lender
Hedging Agreements.”

     “‘Letter of Credit Sublimit’ means an amount equal to the lesser of (i) the
Aggregate Revolving Commitment and (ii) $15,000,000; provided that the $15,000,000
amount shall be reduced dollar for dollar (but not below $5,000,000) to the extent
(a) Letters of Credit are no longer necessary to secure the Indebtedness described
in clauses (1) and (2) of Section 6.12(iv), or (b) replacement letters of credit
have been issued in Argentina by a local letter of credit issuer or (c) such
Indebtedness has been refinanced locally in Argentina.”

     “‘Senior Unsecured Notes’ means the senior notes due 2014 of the Borrower
issued pursuant to that certain Indenture among the Borrower, its Subsidiaries party
thereto and Wells Fargo Bank, N.A., as trustee, dated January 18, 2006 consisting of
(i) those senior notes in the original principal amount of $160,000,000 issued on
January 18, 2006 and (ii) those additional senior notes in an original principal
amount no greater than $95,000,000 issued to partially finance the DLS Acquisition.”

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     “‘Triggering Sale’ means receipt of any Insurance Payment and any Disposition
(including sales of stock or other equity interests of Subsidiaries) (other than a
Disposition permitted by Section 7.07(a), (b) or (c)) by any Loan Party to any other
Person (other than to the Borrower or to a Wholly-Owned Domestic Subsidiary of the
Borrower) with respect to which the Net Cash Proceeds realized by any Loan Party for
such Disposition and from any Insurance Payments, when aggregated with the Net Cash
Proceeds from all such other Dispositions by the Loan Parties occurring since the
First Amendment Closing Date and all Insurance Payments received by the Loan Parties
since the First Amendment Closing Date, equals or exceeds the Threshold Amount. The
portion of the Net Cash Proceeds in excess of the Threshold Amount is herein called
the “Reduction Amount.”

     (b) The following definitions are inserted alphabetically into Section 1.01 of the Credit
Agreement:

     “‘Amendment Date’ means the date the First Amendment by its terms becomes effective
among the parties thereto.”

     “‘Argentina CapEx’ means Capital Expenditures by DLS or any of its Subsidiaries
for the purchase of equipment or fixed or capital assets intended for use in, or
actually used in, Argentina or Bolivia.”

     “‘DLS’ means DLS Drilling Logistics and Services Corp., a British Virgin
Islands corporation.”

     “‘DLS Acquisition’ means the acquisition by the Borrower of 100% of the capital
stock of DLS pursuant to that certain Stock Purchase Agreement among Bridas
International Holdings Ltd., a British Virgin Islands international business
company, Bridas Central Company, Ltd., a British Virgin Islands international
business company, Associated Petroleum Investors Limited, a British Virgin Islands
international business company, as sellers, and Borrower, as buyer.”

     “‘First Amendment” means that certain First Amendment to Amended and Restated
Credit Agreement dated as of August 8, 2006, among the Borrower, the Guarantors,
Royal Bank of Canada, as Administrative Agent and Collateral Agent, and the
Lenders.”

     1.2 Section 2.04. Section 2.04 of the Credit Agreement is amended as follows:

     (a) Section 2.04(b)(iii) of the Credit Agreement is amended in its entirety to read as
follows:

     “(iii) Debt Issuances. Immediately upon the receipt by Borrower or any
Loan Party of the Net Cash Proceeds of any Debt Issuance (excluding Borrower’s
receipt of Net Cash Proceeds from the issuance of the Senior Unsecured Notes), the
Borrower shall prepay the Revolving Loans and/or Cash Collateralize the L/C
Obligations as hereafter provided in an aggregate amount equal to 100% of such Net
Cash Proceeds (such prepayment to be applied as set forth in clause (v) below).”

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Energy Amended and Restated Credit Agreement

 

     (b) Section 2.04(b)(iv) of the Credit Agreement is amended in its entirety to read as
follows:

     “(iv) Equity Issuances. Immediately upon the receipt by the Borrower
of the Net Cash Proceeds of any Equity Issuance, the proceeds of which are not used
to finance either a Permitted Acquisition or the DLS Acquisition, the Borrower shall
prepay the Revolving Loans and/or Cash Collateralize the L/C Obligations in an
aggregate amount equal to 100% of such Net Cash Proceeds (such prepayment to be
applied as set forth in clause (v) below). Net Cash Proceeds of any Equity
Issuance, the proceeds of which are used to finance either a Permitted Acquisition
or the DLS Acquisition, shall not be required to be used to prepay the Revolving
Loans and/or Cash Collateralize the L/C Obligations. Whether Net Cash Proceeds of
any Equity Issuance are used for a Permitted Acquisition, the DLS Acquisition or
another type of acquisition, if such acquisition would be subject to Section 6.15,
the Borrower shall comply with the requirements of Section 6.15.”

     1.3 Section 6.12. Section 6.12 of the Credit Agreement is amended in its entirety to
read as follows:

     “6.12 Use of Proceeds. Use proceeds of the Revolver Facility to (i) refinance
the Indebtedness outstanding under the Original Credit Agreement, (ii) refinance
certain other Indebtedness of Borrower and/or its Subsidiaries outstanding on the
First Amendment Closing Date, (iii) finance working capital requirements and other
general corporate purposes of the Borrower and its Domestic Subsidiaries, including
Permitted Acquisitions, (iv) issue Letters of Credit including (1) a Letter of
Credit of up to $9,100,000 to secure Indebtedness of DLS owing to US Bank National
Association and (2) a Letter of Credit of up to $2,269,864 to secure a customs duty
guarantee issued by Banco Bisa, (v) pay transaction fees and expenses, and (vi) make
loans to DLS and/or have Letters of Credit issued for DLS or DLS’ Subsidiaries in an
aggregate amount at any one time not to exceed $5,000,000 to fund local operations
or Argentina CapEx.”

     1.4 Section 7.01. Section 7.01 of the Credit Agreement is amended by deleting the
word “and” at the end of clause (k), substituting for the period at the end of clause (l) a
semicolon and inserting the following new subsections (m), (n), (o) and (p) to read as follows:

     “(m) Liens securing Indebtedness of DLS to Borrower of up to $19,100,000 to
refinance Indebtedness owing by DLS to Hudson Global permitted under Section
7.04(h);

     (n) Liens securing unlimited intercompany Indebtedness between DLS and DLS’
Subsidiaries, including both “due to” and “due from” intercompany loans and
receivables between DLS and DLS’ Subsidiaries permitted under Section 7.04(i);

     (o) Liens securing Indebtedness of up to $9,100,000 owing by DLS’ Argentina
Branch to US Bank National Association and Indebtedness of up to $9,100,000 owing by
DLS and/or DLS’ Subsidiaries owing to local lenders in Argentina incurred to
refinance the $9,100,000 Indebtedness owing by DLS’ Argentina Branch to US Bank
National Association permitted under Section 7.04(j); and

     (p) Liens on assets of DLS and DLS’ Subsidiaries securing Indebtedness of up to
$10,000,000 owing by DLS and/or DLS’ Subsidiaries to local lenders in Argentina

4

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

incurred to fund local operations and/or Argentina CapEx permitted under
Section 7.04(l).”

     1.5 Section 7.02. Section 7.02 of the Credit Agreement is amended as follows:

     (a) Section 7.02(e) of the Credit Agreement is amended in its entirety to read as follows:

     “(e) Investments consisting of extensions of credit in the nature of accounts
receivable or notes receivable arising from the grant of trade credit in the
ordinary course of business to Persons other than Affiliates of the Borrower, and
Investments received in satisfaction or partial satisfaction thereof from
financially troubled account debtors to the extent reasonably necessary in order to
prevent or limit loss;”

     (b) Section 7.02(g) of the Credit Agreement is amended in its entirety to read as follows:

     “(g) Investments consisting of (i) the acquisition of 100% of the capital stock
of Specialty Rental Tools, Inc., (ii) the acquisition of 100% of the capital stock
of Rogers Oil Tool Services, Inc., (iii) the acquisition of 100% of the capital
stock of DLS and (iv) other Investments made by issuance of Borrower’s Equity
Interest; provided any Investment described in clause (iv) has been approved in
writing by the Administrative Agent;

     (c) Section 7.02 of the Credit Agreement is amended by substituting for the period at the end
of clause (h) a semicolon and inserting the following new subsections (i), (j), (k), (l) and (m) to
read as follows:;

     “(i) Investments consisting of Borrower’s lending up to $19,100,000 to DLS to
refinance existing Indebtedness owing by DLS to Hudson Global;

     (j) Investments consisting of unlimited intercompany Indebtedness between DLS
and DLS’ Subsidiaries, including both “due to” and “due from” intercompany loans and
receivables between DLS and DLS’ Subsidiaries;

     (k) Investments consisting of Borrower’s and Guarantors’ being liable for up to
$9,100,000 in connection with a Letter of Credit to be issued by the L/C Issuer
under this Agreement to secure Indebtedness of up to $9,100,000 owing by DLS’
Argentina Branch to US Bank National Association, such Letter of Credit to be
substituted for and replace an existing letter of credit issued by JPMorgan Chase
Bank;

     (l) Investments consisting of Borrower’s and Guarantors’ being liable in
connection with a Letter of Credit to be issued by the L/C Issuer under this
Agreement to secure a customs duty guarantee issued by Banco Bisa for the benefit of
DLS’ Argentina Branch; and

     (m) other Investments by Borrower (including monies funded under this Agreement
and lent to DLS and DLS’ Subsidiaries and Letters of Credit issued under this
Agreement to secure obligations of DLS and DLS’ Subsidiaries) in DLS and/or DLS’
Subsidiaries in an aggregate amount at any one time not to exceed $5,000,000 (such
$5,000,000 limit to be applicable to all Investments described in this clause (m),
whether or not funded or issued under this Agreement).”

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First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

     1.6 Section 7.04. Section 7.04 of the Credit Agreement is amended by deleting the
word “and” at the end of clause (f), substituting for the period at the end of clause (g) a
semicolon and inserting the following new subsections (h), (i), (j), (k), (l), (m) and (n) and the
proviso at the end to read as follows:

     “(h) Indebtedness of Borrower to Tommie L. Rogers of $750,000 to partially
finance the acquisition of Rogers Oil Tool Services, Inc.;

     (i) Indebtedness of $150,000 for non-competition payments payable $50,000 per
year for three years beginning on the date Tommie L. Rogers’ employment with the
Borrower terminates;

     (j) Indebtedness of DLS to Borrower of up to $19,100,000 to refinance
Indebtedness owing by DLS to Hudson Global;

     (k) unlimited intercompany Indebtedness between DLS and DLS’ Subsidiaries,
including both “due to” and “due from” intercompany loans and receivables between
DLS and DLS’ Subsidiaries;

     (l) Indebtedness of up to $9,100,000 owing by DLS’ Argentina Branch to US Bank
National Association and Indebtedness of up to $9,100,000 owing by DLS and/or DLS’
Subsidiaries owing to local lenders in Argentina incurred to refinance the
$9,100,000 Indebtedness owing by DLS’ Argentina Branch to US Bank National
Association;

     (m) Indebtedness of up to $2,269,864 owing by DLS in connection with an
Argentina customs duty guarantee issued by Banco Bisa for the benefit of DLS’
Argentina Branch; and

     (n) Indebtedness of up to $10,000,000 owing by DLS and/or DLS’ Subsidiaries
owing to local lenders in Argentina incurred to fund local operations and/or
Argentina CapEx; provided, such Indebtedness may not be guaranteed by Borrower or
any of its Subsidiaries (other than DLS and DLS’ Subsidiaries) or secured by any
assets of Borrower or any of its Subsidiaries (other than DLS and DLS’ Subsidiaries)
but such Indebtedness may be secured by Liens on assets of DLS and DLS’
Subsidiaries;

     provided, that if any Indebtedness is incurred pursuant to this Section 7.04,
both before and after such Indebtedness is created, incurred or assumed, no Default
or Event of Default shall exist.”

     1.7 Section 7.05. Section 7.05 of the Credit Agreement is amended by deleting the
figure “$500,000” and substituting therefor the figure “$5,000,000.”

     1.8 Section 7.14. Section 7.14 of the Credit Agreement is amended in its entirety to
read as follows:

     “Section 7.14 Capital Expenditures. Make or incur capital expenditures of the
type and for the relevant Fiscal Year exceeding in the aggregate the amounts set
forth below:

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First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Borrower Capital	 	 	 	 
	 	 	Expenditure (excluding	 	 	 	 
	 	 	Argentina CapEx but	 	 	 	 
	 	 	including Mexico	 	 	 	 
	Fiscal Year	 	CapEx)	 	Mexican CapEx	 	Argentina CapEx
	2006
	 	$	22,000,000	 	 	$	6,000,000	 	 	$	7,000,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	2007
	 	$	15,000,000	 	 	$	3,000,000	 	 	$	18,000,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	2008
	 	$	15,000,000	 	 	$	3,000,000	 	 	$	10,000,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	2009
	 	$	15,000,000	 	 	$	3,000,000	 	 	$	10,000,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	2010
	 	$	15,000,000	 	 	$	3,000,000	 	 	$	10,000,000	 

     Paragraph 2. Effective Date. This Amendment shall not become effective until the date
(such date, the “Amendment Date”) the Administrative Agent receives all of the agreements,
documents, certificates, instruments, and other items described below:

     (a) this Amendment, executed by the Borrower, the Guarantors, and each other Lender;

     (b) a Second Amendment to Pledge and Security Agreement executed by Borrower;

     (c) a First Amendment to Pledge and Security Agreement executed by Allis-Chalmers Production
Services, Inc., f/k/a Capcoil Tubing Services, Inc., successor by merger to Downhole Injection
Systems, LLC;

     (d) a First Amendment to Pledge and Security Agreement executed by Allis-Chalmers Rental
Tools, Inc., f/k/a Safco-Oil Field Products, Inc., successor by merger to Specialty Rental Tools,
Inc. and Delta Rental Service, Inc.;

     (e) Pledge and Security Agreement executed by Allis-Chalmers GP, LLC;

     (f) Pledge and Security Agreement executed by Allis-Chalmers LP, LLC;

     (g) Pledge and Security Agreement executed by Allis-Chalmers Management, LP;

     (h) Pledge and Security Agreement executed by Rogers Oil Tool Services, Inc.;

     (i) Patent Security Agreement executed by Borrower;

     (j) Guaranty executed by Rogers Oil Tool Services, Inc.;

     (k) stock certificate evidencing 100% of the common stock of Allis-Chalmers Production
Services, Inc.;

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First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

     (l) stock certificate evidencing 100% of the common stock of Allis-Chalmers Rental Tools,
Inc.;

     (m) stock certificate evidencing 100% of the common stock of Allis-Chalmers Tubular Services,
Inc.;

     (n) stock certificate evidencing 100% of the common stock of Rogers Oil Tool Services, Inc.;

     (o) stock certificate evidencing 65% of the common stock of DLS Drilling Logistics and
Services Corp.;

     (p) from the Borrower, ACPS, ACRT, ACTS, AC GP, AC LP, AC Management and ROTS, such
certificates of secretary, assistant secretary, manager, or general partner, as applicable, as the
Administrative Agent may require, certifying (i) resolutions of its board of directors, managers or
members (or their equivalent) authorizing the execution and performance of this Amendment and the
other Loan Documents which such Person is executing in connection herewith, (ii) the incumbency and
signature of the officer executing such documents, and (iii) no change in such Person’s
organizational documents since January 18, 2006 or attaching copies of any changes since that date;

     (q) satisfactory evidence that a $25,000 amendment fee has been paid to the Administrative
Agent for the pro rata benefit of each Lender;

     (r) fees and expenses required to be paid pursuant to Paragraph 5 of this Amendment, to the
extent invoiced prior to the Amendment Date;

     (s) such other assurances, certificates, documents and consents as the Administrative Agent
may require.

     The continued effectiveness of this Amendment is also subject to the condition subsequent that
by 5:00 p.m. New York time on August 16, 2006 the DLS Acquisition shall have closed and the Debt
Issuance and Equity Issuance related thereto shall have been consummated.

     Paragraph 3. Acknowledgment and Ratification. As a material inducement to the
Administrative Agent and the Lenders to execute and deliver this Amendment, each of the Borrower
and the Guarantors (i) consents to the agreements in this Amendment, (ii) agrees and acknowledges
that the execution, delivery, and performance of this Amendment shall in no way release, diminish,
impair, reduce, or otherwise affect the respective obligations of the Borrower or any Guarantor
under the Loan Documents to which it is a party, which Loan Documents shall remain in full force
and effect, and all rights thereunder are hereby ratified and confirmed.

     Paragraph 4. Representations. As a material inducement to the Administrative Agent and
the Lenders to execute and deliver this Amendment, each of the Borrower and the Guarantors
represents and warrants to the Administrative Agent and the Lenders that as of the Amendment Date
and as of the date of execution of this Amendment, (a) all representations and warranties in the
Loan Documents are true and correct in all material respects as though made on the date hereof,
except to the extent that any of them speak to a different specific date, and (b) no Default or
Event of Default exists.

     Paragraph 5. Expenses, Funding Losses. The Borrower shall pay on demand all
reasonable costs, fees, and expenses paid or incurred by the Administrative Agent incident to this
Amendment, including, without limitation, Attorney Costs in connection with the negotiation,
preparation, delivery,

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First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

and execution of this Amendment and any related documents, filing and recording costs, and the
costs of title insurance endorsements, if any.

     Paragraph 6. Miscellaneous. This Amendment is a “Loan Document” referred to in the
Credit Agreement. The provisions relating to Loan Documents in Article X of the Credit Agreement
are incorporated in this Amendment by reference. Unless stated otherwise (a) the singular number
includes the plural and vice versa and words of any gender include each other gender, in each case,
as appropriate, (b) headings and captions may not be construed in interpreting provisions, (c) this
Amendment must be construed, and its performance enforced, under Texas law and applicable federal
law, (d) if any part of this Amendment is for any reason found to be unenforceable, all other
portions of it nevertheless remain enforceable, and (e) this Amendment may be executed in any
number of counterparts with the same effect as if all signatories had signed the same document, and
all of those counterparts must be construed together to constitute the same document.

     Paragraph 7. Entire Agreement. This amendment represents the final agreement
between the parties about the subject matter of this amendment and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no
unwritten oral agreements between the parties.

     Paragraph 8. Parties. This Amendment binds and inures to the benefit of the Borrower,
the Guarantors, the Administrative Agent, the other Lenders, and their respective successors and
assigns.

     Paragraph 9. Further Assurances. The parties hereto each agree to execute from time to
time such further documents as may be necessary to implement the terms of this Agreement.

     The parties hereto have executed this Amendment in multiple counterparts to be effective as of
the Effective Date.

Remainder of Page Intentionally Blank

Signature Pages to Follow.

9

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first above written.

	 	 	 	 	 
	 	BORROWER:

ALLIS-CHALMERS ENERGY INC.,

a Delaware corporation, as Borrower

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

Signature Page 1

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

GUARANTORS:

	 	 	 	 	 
	 	AirComp L.L.C.

 	 
	 	By:  	/s/
Victor M. Perez 	 
	 	 	Victor M. Perez 	 
	 	 	Chief Financial Officer 	 
	 
	 	Allis-Chalmers Tubular Services, Inc., f/k/a

Jens’ Oil Field Service, Inc.

 	 
	 	By:  	/s/
Victor M. Perez 	 
	 	 	Victor M. Perez 	 
	 	 	Chief Financial Officer 	 
	 
	 	Strata Directional Technology, Inc.

 	 
	 	By:  	/s/
Victor M. Perez 	 
	 	 	Victor M. Perez 	 
	 	 	Chief Financial Officer 	 
	 
	 	Mountain Compressed Air, Inc.

 	 
	 	By:  	/s/
Theodore F. Pound, III 	 
	 	 	Theodore F. Pound, III 	 
	 	 	Vice President and Secretary 	 
	 

	 	 	 	 	 
	 	Allis-Chalmers Rental Tools, Inc., f/k/a Safco-Oil Field

Products, Inc., successor by merger to Specialty Rental

Tools, Inc, and Delta Rental Service, Inc.

 	 
	 	By:  	/s/
Victor M. Perez 	 
	 	 	Victor M. Perez 	 
	 	 	Chief Financial Officer 	 
	 
	 	Allis-Chalmers Production Services, Inc., f/k/a Capcoil

Tubing Services, Inc., successor by merger to Downhole

Injection Systems, LLC

 	 
	 	By:  	/s/
Victor M. Perez 	 
	 	 	Victor M. Perez 	 
	 	 	Chief Financial Officer 	 
	 
	 	Target Energy Inc.

 	 
	 	By:  	/s/
Theodore F. Pound, III 	 
	 	 	Theodore F. Pound, III 	 
	 	 	Vice President and Secretary 	 
	 
	 	OilQuip Rentals Inc.

 	 
	 	By:  	/s/
Theodore F. Pound, III 	 
	 	 	Theodore F. Pound, III 	 
	 	 	Vice President and Secretary 	 
	 

Signature Page 2

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

	 	 	 	 	 
	 	ADMINISTRATIVE AGENT

ROYAL BANK OF CANADA,

as Administrative Agent and Collateral Agent

 	 
	 	By:  	/s/ David Wheatley	 
	 	Name:  	David Wheatley	 
	 	Title:  	Manager, Agency	 
	 
	 	L/C ISSUER AND LENDER:

ROYAL BANK OF CANADA, as a Lender

and L/C Issuer

 	 
	 	By:  	/s/ Jason S. York	 
	 	Name:  	 Jason S. York	 
	 	Title:  	Authorized Signatory	 
	 

Signature Page 3

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

	 	 	 	 	 
	 	LENDER:

CATERPILLAR FINANCIAL

SERVICES CORPORATION, as Lender

 	 
	 	By:  	/s/ Michael M. Ward	 
	 	Name:  	Michael M. Ward	 
	 	Title:  	Business Underwriter	 
	 

Signature Page 4

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

	 	 	 	 	 
	 	LENDER:

COMMERCEBANK,

as a Lender

 	 
	 	By:  	/s/ Francisco Rivero	 
	 	Name:  	Francisco Rivero	 
	 	Title:  	Senior Vice President	 
	 
	 
	 	By:  	/s/ Lance Shervin Ramesh	 
	 	Name:  	Lance Shervin Ramesh	 
	 	Title:  	Vice President — U.S. Oil & Gas Banking	 
	 

Signature Page 5

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

SCHEDULE 5.05

EXISTING INDEBTEDNESS

($ in 000’s)

as of the Amendment Date

	 	 	 	 	 
	9.0% Senior Notes—original
	 	 	160,000	 
	Additional Senior Notes
	 	 	80,000	 
	Other Indebtedness:
	 	 	 	 
	Capcoil Non-Compete
	 	 	220	 
	Jens’ Non-Compete
	 	 	103	 
	Mountain Air Seller Note
	 	 	150	 
	N/P to former A-C Directors
	 	 	33	 
	Safco Non-Compete
	 	 	100	 
	Caterpillar Financial Notes
	 	 	2,820	 
	Rogers’ Seller’s Note
	 	 	750	 
	Rogers’ Non-Compete
	 	 	150	 
	DLS Argentina Branch/US Bank Debt
	 	 	9,100	 
	DLS/Banco Bisa
	 	 	2,200	 
	Insurance Financed
	 	 	1,398	 
	TOTAL
	 	 	257,024	 

Supplemental Schedule 5.05

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

SCHEDULE 5.13

SUBSIDIARIES

AND OTHER EQUITY INVESTMENTS

(a) Subsidiaries as of the Amendment Date:

	 	 	 	 	 
	Name	 	Jurisdiction of Organization	 	Ownership
	 
	 	 	 	 
	OilQuip Rentals, Inc.

	 	Delaware
	 	100% owned by the Borrower
	 
	 	 	 	 
	Allis-Chalmers Production Services, Inc.
f/k/a Capcoil Tubing Services, Inc. and
successor by merger to Downhole Injection
Systems, LLC

	 	Texas
	 	100% owned by the Borrower
	 
	 	 	 	 
	Allis-Chalmers Rental Tools, Inc.

f/k/a Safco-Oil Field Products, Inc.
successor by merger to Specialty Rental
Tools, Inc., itself successor by merger
With Delta Rental Service, Inc.

	 	Texas
	 	100% owned by the Borrower
	 
	 	 	 	 
	Allis-Chalmers Tubular Services, Inc.

	 	Texas
	 	100% owned by the Borrower
	 
	 	 	 	 
	Strata Directional Technology, Inc.

	 	Texas
	 	100% owned by the Borrower
	 
	 	 	 	 
	AirComp, LLC

	 	Delaware
	 	100% owned by the Mountain Compressed Air, Inc.
	 
	 	 	 	 
	Mountain Compressed Air, Inc.

	 	Texas
	 	100% owned by OilQuip Rentals, Inc.
	 
	 	 	 	 
	Target Energy, Inc.

	 	Delaware
	 	100% owned by the Borrower
	 
	 	 	 	 
	Rogers Oil Tool Services, Inc.

	 	Louisiana
	 	100% owned by the Borrower
	 
	 	 	 	 
	DLS Drilling Logistics and Services, Corp.

	 	British Virgin Islands
	 	100% owned by the Borrower
	 
	 	 	 	 
	Allis-Chalmers GP, LLC

	 	Delaware
	 	100% owned by the Borrower
	 
	 	 	 	 
	Allis-Chalmers LP, LLC

	 	Delaware
	 	100% owned by the Borrower

Supplemental Schedule 5.13

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

	 	 	 	 	 
	Allis-Chalmers Management LP

	 	Texas
	 	100% general partner interest owned by AC GP and 100% limited partner interest owned by AC LP

(b) Other Equity Investments as of the Amendment Date:

(c) Other Investments as of the Amendment Date:

Supplemental Schedule 5.13

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

SCHEDULE 5.22

LEASED LOCATIONS

as of Amendment Date

Borrower

1. Leased office space in Houston, Texas

AirComp

1. Leased site in Grand Junction, Colorado

2. Leased site in Farmington, New Mexico

3. Leased site in Fort Stockton, Texas

4. Leased site in San Angelo, Texas

5. Leased site in Carlsbad, New Mexico

6. Leased site in Denver, Colorado

7. Leased site in Houston, Texas

8. Leased site in Wilburton, Oklahoma

9. Leased site in Granbury, Texas

10. Leased site in Sonora, Texas

AC Tubular

1. Leased site in Buffalo, Texas

2. Leased site in Pearsall, Texas

3. Leased site in Edinburg, Texas

4. Leased site in Lafayette, Louisiana

5. Leased site in Houma, Louisiana

6. Leased site in Corpus Christi, Texas

7. Leased site in Kilgore, Texas

Strata

1. Leased site in Houston, Texas

2. Leased site in Corpus Christi, Texas

3. Leased site in Lafayette, Louisiana

4. Leased site in Oklahoma City, Oklahoma

AC Rental Tools

1. Leased site in Houston, Texas

2. Leased site in Broussard, Louisiana

AC Production Services

1. Leased site in Midland, Texas

2. Leased site in Corpus Christi, Texas

3. Leased site in Carthage, Texas

4. Leased site in Kilgore, Texas

5. Leased site in Cordell, Oklahoma

Rogers Oil Tool Services

1. Leased site in Broussard, Louisiana

2. Leased site in Elk City, Oklahoma

Target Energy, Inc.

1. Leased site in Houston, Texas

Supplemental Schedule 5.22

 

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

 

SCHEDULE 5.23

MATERIAL AGREEMENTS

as of Amendment Date

	1.	 	Lease Agreement between Materiales y Equipo Petroleo, S.A. de C.V. (Matyep) and Jens’ Oil Field
Service, now known as Allis-Chalmers Tubular Services, Inc. dated August 4, 1997
	 
	2.	 	Indenture for Senior Unsecured Notes between Wells Fargo Bank, N.A., as trustee, and Borrower
and its Subsidiaries named therein
	 
	3.	 	Stock Purchase Agreement among Bridas International Holdings Ltd., Bridas Central Company,
Ltd., Associated Petroleum Investors Limited and Borrower
	 
	4.	 	Strategic Agreement with Pan American Energy (pursuant to which a majority of DLS’ revenues
are received)
	 
	5.	 	Drilling Equipment Contract between DLS and Repsol-YPF
	 
	6.	 	Registration Rights Agreement dated January 18, 2006
	 
	7.	 	Insurance Premium Financing Loan and Security Agreement dated May 10, 2005 between
Allis-Chalmers Energy Inc. and Flatiron Capital Corp.

Supplemental Schedule 5.23

 

First Amendment to Allis-Chalmers
Energy Amended and Restated Credit Agreement

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