Document:

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                                                                    EXHIBIT 10.5

                                CREDIT AGREEMENT

        THIS AGREEMENT is entered into as of February ____1, 2002, by and
between ALLIS-CHALMERS CORPORATION, a Delaware corporation ("Borrower"), and
WELLS FARGO ENERGY CAPITAL, INC. ("Lender").

                                    RECITALS

        Borrower has requested that Lender extend credit to Borrower for the
purpose of financing, in part, the acquisition of all of the outstanding stock
of STRATA Directional Technology, Inc. ("Strata") and 81% of the outstanding
stock of Jens' Oil Field Service Inc. ("Jens," Jens and Strata are herein
sometimes collectively "Guarantors") and Lender has agreed to provide such
credit to Borrower on the terms and conditions contained herein.

        NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Lender and Borrower hereby agree as follows:

                                   ARTICLE I.
                                  CREDIT TERMS

SECTION 1.01 TERM LOAN.

        (a) Term Loan. Subject to the terms and conditions of this Agreement,
Lender hereby agrees to make a loan to Borrower in the principal amount of Three
Million Dollars ($3,000,000) ("Term Loan"), the proceeds of which shall be used
to finance a portion of the cost of acquiring all of the outstanding stock in
Strata and 81% of the outstanding stock of Jens. Borrower's obligation to repay
the Term Loan shall be evidenced by a promissory note substantially in the form
of Exhibit A attached hereto ("Term Note"), all terms of which are incorporated
herein by this reference.

        (b) Repayment. Principal and interest on the Term Loan shall be repaid
in accordance with the provisions of the Term Note with a final maturity date of
January 31, 2005 ("Maturity Date").

SECTION 1.02 INTEREST/FEES.

        (a) Interest. The outstanding principal balance of the Term Loan shall
bear interest at the rate of interest set forth in the Term Note.

        (b) Commitment Fee. Borrower shall pay to Lender a non-refundable
commitment fee equal to $60,000, which fee shall be due and payable in full
contemporaneously herewith.

        (c) Warrant. Borrower shall sell and issue to Lender a warrant to
purchase 700,000 shares of Borrower's common stock at $0.15 per share ("Warrant
B") and a warrant to purchase 335,000 shares of Borrower's common stock at $1.00
per share ("Warrant C") as more particularly set forth in that certain Warrant
Purchase Agreement and Shareholder's Agreement of even date herewith between
Borrower and Lender, attached hereto as Exhibit B.

SECTION 1.03 COLLECTION OF PAYMENTS. Borrower authorizes Lender to collect all
principal, interest, and fees due under each credit subject hereto by charging
Borrower's account with Wells Fargo Bank Texas, National Association ("WF Bank")
designated by Borrower prior to March 1, 2002, for the full amount thereof.
Should there be insufficient funds in any such account to pay all such sums when
due, any overdraft created in such account shall constitute an Event of Default.

SECTION 1.04 COLLATERAL. As security for all indebtedness of Borrower to Lender
subject hereto and all of Borrower's obligations hereunder and all other Loan
Documents executed herewith, as same may be amended,

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modified or restated from time to time (collectively "Indebtedness"), Borrower
hereby grants to Lender security interests in all of Borrower's stock in
Guarantors subject to prior liens in favor of Wells Fargo Credit, Inc., a
Minnesota corporation ("Senior Lender"), evidenced by and subject to the terms
of such security agreements, financing statements, and other documents described
on Schedule I hereto (the "Security Documents") as Lender shall require, all in
form and substance satisfactory to Lender. Borrower shall reimburse Lender
immediately upon demand for all reasonable costs and expenses incurred by Lender
in connection with any of the foregoing security, including without limitation,
filing and recording fees and costs of appraisals, audits, title insurance, and
attorneys' fees.

SECTION 1.05 SUBORDINATION OF DEBT. In connection with the Term Note, Borrower
is borrowing money from and incurring obligations to Senior Lender (the "Senior
Lender Indebtedness"), and from Jens H. Mortensen, Jr. ("Seller") (the "Seller
Indebtedness"). The obligation of Borrower to repay the Term Note and other
Indebtedness hereunder and the priority of liens created under the Security
Agreements are subject to the terms of that certain Subordination Agreement,
dated as of February 1, 2002, by and between Senior Lender and Lender attached
as Exhibit C hereto (hereafter, the "Intercreditor Agreement") and that certain
Subordination Agreement, dated as of February 1, 2002, by and among Lender,
Seller and Senior Lender attached as Exhibit D hereto (hereafter, "Seller's
Subordination Agreement").

SECTION 1.06 GUARANTY. As further security for the Indebtedness, Borrower shall
cause Guarantors to execute and deliver to Lender an absolute and unconditional
guaranty of the timely payment of, and due and punctual performance of the
Indebtedness (each a "Guaranty"). Each Guaranty will be secured by a pledge of
each Guarantor of all of such Guarantor's assets evidenced by and subject to the
terms of such security agreements, financing statements, and other documents
described on Schedule 1 hereto in form and substance satisfactory to Lender.
Borrower will cause each Guarantor to deliver to Lender, simultaneously with its
delivery of such Guaranty, written evidence satisfactory to Lender that such
Guarantor has taken all corporate action necessary to duly approve and authorize
its execution, delivery and performance of such Guaranty and any other documents
which it is required to execute.

                                   ARTICLE II.
                         REPRESENTATIONS AND WARRANTIES

        Borrower makes the following representations and warranties to Lender,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to
Lender subject to this Agreement.

SECTION 2.01 LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of Delaware, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in Texas, and all other jurisdictions in which such
qualification or licensing is required or in which the failure to so qualify or
to be so licensed could have a material adverse effect on Borrower.

SECTION 2.02 AUTHORIZATION AND VALIDITY. This Agreement, the Term Note, the
Security Documents, the Warrant Purchase Agreement, the Shareholder's Agreement
and each promissory note, contract, instrument and other document required
hereby or at any time hereafter delivered to Lender in connection herewith
(collectively, the "Loan Documents") have been duly authorized, and upon their
execution and delivery in accordance with the provisions hereof will constitute
legal, valid and binding agreements and obligations of Borrower, enforceable in
accordance with their respective terms.

SECTION 2.03 NO VIOLATION. The execution, delivery and performance by Borrower
of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.

SECTION 2.04 LITIGATION. There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Lender in
writing prior to the date hereof.

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SECTION 2.05 CORRECTNESS OF FINANCIAL STATEMENT. The quarterly consolidated and
consolidating balance sheet dated September 31, 2001, prepared by Borrower's
chief financial officer (a) are complete and correct and present fairly the
financial condition of Borrower, (b) disclose all liabilities of Borrower that
are required to be reflected or reserved against under generally accepted
accounting principles, whether liquidated or unliquidated, fixed or contingent,
and (c) were prepared in accordance with generally accepted accounting
principles consistently applied. Since the date of such quarterly financial
statement there has been no material adverse change in the financial condition
of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in
or otherwise encumbered any of its assets or properties except in favor of
Lender or Senior Lender or as otherwise permitted by Lender in writing.

SECTION 2.06 INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

SECTION 2.07 NO SUBORDINATION. There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations
subject to this Agreement to any other obligation of Borrower except as provided
in Seller's Subordination Agreement and Intercreditor Agreement.

SECTION 2.08 PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.

SECTION 2.09 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time ("ERISA"); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event
as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under generally accepted accounting principles.

SECTION 2.10 OTHER OBLIGATIONS. Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.

SECTION 2.11 ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Lender in
writing prior to the date hereof, Borrower is in compliance, which compliance
could not reasonably be expected to have a material adverse effect (as such term
is used in Section 3.01(d) hereof) with all applicable federal or state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any of Borrower's
operations and/or properties, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Resource Conservation
and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any
of the same may be amended, modified or supplemented from time to time. None of
the operations of Borrower is the subject of any federal or state investigation
evaluating whether any remedial action involving a material expenditure is
needed to respond to a release of any toxic or hazardous waste or substance into
the environment. Borrower has no material contingent liability in connection
with any release of any toxic or hazardous waste or substance into the
environment.

SECTION 2.12 REAL PROPERTY. The Borrower has no real property.

SECTION 2.13 NO CONSENT. The Borrower's execution, delivery and performance of
each of the Loan Documents, including this Agreement, to which the Borrower is a
party do not require the consent or approval of any other person or entity which
has not been obtained, including, without limitation, any regulatory authority
or governmental body of the United States of America or any state thereof or any
political subdivision of the United States of America or any state thereof.

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SECTION 2.14 QUALIFIED COMMERCIAL LOAN. This loan is a Qualified Commercial Loan
as defined in Chapter 306 of the Texas Finance Code. This loan is not secured by
real property and is not a loan for the purpose of financing a business licensed
by the Motor Vehicle Board of the Texas Department of Transportation under
Section 4.01(a), Texas Motor Vehicle Commission (Article 4413(36), Vernon's
Texas Civil Statutes). Borrower has been advised by Lender to seek advice of an
attorney and an accountant in connection with this Qualified Commercial Loan and
Borrower has had the opportunity to seek the advice of an attorney and
accountant of Borrower's choice in connection with this Qualified Commercial
Loan.

                                  ARTICLE III.
                                   CONDITIONS

SECTION 3.01 The obligation of Lender to extend any credit contemplated by this
Agreement is subject to the fulfillment to Lender's satisfaction of all of the
following conditions:

        (a) APPROVAL OF LENDER COUNSEL. All legal matters incidental to the
extension of credit by Lender shall be satisfactory to Lender's counsel.

        (b) DOCUMENTATION AND FEES. Lender shall have received, in form and
substance satisfactory to Lender, such documents as Lender may require
including, without limitation, each of the documents described on Schedule I
attached hereto and payment of all fees and expenses due hereunder.

        (c) SIMULTANEOUS CLOSING. All conditions precedent for consummation of
Borrower's acquisition of Guarantors' common stock under the Stock Purchase
Agreement between Borrower and Energy Spectrum Partners, L.P. regarding Strata
and Stock Purchase Agreement between Borrower and Jens H. Mortenson, Jr.
regarding Jens, and under the Senior Loan Documents shall be satisfied and all
such agreements shall close and fund contemporaneously herewith.

        (d) FINANCIAL CONDITION. There shall have been no material adverse
change, as determined by Lender, in the financial condition or business of
Borrower or any guarantor hereunder, nor any material decline, as determined by
Lender, in the market value of any collateral required hereunder or a
substantial or material portion of the assets of Borrower or any such guarantor.

        (e) INSURANCE. Borrower shall have delivered to Lender evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Lender, and where
required by Lender, with loss payable endorsements in favor of Lender, including
without limitation, policies of fire and extended coverage insurance covering
all real property collateral required hereby, with replacement cost and
mortgagee loss payable endorsements, and such policies of insurance against
specific hazards affecting any such real property as may be required by
governmental regulation or Lender, and all containing provisions that such
policies cannot be cancelled without thirty (30) days' prior written notice to
Lender.

        (f) OPINION OF BORROWER'S COUNSEL. An opinion of counsel for Borrower
and the Guarantors, addressed to Lender.

                                   ARTICLE IV.
                             AFFIRMATIVE COVENANTS

        Borrower covenants that so long as any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Lender under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Lender otherwise consents in
writing:

SECTION 4.01 PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein, and immediately upon

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demand by Lender, the amount by which the outstanding principal balance of any
credit subject hereto at any time exceeds any limitation on borrowings
applicable thereto.

SECTION 4.02 ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Lender, at any reasonable time, to inspect,
audit and examine such books and records, to make copies of the same, and to
inspect the properties of Borrower.

SECTION 4.03 FINANCIAL STATEMENTS. Borrower will promptly furnish to Lender from
time to time upon request such information regarding the business and affairs
and financial condition of Borrower and its Subsidiaries (as used herein,
"Subsidiary" shall mean any corporation of which more than 50% of the issued and
outstanding securities having ordinary voting power for the election of
directors is owned or controlled, directly or indirectly, by Borrower and/or one
or more of its subsidiaries) as Lender may reasonably request, and will furnish
to Lender:

        (a) Annual Reports - promptly after becoming available and in any event
within 90 days after the close of each fiscal year of Borrower, the audited
consolidated and consolidating balance sheets of Borrower and its Subsidiaries
as at the end of such year, the audited consolidated and consolidating
statements of profit and loss of Borrower and its Subsidiaries for such year and
the audited consolidated and consolidating statements of reconciliation of
capital accounts of the Borrower and its Subsidiaries for such year, setting
forth in each case for fiscal years ending after December 31, 2000, in
comparative form the corresponding figures for the preceding fiscal year,
accompanied by the related report of independent public accountants acceptable
to Lender which report shall be to the effect that such statements have been
prepared in accordance with generally accepted accounting principles
consistently followed throughout the period indicated except for such changes in
such principles with which the independent public accountants shall have
concurred, showing the calculations confirming Borrower's compliance with all
financial covenants; and

        (b) Quarterly Reports -- promptly after becoming available and in any
event within 45 days after the end of each of the first three quarterly periods
in each fiscal year of Borrower, the consolidated and consolidating balance
sheets of Borrower and its Subsidiaries as at the end of such period, the
consolidated and consolidating statements of profit and loss of Borrower and its
Subsidiaries for such quarter and for the period from the beginning of the
fiscal year to the close of such quarter, and the consolidated and consolidating
statement of reconciliation of capital accounts of Borrower and its Subsidiaries
for such quarter and for the period from the beginning of the fiscal year to the
close of such quarter, setting forth in each case for fiscal years ending after
January 1, 2001, in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, certified by the principal
financial officer of Borrower to have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the period
indicated except to the extent stated therein, subject to normal changes
resulting from year-end adjustment;

        (c) Audit Reports -- promptly upon receipt thereof, one copy of each
other report submitted to Borrower or any Subsidiary by independent accountants
in connection with any annual, interim or special audit made by them of the
books of Borrower or any Subsidiary;

        (d) contemporaneously with each annual and quarterly financial statement
of Borrower required hereby, a certificate of a senior financial officer of
Borrower that said financial statements are accurate, showing the calculations
confirming Borrower's compliance with all financial covenants and that there
exists no Event of Default nor any condition, act or event which with the giving
of notice or the passage of time or both would constitute an Event of Default;

        (e) SEC and Other Reports -- promptly upon their becoming available, one
copy of each financial statement, report, notice or proxy statement sent by
Borrower to stockholders generally, and of each regular or periodic report and
any registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by Borrower with or received by
Borrower in connection therewith from, any securities exchange or the Securities
and Exchange Commission or any successor agency; and

        (f) From time to time such other information as Lender may reasonably
request.

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SECTION 4.04 COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.

SECTION 4.05 INSURANCE. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business similar to that of Borrower,
including but not limited to fire, extended coverage, public liability, flood,
property damage and workers' compensation, with all such insurance carried with
companies and in amounts satisfactory to Lender, and deliver to Lender from time
to time at Lender's request Schedules setting forth all insurance then in
effect.

SECTION 4.06 FACILITIES. Keep all properties useful or necessary to Borrower's
business in good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be
fully and efficiently preserved and maintained.

SECTION 4.07 TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Lender's satisfaction, for eventual payment thereof in
the event Borrower is obligated to make such payment.

SECTION 4.08 LITIGATION. Promptly give notice in writing to Lender of all
litigation pending or threatened against Borrower with claims in excess of
$25,000.00 in the aggregate.

SECTION 4.09 FINANCIAL CONDITION. Maintain Borrower's financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein):

        (a) Tangible Net Worth not at any time, less than eighty-five percent
(85%) of Tangible Net Worth as of the date hereof (plus seventy-five percent
(75%) of cumulative net income after the date hereof, excluding any fiscal
quarters in which net income is negative), plus one hundred percent (100%) of
equity offerings after the date hereof, with "Tangible Net Worth" defined herein
as the aggregate of total stockholders' equity plus any debt subordinated to the
Indebtedness hereunder less any intangible assets.

        (b) Fixed Charge Coverage Ratio not less than 1.1 to 1.0 for the twelve
(12) month period ending on the last day of each fiscal quarter, beginning with
the fiscal quarter ending March 31, 2003, with "EBITDA" defined herein as net
income plus cash interest charges, plus cash taxes, plus depreciation,
amortization and non-cash charges on a trailing twelve (12) month basis with
"Fixed Charge Coverage Ratio" defined herein as (i) EBITDA plus applicable
operating lease payments less unfinanced capital expenditures divided by (ii)
the aggregate of total interest charges (excluding any applicable paid-in-kind
("PIK") charges), scheduled principal payments, operating lease payments, cash
dividends paid, and paid taxes for the same period.

        (c) [Total Funded Debt to EBITDA Ratio not more than 2.0 to 1.0
commencing March 31, 2003, with "Total Funded Debt to EBITDA Ratio" defined as
Total Funded Debt divided by the twelve (12) trailing months EBITDA. "Total
Funded Debt" is defined herein as all interest-bearing obligations of Borrower,
whether secured or unsecured, senior or subordinated, excluding the Seller
Note.]

        (d) Consolidated Minimum Debt Service Coverage Ratio determined for the
fiscal year to date, at not less than the amounts set forth on Schedule 4.09(d)
hereto.

SECTION 4.10 NOTICE TO LENDER. Promptly (but in no event more than five (5) days
after the occurrence of each such event or matter) give written notice to Lender
in reasonable detail of: (a) the occurrence of any Event of Default of which
Borrower is aware, or any condition, event or act which with the giving of
notice or the passage of time or both would constitute an Event of Default; (b)
any change in the name or the organizational structure of

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Borrower; (c) the occurrence and nature of any Reportable Event or Prohibited
Transaction, each as defined in ERISA, or any funding deficiency with respect to
any Plan; or (d) any termination or cancellation of any insurance policy which
Borrower is required to maintain, or any uninsured or partially uninsured loss
through liability or property damage, or through fire, theft or any other cause
affecting Borrower's property in excess of an aggregate of $250,000.00.

                                   ARTICLE V.
                               NEGATIVE COVENANTS

        Borrower further covenants that so long as Lender remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Lender under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Lender's prior written
consent:

SECTION 5.01 USE OF FUNDS. The proceeds of credit extended hereunder shall be
used to finance the acquisition of a portion of the common stock of Guarantors
and for no other purposes.

SECTION 5.02 OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Lender, (b) any
other liabilities of Borrower existing as of, and described in Seller's
Subordination Agreement and the Intercreditor Agreement, and (c) liabilities of
Borrower, arising under the MCA Loan Documents. "MCA Loan Documents" are defined
as that certain Credit Agreement between Lender and Mountain Compressed Air,
Inc., a Texas corporation ("MCA"), a wholly owned subsidiary of OilQuip, Inc., a
wholly-owned subsidiary of Borrower, dated February 6, 2001, as amended, along
with all loan documents executed in connection therewith, as amended from time
to time.

SECTION 5.03 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.

SECTION 5.04 GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except Borrower's
guaranty of obligations arising under the MCA Loan Documents, any of the
foregoing in favor of Lender or as described in Intercreditor Agreement.

SECTION 5.05 LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except any of the foregoing existing as of,
and disclosed to Lender prior to, the date hereof.

SECTION 5.06 DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding except
as provided in the Warrant Purchase Agreement.

 SECTION 5.07 PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower's assets now
owned or hereafter acquired, except any of the foregoing in favor of Lender or
which is existing as of, and described under the Intercreditor Agreement as
described in the MCA Loan Documents.

SECTION 5.08 SALES AND LEASEBACKS. Enter into any arrangement, directly or
indirectly, with any person whereby Borrower shall sell or transfer any of its
property, whether now owned or hereafter acquired, and whereby Borrower shall
then or thereafter rent or lease as lessee such property or any part thereof or
other property which Borrower intends to use for substantially the same purpose
or purposes as the property is sold or transferred.

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SECTION 5.09 NATURE OF BUSINESS. Allow any material change to be made in the
character of Borrower's business as an oilfield service provider.

SECTION 5.10 TRANSACTIONS WITH AFFILIATES. Enter into any transaction, including
without limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with any affiliate of Borrower unless such
transactions are in the ordinary course of its business and are upon fair and
reasonable terms no less favorable to Borrower than Borrower would obtain in a
comparable arm's-length transaction with a person not an affiliate.

                                   ARTICLE VI.
                               EVENTS OF DEFAULT

SECTION 6.01 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:

        (a) Borrower shall fail to pay when due any principal, interest, fees or
other amounts payable under any of the Loan Documents.

        (b) Any financial statement or certificate furnished to Lender in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.

        (c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections 6.01(a) and (b) and notice required
under Section 4.10 above), and with respect to any such default which by its
nature can be cured, such default shall continue for a period of twenty (20)
days from its occurrence. Any default regarding failure to provide notice
required under Section 4.10 above, shall constitute an immediate Event of
Default.

        (d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any Guarantor
hereunder has incurred any debt or other liability to any person or entity,
including Lender.

        (e) The filing of a notice of judgment lien against Borrower or any
Guarantor hereunder; or the recording of any abstract of judgment against
Borrower or any Guarantor hereunder in any county in which Borrower or such
Guarantor has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any Guarantor hereunder; or the entry of a judgment
against Borrower or any Guarantor hereunder. Notwithstanding the foregoing,
there shall not be an Event of Default upon the filing of notices of judgment
lien, the recording of abstracts of judgment, or the entries of judgment against
Borrower or any Guarantor hereunder if the aggregate amount of all such
judgments is less than $50,000 and such judgments are released within sixty (60)
days of the filing, recording or entry of such judgment.

        (f) Borrower or any Guarantor hereunder shall become insolvent, or shall
suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any Guarantor hereunder shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any Guarantor
hereunder, or Borrower or any such Guarantor shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any such Guarantor shall be adjudicated a bankrupt, or
an order for relief shall be entered against Borrower or any such Guarantor by
any court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors.

                                      156
<PAGE>

        (g) The dissolution or liquidation of Borrower or either Guarantor; or
Borrower or either Guarantor, or any of their directors or stockholders
respectively, shall take action seeking to effect the dissolution or liquidation
of Borrower or such Guarantor.

        (h) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the common stock of
stockholders' equity in Borrower.

        (i) Any "Event of Default" as defined under the Senior Loan Documents,
the Seller's Note or the MCA Loan Documents or any amendments, modifications or
restatements thereof.

        SECTION 6.02 REMEDIES. Upon (a) the occurrence of any Event of Default
under subsection 6.1(f) above, all Indebtedness including principal and accrued
and unpaid interest outstanding under each of the Loan Documents shall become
automatically due and payable and (b) upon the occurrence of any other Event of
Default, all Indebtedness including all principal and accrued and unpaid
interest outstanding under each of the Loan Documents, any term thereof to the
contrary notwithstanding, shall at Lender's option and without notice become
immediately due and payable; in each case without presentment, demand, or any
notices of any kind, including without limitation notice of nonperformance,
notice of protest, protest, notice of dishonor, notice of intention to
accelerate or notice of acceleration, all of which are hereby expressly waived
by each Borrower. Upon acceleration of the Indebtedness, Lender shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Lender may be exercised at any time by Lender and from time to
time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.

                                  ARTICLE VII.
                                 MISCELLANEOUS

SECTION 7.01 NO WAIVER. No delay, failure or discontinuance of Lender in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Lender of any breach of or default under any of the Loan Documents must
be in writing and shall be effective only to the extent set forth in such
writing.

SECTION 7.02 NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

        BORROWER:     ALLIS-CHALMERS CORPORATION
                      7660 Woodway, Suite 200
                      Houston, Texas 77063

        LENDER:       WELLS FARGO ENERGY CAPITAL, INC.
                      1000 Louisiana, Suite 600
                      Houston, Texas 77002

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.

SECTION 7.03 COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Lender
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees), expended or incurred by Lender in connection with (a) the
negotiation and preparation of this Agreement and the other Loan Documents,
Lender's continued administration hereof and thereof,

                                      157
<PAGE>

and the preparation of any amendments and waivers hereto and thereto, (b) the
enforcement of Lender's rights and/or the collection of any amounts which become
due to Lender under any of the Loan Documents, (c) the prosecution or defense of
any action in any way related to any of the Loan Documents, including without
limitation, any action for declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any of
the foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion brought
by Lender or any other person) relating to any Borrower or any other person or
entity, (d) the performance, prior to the date hereof and after any Event of
Default, of an asset appraisal by an independent qualified appraiser approved by
Lender; and (e) up to two (2) collateral audits performed by Lender per fiscal
year with respect to the collateral or any other matters relating to the loans
provided for in this Agreement and/or Borrower's compliance with the terms and
provisions of this Agreement.

SECTION 7.04 SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Lender's
prior written consent. Lender reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Lender's rights and benefits under each of the Loan Documents. In connection
therewith, Lender may disclose all documents and information which Lender now
has or may hereafter acquire relating to any credit subject hereto, Borrower or
its business, any guarantor hereunder or the business of such guarantor, or any
collateral required hereunder.

SECTION 7.05 AMENDMENT. This Agreement may be amended or modified only in
writing signed by each party hereto.

SECTION 7.06 NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

SECTION 7.07 TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

SECTION 7.08 SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

SECTION 7.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

SECTION 7.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.

SECTION 7.11 SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in the Loan Documents, in no event shall any Loan Documents
require the payment or permit the payment, taking, reserving, receiving,
collection or charging of any sums constituting interest under applicable laws
that exceed the maximum amount permitted by such laws, as the same may be
amended or modified from time to time (the "Maximum Rate"). If any such excess
interest is called for, contracted for, charged, taken, reserved or received in
connection with any Loan Documents, or in any communication by or any other
person to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under the Loan
Documents shall exceed the Maximum Rate, then in such event it is agreed that:
(i) the provisions of this Paragraph shall govern and control; (ii) neither
Borrower nor any other person or entity now or hereafter liable for the payment
of any Loan Documents shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (iii) any such excess interest
which is or has been received by Lender, notwithstanding this paragraph, shall
be credited against the

                                      158
<PAGE>

then unpaid principal balance hereof or thereof, or if any of the Loan Documents
has been or would be paid in full by such credit, refunded to Borrower; and (iv)
the provisions of each of the Loan Documents, and any other communication to
Borrower, shall immediately be deemed reformed and such excess interest reduced,
without the necessity of executing any other document, to the Maximum Rate. The
right to accelerate the maturity of the Loan Documents does not include the
right to accelerate, collect or charge unearned interest, but only such interest
that has otherwise accrued as of the date of acceleration. Without limiting the
foregoing, all calculations of the rate of interest contracted for, charged,
taken, reserved or received in connection with any of the Loan Documents which
are made for the purpose of determining whether such rate exceeds the Maximum
Rate shall be made to the extent permitted by applicable laws by amortizing,
prorating, allocating and spreading during the period of the full term of such
Loan Documents, including all prior and subsequent renewals and extensions
hereof or thereof, all interest at any time contracted for, charged, taken,
reserved or received by Lender. The terms of this Paragraph shall be deemed to
be incorporated into each of the other Loan Documents.

        To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Lender hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Lender's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.

SECTION 7.12 RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of
an Event of Default, (a) Borrower hereby authorizes Lender and WF Bank, acting
on Lender's behalf, at any time and from time to time, without notice, which is
hereby expressly waived by each Borrower, and whether or not Lender shall have
declared any credit subject hereto to be due and payable in accordance with the
terms hereof, to set off against, and to appropriate and apply to the payment
of, Borrower's obligations and liabilities under the Loan Documents (whether
matured or unmatured, fixed or contingent, liquidated or unliquidated), any and
all amounts owing by Lender to Borrower (whether payable in U.S. dollars or any
other currency, whether matured or unmatured, and in the case of deposits,
whether general or special (except trust and escrow accounts), time or demand
and however evidenced), and (b) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Lender, in its sole
discretion, may elect. Borrower hereby grants to Lender a security interest in
all deposits and accounts maintained with Lender and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Lender under the Loan Documents subject only to prior liens and security
interests in favor of WF Bank.

SECTION 7.13 BUSINESS PURPOSE. Borrower represents and warrants that each credit
subject hereto is for a business, commercial, investment, agricultural or other
similar purpose and not primarily for a personal, family or household use.

SECTION 7.14 ARBITRATION.

        (a) Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related Loan Documents which are the subject of
this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.

        (b) Governing Rules. Any arbitration proceeding will (i) proceed in a
location in Texas selected by the American Arbitration Association ("AAA"); (ii)
be governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following

                                      159
<PAGE>

a demand by any other party shall bear all costs and expenses incurred by such
other party in compelling arbitration of any dispute. Nothing contained herein
shall be deemed to be a waiver by any party that is a Lender of the protections
afforded to it under 12 U.S.C. Section 91 or any similar applicable state law.

        (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in Sections (i), (ii) and (iii) of this paragraph.

        (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of Texas with a minimum of ten years experience
in the substantive law applicable to the subject matter of the dispute to be
arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in determining
any claim. In any arbitration proceeding the arbitrator will decide (by
documents only or with a hearing at the arbitrator's discretion) any pre-hearing
motions which are similar to motions to dismiss for failure to state a claim or
motions for summary adjudication. The arbitrator shall resolve all disputes in
accordance with the substantive law of Texas and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.

        (e) Discovery. In any arbitration proceeding discovery will be permitted
in accordance with the Rules. All discovery shall be expressly limited to
matters directly relevant to the dispute being arbitrated and must be completed
no later than 20 days before the hearing date and within 180 days of the filing
of the dispute with the AAA. Any requests for an extension of the discovery
periods, or any discovery disputes, will be subject to final determination by
the arbitrator upon a showing that the request for discovery is essential for
the party's presentation and that no alternative means for obtaining information
is available.

        (f) Class Proceedings and Consolidations. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.

        (g) Payment Of Arbitration Costs And Fees. The arbitrator shall award
all costs and expenses of the arbitration proceeding.

        (h) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.

                                      160
<PAGE>

SECTION 7.15 INDEMNIFICATION. Borrower agrees to indemnify Lender, each assignee
or participant hereunder, each of their Affiliates and each of their officers,
directors, employees, representatives, agents, attorneys, accountants and
experts ("Indemnified Parties") from, hold each of them harmless against and
promptly upon demand pay or reimburse each of them for, the Indemnity Matters
(hereafter defined) which may be incurred by or asserted against or involve any
of them (whether or not any of them is designated a party thereto) as a result
of, arising out of or in any way related to (i) any actual or proposed use by
Borrower of the proceeds of any of the Loans, (ii) the execution, delivery and
performance of the Loan Documents, (iii) the operations of the business of
Borrower, (iv) the failure of Borrower to comply with the terms of any Loan
Document or this Agreement, or with any applicable law, (v) any inaccuracy of
any representation or any breach of any warranty of Borrower set forth in any of
the Loan Documents, (vi) any assertion that any Indemnified Party was not
entitled to receive the proceeds received pursuant to the Loan Documents or
(vii) any other aspect of the Loan Documents, including, without limitation, the
reasonable fees and disbursements of counsel and all other expenses incurred in
connection with investigating, defending or preparing to defend any such action,
suit, proceeding (including any investigations, litigation or inquiries) or
claim and including all Indemnity Matters arising by reason of the ordinary
negligence of any Indemnified Party, but excluding all Indemnity Matters arising
solely by reason of claims between the Lender or any assignee or participant, or
any such party's shareholders against Lender or any assignee or participant or
by reason of the gross negligence or willful misconduct on the part of the
Indemnified Party. "Indemnity Matters" shall mean any and all actions, suits,
proceedings (including any investigations, litigation or inquiries), claims,
demands and causes of action made or threatened against a person and, in
connection therewith, all losses, liabilities, damages (including, without
limitation, consequential damages) or reasonable costs and expenses of any kind
or nature whatsoever incurred by such person whether caused by the sole or
concurrent negligence of such person seeking indemnification.

SECTION 7.16 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF LENDER
IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF.

NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.

   [The remainder of this page intentionally blank. Signature page to follow.]

                                      161
<PAGE>

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

                                        WELLS FARGO ENERGY CAPITAL, INC.

                                        By:
                                           _____________________________________
                                              Gary Milavec
                                              Senior Vice President

                                        ALLIS-CHALMERS CORPORATION

                                        By:
                                           _____________________________________
                                              Munawar H. Hidayatallah
                                              Chairman and Chief Executive Off

                                      162<PAGE>
                                                                    EXHIBIT 10.6

                           WARRANT PURCHASE AGREEMENT

                                 BY AND BETWEEN

                           ALLIS-CHALMERS CORPORATION
                             A DELAWARE CORPORATION
                                 (THE "COMPANY")

                                       AND

                        WELLS FARGO ENERGY CAPITAL, INC.
                               A TEXAS CORPORATION
                                  ("PURCHASER")

                                 CONCERNING THE
                   PURCHASE OF WARRANTS TO PURCHASE 1,500,000
                      SHARES OF THE COMPANY'S COMMON STOCK

                           EFFECTIVE FEBRUARY 1, 2002

                                      163
<PAGE>

                                TABLE OF CONTENTS

                           WARRANT PURCHASE AGREEMENT

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                       <C>
ARTICLE I.  PURCHASE AND SALE OF WARRANTS....................................................1
        Section 1.1.  Sale and Issuance......................................................1
        Section 1.2.  Purchase; Purchase Price...............................................2
        Section 1.3.  Termination of Shareholder Agreement

ARTICLE II.  CLOSING DATE; DELIVERY..........................................................2
        Section 2.1.  Closing Date...........................................................2
        Section 2.2.  Payment; Delivery......................................................2

ARTICLE III.  REPRESENTATIONS AND WARRANTIES.................................................2
        Section 3.1.  Representations and Warranties of the Company..........................2
                (a)   Organization and Standing; Certificate and By-Laws.....................2
                (b)   Corporate Power........................................................2
                (c)   Authorization..........................................................3
                (d)   Capitalization.........................................................3
                (e)   Governmental Consent, etc..............................................4
                (f)   Offering...............................................................4
                (g)   Brokers or Finders.....................................................4
        Section 3.2.  Representations and Warranties of Purchaser............................4

ARTICLE IV.  CONDITIONS TO CLOSING...........................................................5
        Section 4.1.  Purchaser's Conditions.................................................5
                (a)   Representations and Warranties Correct.................................5
                (b)   Covenants..............................................................6
                (c)   Compliance Certificate.................................................6
                (d)   Consents...............................................................6
                (e)   Consummation of Loan Agreement.........................................6
        Section 4.2.  Company's Conditions...................................................6
                (a)   Representations........................................................6
                (b)   Closing of Loan Agreement..............................................6

ARTICLE V.  AFFIRMATIVE COVENANTS OF THE COMPANY.............................................6
        Section 5.1.  Financial Information..................................................6
                (a)   SEC Reports............................................................6
                (b)   Other Reports..........................................................7
        Section 5.2.  Transactions with Affiliates...........................................7
        Section 5.3.  Restrictions on Dividend Payments......................................7
                (a)   Restriction............................................................7
                (b)   Permitted Dividends....................................................7
</TABLE>

                                      164

<PAGE>

<TABLE>
<S>                                                                                       <C>
        Section 5.4.  Access.................................................................8
        Section 5.5.  Rule 144 Reporting.....................................................8

ARTICLE VI.  THE COMPANY'S INDEMNIFICATION...................................................8
        Section 6.1.  Indemnification........................................................8

ARTICLE VII.  WARRANT A PUT AND CALL OPTIONS.................................................8

ARTICLE VIII.  WARRANT B PUT AND CALL OPTIONS

ARTICLE IX.  MISCELLANEOUS..................................................................14
        Section 9.1.  Governing Law.........................................................14
        Section 9.2.  Survival..............................................................14
        Section 9.3.  Successors and Assigns................................................14
        Section 9.4.  Entire Agreement, Amendment...........................................14
        Section 9.5.  Notices, etc..........................................................14
        Section 9.6.  Delays or Omissions...................................................15
        Section 9.7.  Counterparts..........................................................15
        Section 9.8.  Severability..........................................................15
        Section 9.9.  Titles and Subtitles..................................................15
        Section 9.10  Specific Performance..................................................15

                                    WARRANTS

ARTICLE I.  EXERCISE OF WARRANT..............................................................1
        Section 1.1.  Manner of Exercise.....................................................1
        Section 1.2.  When Exercise Effective................................................1
        Section 1.3.  Delivery of Stock Certificates, etc....................................1
                (a)   Certificates...........................................................2
                (b)   Warrant................................................................2

ARTICLE II. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE................................2
        Section 2.1.  General; Warrant Price.................................................2
        Section 2.2.  Issuance of Additional Shares of Common Stock..........................2
        Section 2.3.  Extraordinary Dividends and Distributions..............................3
        Section 2.4.  Treatment of Options and Convertible Securities........................3
        Section 2.5.  Treatment of Stock Dividends, Stock Splits, etc........................4
        Section 2.6.  Computation of Consideration...........................................4
                (a)   Shares Actually Issued.................................................4
                (b)   Shares Deemed Issued...................................................4
                (c)   Stock Dividends, Etc...................................................5
                (d)   Services...............................................................5
        Section 2.7.  Adjustments for Combinations, etc......................................5
        Section 2.8.  Dilution in Case of Other Securities...................................5
        Section 2.9.  Appreciation Rights....................................................6
</TABLE>

                                      165

<PAGE>

<TABLE>
<S>                                                                                       <C>
                (b)   Value Based on Liquidating Distributions...............................6
                (c)   Value Based on Dividends and Liquidating Distributions.................6
                (d)   Other Profits..........................................................6

ARTICLE III.  CONSOLIDATION, MERGER, ETC.....................................................6
        Section 3.2.  Assumption of Obligations..............................................6

ARTICLE IV.  OTHER PROVISIONS CONCERNING DILUTION............................................7
        Section 4.1.  Other Dilutive Events..................................................7
        Section 4.2.  No Dilution or Impairment..............................................7
        Section 4.3.  Accountant's and Company's Report as to Adjustments....................7
        Section 4.4.  Notices of Corporate Action............................................8
        Section 4.5.  Registration of Common Stock...........................................8
        Section 4.6.  Availability of Information............................................9
        Section 4.7.  Reservation of Stock, etc..............................................9

ARTICLE V.  RESTRICTIONS ON TRANSFER.........................................................9
        Section 5.1.  Restrictive Legends....................................................9
        Section 5.2.  Notice of Proposed Transfer; Opinions of Counsel.......................9
        Section 5.3.  Termination of Restrictions...........................................10

ARTICLE VI. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS................................10
        Section 6.1.  Ownership of Warrants.................................................10
        Section 6.2.  Office, Transfer and Exchange of Warrants.............................10
                (a)   Office................................................................10
                (b)   New Warrant...........................................................10
        Section 6.3.  Replacement of Warrants...............................................10

ARTICLE VII.  DEFINITIONS...................................................................11

ARTICLE VIII. MISCELLANEOUS.................................................................14
        Section 8.1.  Remedies..............................................................14
        Section 8.2.  No Rights or Liabilities as Stockholder...............................14
        Section 8.3.  Notices...............................................................14
        Section 8.4.  Miscellaneous.........................................................14
</TABLE>

                                      166

<PAGE>

                           WARRANT PURCHASE AGREEMENT

        This Warrant Purchase Agreement ( the "AGREEMENT") is made and entered
into as of February 1, 2002 , by and between Allis-Chalmers Corporation, a
Delaware corporation (the "COMPANY"), and Wells Fargo Energy Capital, Inc., a
Texas corporation (the "PURCHASER").

                              W I T N E S S E T H:

        WHEREAS, the Company and Purchaser have agreed to (i) the cancellation
and termination of that certain Warrant (the "PRIOR WARRANT") to purchase
1,350,000 shares of the common stock, par value $0.01 per share, of Mountain
Compressed Air, Inc., a Texas corporation ("MCAI") and wholly-owned subsidiary
of OilQuip Rentals, Inc., a Delaware corporation ("OILQUIP"), which is a
wholly-owned subsidiary of the Company, dated as of February 6, 2001, held by
Purchaser, and (ii) the cancellation and termination of that certain
Shareholders Agreement (the "PRIOR SHAREHOLDERS' AGREEMENT") dated as of
February 6, 2001 by and among Purchaser, OilQuip, and MCAI (collectively, the
"TERMINATIONS"); and

        WHEREAS, in connection with the Terminations and the transactions
contemplated by that certain Credit Agreement between Purchaser and the Company,
dated as of even date herewith, as same may be amended or restated from time to
time (the "LOAN AGREEMENT"), Purchaser and the Company have agreed to (i) the
issuance by the Company to Purchaser, in accordance with the terms of this
Agreement, of Warrants to purchase an aggregate of 1,500,000 shares of the
common stock, par value $0.15 per share, of the Company (the "COMMON STOCK");
(ii) enter into that certain Registration Rights Agreement (the "REGISTRATION
RIGHTS AGREEMENT"), dated as of even date herewith, to provide Purchaser with
certain rights with respect to the shares of Common Stock or other securities
into which the Warrants will be exercisable upon payment of the purchase price
as set forth in the Warrants (the "SHARES"); and (iii) enter into that certain
Shareholders' Agreement (the "SHAREHOLDERS' AGREEMENT"), dated as of even date
herewith, with Munawar H. Hidayatallah ("HIDAYATALLAH") and Energy Spectrum
Partners, LP, a Delaware limited partnership ("ENERGY SPECTRUM"), to provide
Purchaser with certain rights with respect to the Shares.

        NOW, THEREFORE, for and in consideration of the mutual covenants and
promises herein contained, as well as for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, contract and agree as follows:

                    ARTICLE I. PURCHASE AND SALE OF WARRANTS

        Section 1.1. Sale and Issuance. The Company shall sell and issue to
Purchaser at the Closing (as hereinafter defined) (i) a Warrant, dated effective
as of the Closing Date, to purchase 465,000 shares of Common Stock ("WARRANT
A"), the form of which is attached hereto as EXHIBIT A and incorporated herein,
(ii) a Warrant, dated effective as of the Closing Date (as hereinafter defined),
purchase 700,000 shares of Common Stock ("WARRANT B"), the form of which is
attached hereto as EXHIBIT B and incorporated herein, and (iii) a Warrant, dated
effective as of the Closing Date, to purchase 335,000 shares of Common Stock
("WARRANT C"), the form of which is attached hereto as EXHIBIT C and
incorporated herein (collectively, the "WARRANTS"), each on the terms and
subject to adjustment as provided for therein.

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        Section 1.2. Purchase; Purchase Price. Subject to the terms and
conditions set forth herein, for and in consideration of the sale and issuance
of the Warrants, Purchaser hereby (i) consents to the Terminations and (ii)
agrees to enter into the Loan Agreement.

        Section 1.3. Termination of Prior Warrant. Purchaser, the Company and
MCAI do hereby agree to terminate and cancel in all respects the Prior Warrant.

        Section 1.4. Termination of Prior Shareholders' Agreement. Purchaser,
the Company, OilQuip and MCAI do hereby agree to terminate and cancel in all
respects the Prior Shareholders' Agreement.

        Section 1.5. New Shareholders' Agreement. Purchaser, the Company,
Hidayatallah and Energy Spectrum, do hereby agree to enter into the
Shareholders' Agreement on mutually agreeable terms as of the date hereof.

        Section 1.6. Registration Rights Agreement. Purchaser and the Company do
hereby agree to enter into the Registration Rights Agreement on mutually
agreeable terms as of the date hereof.

                       ARTICLE II. CLOSING DATE; DELIVERY

        Section 2.1. Closing Date. The closing ("CLOSING") of the purchase and
sale of the Warrants hereunder shall be held contemporaneously with the
transactions contemplated by the Loan Agreement (the "CLOSING DATE") or at such
other time and place upon which the Company and Purchaser shall agree.

        Section 2.2. Payment; Delivery. At the Closing, the Company will deliver
to Purchaser the duly executed Warrants registered in the name of Purchaser,
together with delivery by the Company of such other documents, certificates and
opinions of counsel as may be required to be delivered by the Company to
Purchaser as a condition to Purchaser's consummation of this Agreement.

                   ARTICLE III. REPRESENTATIONS AND WARRANTIES

        Section 3.1. Representations and Warranties of the Company. In order to
induce Purchaser to enter into this Agreement, the Company hereby represents and
warrants to Purchaser and each subsequent holder of Warrants, as follows:

               (a) Organization and Standing; Certificate and By-Laws. The
        Company is a corporation legally incorporated, duly organized, validly
        existing, and in good standing under the laws of the State of Delaware.
        The Company has all requisite corporate power and authority to own and
        operate its properties and assets, and to carry on its business as
        presently conducted and as proposed to be conducted. The Company is
        qualified to do business as a foreign corporation and is in good
        standing in all jurisdictions in which the Company owns or leases
        property or in which the failure to be so qualified would have a
        material adverse affect on the Company's business as currently
        conducted.

               (b) Corporate Power. The Company has, and will have at the
        Closing and at all times during which the Warrants are exercisable, all
        requisite corporate power and authority to execute and deliver this
        Agreement, to sell and issue the Warrants hereunder,

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        to issue the Shares upon exercise of the Warrants and to carry out and
        perform its obligations under the terms of this Agreement and the
        Warrants.

               (c) Authorization. All corporate action necessary for the
        authorization, execution, delivery and performance of this Agreement by
        the Company, the authorization, sale, issuance and delivery of the
        Warrants and (upon exercise of the Warrant) the Shares and the
        performance of all of the Company's obligations hereunder and under the
        Warrants have been taken. This Agreement and the Warrants each
        constitutes a valid and binding obligation of the Company, enforceable
        in accordance with its terms, except as may be limited by insolvency,
        bankruptcy, moratorium or other laws affecting the rights of creditors
        in general. The Shares have been duly and validly reserved and, when
        issued in compliance with the provisions of this Agreement and the
        Warrants, will be validly issued, fully paid and nonassessable. Upon
        issuance upon exercise of the Warrants, the Shares will be free of any
        liens, claims or encumbrances. The Shares are not subject to any
        preemptive rights or rights of first refusal.

               (d) Capitalization. The authorized capital stock of the Company
        consists of 100,000,000 shares of Common Stock, of which 11,588,128
        shares are issued and outstanding as of the date hereof, and 10,000,000
        shares of preferred stock, par value $0.01 per share (the "PREFERRED
        STOCK"), of which no shares are issued and outstanding. The outstanding
        shares have been duly authorized and validly issued, and are fully paid
        and nonassessable. All outstanding securities of the Company were issued
        in compliance with applicable federal and state securities laws. The
        Company has reserved 1,035,000 shares of Common Stock for issuance upon
        exercise of the Warrants. After giving effect to all of the transactions
        contemplated by the Loan Agreement, the authorized capital stock of the
        Company shall consist of 100,000,000 shares of Common Stock, of which [
        ] shares shall be issued and outstanding, and 10,000,000 shares of
        Preferred Stock, of which 3,500,000 shares shall be issued and
        outstanding and designated as Series A 10% Cumulative Convertible
        Preferred Stock. Such shares shall be duly authorized and validly
        issued, shall be fully paid and nonassessable, and shall be issued in
        compliance with applicable federal and state securities laws. Other than
        as set forth on Schedule 3.1(d) attached hereto and made a part hereof,
        and except as specifically described above, the Company does not have,
        and will not have after giving effect to all of the transactions
        contemplated by the Loan Agreement, any outstanding capital stock or
        securities convertible into or exchangeable for any shares
        of its capital stock, or any outstanding rights (either preemptive or
        other) to subscribe for or to purchase, or any outstanding rights or
        options for the purchase of, or any agreements providing for the
        issuance (contingent or otherwise) of, or any outstanding calls,
        commitments or claims of any character relating to, any capital stock or
        any stock or securities convertible into or exchangeable for any capital
        stock of the Company. Except as provided in the Warrants and other than
        as set forth on Schedule 3.1(d) attached hereto and made a part hereof,
        the Company is not subject to any obligation (contingent or otherwise)
        to repurchase or otherwise acquire or retire any shares of its capital
        stock or any convertible securities, rights or options of the type
        described in the preceding sentence. Other than as set forth on Schedule
        3.1(d) attached hereto and made a part hereof, the Company is not a
        party to any agreement (except as set forth in this Agreement)
        restricting the transfer of any shares

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        of the Company's capital stock as of the date hereof or after giving
        effect to all of the transactions contemplated by the Loan Agreement.

               (e) Governmental Consent, etc. No consent, approval or
        authorization of (or designation, declaration or filing with) any
        governmental authority or the National Association of Securities
        Dealers, Inc., on the part of the Company is required in connection with
        the valid execution, delivery or performance of this Agreement, or the
        offer, sale or issuance of the Warrants and the Shares pursuant hereto,
        or the consummation of any other transaction contemplated hereby.

               (f) Offering. The offer, sale and issuance of the Warrants, and
        the issuance of the Shares upon exercise of the Warrants, constitute
        transactions exempt from the registration and prospectus delivery
        requirements of the Securities Act of 1933 (the "SECURITIES ACT") and
        any applicable state securities laws.

               (g) Brokers or Finders. The Company has not incurred, and will
        not incur, directly or indirectly, as a result of any action taken by
        the Company, any liability for brokerage or finders' fees or agents'
        commissions or any similar charges in connection with this Agreement.

        Section 3.2. Representations and Warranties of Purchaser. Purchaser
hereby represents and warrants to the Company as follows:

               (a) Organization and Standing. Purchaser is a corporation duly
        organized, validly existing, and in good standing under the laws of
        Texas, and has full power and authority to own and operate its
        properties and assets and to carry on its business as presently
        conducted and as contemplated.

               (b) Authorization. All corporate action on the part of the
        Purchaser, its officers, directors and shareholders necessary for the
        authorization, execution and delivery of this Agreement and the other
        agreements and documents contemplated herein, the performance of all the
        Purchaser's obligations hereunder have been taken. This Agreement and
        the other agreements and documents contemplated herein, when executed
        and delivered, shall constitute valid and legally binding obligations of
        the Purchaser enforceable in accordance with their respective terms,
        subject to, except as may be limited by insolvency, bankruptcy,
        moratorium or other laws affecting the rights of creditors in general.

               (c) Compliance with Other Instruments. Assuming the accuracy of
        the Company's representations and warranties under this Agreement, the
        execution, delivery, and performance of and compliance with this
        Agreement will not result in any violation of any term of the
        Certificate or Articles of Incorporation or Bylaws of the Purchaser.

               (d) Investment. The Purchaser has been advised that the Warrants
        and Shares have not been registered under the Securities Act of 1933 (as
        amended from time

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        to time, the "Securities Act") nor qualified under any state securities
        law, on the ground that no distribution or public offering of the
        Securities is to be effected, and that in this connection the Company is
        relying in part on the representations of the Purchaser set forth in
        this Section 3.2. The Purchaser represents that:

                      (i) Investment Intent. The Warrants acquired by the
        Purchaser pursuant to this Agreement are being acquired by such
        Purchaser solely for such Purchaser's own account, for investment
        purposes only, and with no present intent to make any distribution (as
        such term is used in Section 2(11) of the Securities Act) of the
        Warrants or the Shares upon exercise of the Warrants;

                      (ii) Sophistication. The Purchaser is an experienced and
        sophisticated investor, is able to fend for itself in the transactions
        contemplated by this Agreement, and has such knowledge and experience in
        financial and business matters that such Purchaser is capable of
        evaluating the risks and merits of acquiring the Warrants. The Purchaser
        has had, during the course of this transaction and prior to its purchase
        of the Warrants, the opportunity to ask questions of, and receive
        answers from, the Company and its management concerning the Company and
        the terms and conditions of this Agreement. The Purchaser hereby
        acknowledges that such Purchaser has received all such information as
        such Purchaser considers necessary for evaluating the risks and merits
        of acquiring the Warrants or upon exercise the Shares and for verifying
        the accuracy of any information furnished to it or to which it had
        access. The Purchaser understands that there is no public market for the
        Warrants or upon exercise the Shares and that there may never be such a
        public market, and that even if a market develops it may never be able
        to sell or dispose of the Shares and may thus have to bear the risk of
        its investment for a substantial period of time, or forever. The
        Purchaser is aware that the Warrants or upon exercise the Shares may not
        be sold pursuant to Rule 144 adopted under the Securities Act unless
        certain conditions have been met and until the Purchaser or such
        Purchaser's qualified transferees have held the Shares for at least a
        year.

                      (iii) Accredited Investor. The Purchaser is an "accredited
        investor" for purposes of Regulation D promulgated by the Securities and
        Exchange Commission under the Securities Act.

                        ARTICLE IV. CONDITIONS TO CLOSING

        Section 4.1. Purchaser's Conditions. Purchaser's obligations to purchase
the Warrants at the Closing are subject to the fulfillment of the following
conditions, the waiver of which shall not be effective against Purchaser unless
specifically consented to in writing:

               (a) Representations and Warranties Correct. The representations
        and warranties made by the Company in Section 3.1 hereof (including any
        representations of the Company incorporated by reference) shall be true
        and correct when made, and shall be true and correct on the Closing
        Date.

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               (b) Covenants. All covenants, agreements and conditions contained
        in this Agreement to be performed by the Company on or prior to the
        Closing Date shall have been performed or complied with in all respects.

               (c) Compliance Certificate. The Company shall have delivered to
        Purchaser a certificate of the Company, executed by the President and
        Secretary of the Company, dated the Closing Date, and certifying, that
        all representations and warranties of the Company contained in the
        Agreement are true and correct on the Closing Date as if made on such
        date, that all conditions to the obligations of Purchaser to close the
        transactions contemplated by this Agreement have been satisfied or
        waived in writing by Purchaser and that the Company has complied with
        all covenants or obligations set forth in this Agreement.

               (d) Consents. Any consent, approval, authorization or order of
        any court or governmental agency or administrative body required for the
        consummation of the transactions contemplated by this Agreement, shall
        have been obtained and shall be in effect on the Closing Date.

               (e) Consummation of Loan Agreement. The Company shall have
        satisfied all conditions precedent to the obligation of the Purchaser to
        advance funds under the Loan Agreement in compliance with all applicable
        laws.

        Section 4.2. Company's Conditions. The Company's obligation to sell and
issue the Warrants at the Closing is, at the option of the Company, subject to
the fulfillment as of the Closing Date of the following conditions:

               (a) Representations. The representations made by Purchaser in
        Section 3.2 hereof shall be true and correct when made, and shall be
        true and correct on the Closing Date.

               (b) Closing of Loan Agreement. The loan contemplated by the Loan
        Agreement shall have been consummated in accordance with the terms of
        such commitment.

                 ARTICLE V. AFFIRMATIVE COVENANTS OF THE COMPANY

        Section 5.1. Financial Information. The Company will mail to each holder
of any of the Warrants or Shares:

               (a) SEC Reports. The Company shall promptly mail copies of all
        quarterly and annual reports and of the information, documents and other
        reports which the Company is required to file with the Securities and
        Exchange Commission (the "COMMISSION"), exclusive of any exhibits to
        such reports and exclusive of registration statements on Form S-8.

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               (b) Other Reports. If the Company is not subject to the
        requirements of Section 13 or 15(d) of the Securities Exchange Act of
        1934 (the "EXCHANGE ACT"), the Company shall mail within five days after
        it would have been required to file with the Commission, annual and
        quarterly financial statements, including notes thereto accompanied by
        the auditor's report relating thereto.

        Section 5.2. Transactions with Affiliates. The Company will not, and
will not permit any of its Subsidiaries (as defined in Article VII of the
Warrants), except as provided in Schedule 5.2 attached hereto, , (i) enter into
any transaction or series of related transactions with any Affiliate or
Affiliates (other than a wholly-owned Subsidiary) including shareholders,
directors and officers and their respective Affiliates, if the aggregate amount
paid or payable to such persons with respect to such transaction or series of
transactions is in excess of $100,000 unless such transaction (a) is fair to the
Company, (b) is not materially adverse to the rights of the holders of Warrants,
and (c) is on terms equivalent to those available on an arm's length basis, or
(ii) issue, or agree to issue, any shares of capital stock (including rights or
warrants with respect thereto) or stock appreciation rights, stock benefit
plans, phantom stock rights or plans or any similar plans or rights or other
rights measured by earnings, profits, or revenues of the Company or its
Subsidiaries to any Affiliate including shareholders, directors and officers and
their respective Affiliates, unless such transaction (a) is fair to the Company,
(b) is not materially adverse to the rights to the holders of Warrants, and (c)
is on terms equivalent to those available on an arm's length basis. If a
transaction referred to in subsection (i) or (ii) hereof is approved by a
majority of Independent Directors, such approval shall be presumptive evidence
that such transaction complies with the provisions of this Section. As used
herein, an "Independent Director" shall mean any director who is not an officer
or employee of the Company and who does not beneficially own more than 5% of any
outstanding class or series of capital stock of the Company and who is not
related by blood or marriage to any of the foregoing. As used herein,
"Affiliate" means any person or entity that, directly or indirectly, controls or
is controlled by or is under common control with the Company, including without
limitation, any partnership, group, joint venture, corporation, association or
other entity, except that the Persons (as defined in Article VII of the
Warrants) that directly or indirectly own Purchaser shall not be deemed
Affiliates of the Company.

        Section 5.3. Restrictions on Dividend Payments.

               (a) Restriction. For so long as the Warrants are outstanding and
        except as provided in 5.3(b), the Company shall not pay any dividends
        with respect to its Common Stock (other than dividends payable in shares
        of its Common Stock) out of its surplus or otherwise or return any
        capital to its stockholders as such or authorize or make any other
        distribution, payment or delivery of property or cash to its holders of
        Common Stock as such, or redeem, retire, purchase or otherwise acquire,
        directly or indirectly, for a consideration (otherwise than in exchange
        for, or from the proceeds of the substantially concurrent sale of, other
        shares of capital stock of the Company), any shares of any class of its
        Common Stock now or hereafter outstanding.

               (b) Permitted Dividends. The Company may pay dividends to the
        holders of its Common Stock, provided that (i) contemporaneously with
        the declaration of any such dividend, the Company will set aside for
        payment to the holders of Warrants an amount equal to the total Dividend
        Amount (as hereinafter defined) payable to all holders of Warrants and
        (ii) on the date of

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        payment of such dividend, will pay to each holder of Warrants the
        Dividend Amount multiplied times the number of Warrants owned by such
        holder as reflected on the Warrantholders' List. Such payment shall be
        made by Company check to such holder of Warrants at the address of such
        Holder as reflected on the Warrantholders' List. As used herein, the
        Dividend Amount shall equal the dividend declared or paid (as the case
        may be) with respect to one share of Common Stock multiplied times the
        Dilution Factor on the date of declaration or payment.

        Section 5.4. Access. The Company will allow, and will cause its
Subsidiaries to allow, any holder of Warrants or proposed assignee of Warrants
designated by such holder, and their respective representatives, upon two
Business Days prior telephonic notice, to visit and inspect any of its property,
to examine its books of record and account, and to discuss its affairs, finances
and accounts with its officers, provided, (i) the holder of Warrants, proposed
assignee or representative signs a customary confidentiality agreement if
requested by the Company and (ii) the examination will not unreasonably disrupt,
in any material manner, the operations of the Company.

        Section 5.5. Rule 144 Reporting. The Company agrees that for so long as
any class of its securities is registered under Section 12(b) or 12(g) of the
Exchange Act, it shall:

               (a) Make and keep "adequate public information" available, as
        those terms are understood and defined in Rule 144 under the Securities
        Act, at all times from and after the date hereof;

               (b) File with the Commission in a timely manner all reports and
        other documents required of the Company under the Securities Act and the
        Exchange Act; and

               (c) So long as Purchaser owns any Shares, furnish to Purchaser
        promptly upon request a written statement by the Company as to its
        compliance with the reporting requirements (i) necessary to cause
        "adequate public information" to be available under Rule 144, and (ii)
        of the Securities Act and Exchange Act.

                    ARTICLE VI. THE COMPANY'S INDEMNIFICATION

        Section 6.1. Indemnification. The Company will indemnify and hold
harmless Purchaser, and its respective officers, directors, employees, agents,
representatives and affiliates (collectively "INDEMNITEES") from and against any
and all expenses, claims, charges, losses, damages, fines or penalties,
including without limitation reasonable attorneys' fees incurred in defending or
resisting any claims, actions or proceedings or in enforcing this indemnity
(hereinafter "DAMAGES"), that an Indemnitee may suffer, sustain, incur or become
subject to, whether directly or indirectly, arising out of, based upon,
resulting from any violation or inaccuracy of any representations, warranties,
obligations or covenants of the Company contained, disclosed or set forth in
this Agreement or the Warrant.

                   ARTICLE VII. WARRANT A PUT AND CALL OPTIONS

        Section 7.1 Purchaser's Option to Cause Purchase. From and after the
earlier to occur of (i) February 6, 2004 and (ii) the date the Indebtedness (as
defined in that certain Credit Agreement between Purchaser and MCAI, dated as of
February 6, 2001, as same may be amended or restated from time to time)

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is paid in full ("WARRANT A COMMENCEMENT DATE") but before February 6, 2006,
Purchaser shall have the right and option to cause the Company to purchase all
(and not any portion) of Warrant A, in the following manner:

               (a) Exercise Notice. In order to exercise its right and option to
        cause the Company to purchase Warrant A, a holder desiring to cause the
        Company to purchase Warrant A (a "WARRANT A SELLING HOLDER"), shall
        notify ("WARRANT A EXERCISE NOTICE") the Company of its intent to sell
        Warrant A to the Company. The Warrant A Exercise Notice shall specify
        the proposed closing date of such purchase which shall be a Business Day
        at least ten and no more than thirty Business Days from the date of such
        notice.

               (b) Purchase Price. The purchase price (the "WARRANT A PUT
        PURCHASE PRICE") for Warrant A shall be $600,000.

               (c) Closing. The closing shall be held at the principal executive
        offices of the Company at 10:00 a.m., local time on the date specified
        in the Warrant A Exercise Notice, or such other time and place as the
        Warrant A Selling Holder and the Company shall agree in writing. At the
        closing, the Company shall pay the Warrant A Selling Holder the purchase
        price by cashier's check or wire transfer of immediately available
        funds. The Warrant A Selling Holder shall deliver Warrant A duly
        endorsed for transfer to the Company.

               (d) Purchaser's Representations and Warranties. At the closing,
        the Warrant A Selling Holder shall make customary representations and
        warranties as to the following, and shall not be required to make any
        additional representations or warranties:

                   (i) That Warrant A Selling Holder has the power and authority
               to transfer Warrant A to the Company;

                   (ii) That the transfer of Warrant A has been duly authorized
               by the Warrant A Selling Holder; and

                   (iii) That Warrant A will be transferred to the Company free
               and clear of any liens, claims, pledges, and encumbrances created
               by the Warrant A Selling Holder.

               (e) Company's Representations and Warranties. At the closing, the
        Company shall make customary representations and warranties as to the
        following, and shall not be required to make any additional
        representations or warranties:

                   (i) That the Company has the power and authority to purchase
               Warrant A from the Warrant A Selling Holder;

                   (ii) That the purchase of Warrant A has been duly authorized
               by the Company;

                   (iii) That the purchase of Warrant A is in compliance with
               applicable state corporate laws governing the Company's
               repurchase of its securities;

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                   (iv) That Warrant A is not being purchased with a view toward
               distribution in violation of applicable securities laws; and

                   (v) That purchase of Warrant A does not render the Company
               insolvent.

        Section 7.2. Restrictions on Company's Ability to Purchase.

               (a) Dividend Restriction. Whenever Warrant A is required to be
        purchased by the Company pursuant to this Agreement, if the Company
        shall not be able lawfully to purchase the entire Warrant on the closing
        date under the provisions of applicable state corporate law dealing with
        impairment of surplus, the Company shall purchase on the closing date so
        much of Warrant A as it may lawfully purchase. In the event the Company
        purchases less than all of Warrant A on the closing date, then the
        Company shall not, without the written consent of the Warrant A Selling
        Holder, pay dividends, distributions or other payments to any
        stockholder or make any loans to stockholders, other than reasonable
        salary and benefits payments, until the remainder of Warrant A is
        purchased in accordance with the terms of this Agreement.

               (b) Restrictions on Certain Capital Transactions. The Company
        will not, without the written consent of the holder of Warrant A,
        increase the par value of any Shares or effect a transfer from the
        retained earnings account of the Company to the capital or additional
        paid in capital accounts of the Company if, at the time of such transfer
        and after giving effect thereto and to any concurrent or then
        contemplated transactions, the ability of the Company to lawfully
        discharge its obligations to purchase Warrant A pursuant to this
        Agreement would be materially or adversely impaired.

               (c) Continuing Obligation. If the Company is unable on the
        closing date lawfully to purchase all of Warrant A, the obligation of
        the Company to purchase such portion of Warrant A that the Company could
        not lawfully purchase shall continue until such time as the Company may
        lawfully discharge such obligation; provided, however, that the purchase
        price shall be increased by an amount equal to interest on the purchase
        price at the rate of 20% per annum.

        Section 7.3 Company's Option to Purchase. On February 6, 2006, if
Warrant A has not previously been exercised or put to the Company, the Company
shall have the right and option to purchase all, but not less than all, of
Warrant A, in the following manner:

               (a) Purchase Notice. In order to exercise its right and option to
        cause the holder of Warrant A to sell all of Warrant A to the Company,
        the Company shall notify ("WARRANT A PURCHASE NOTICE") the holder
        ("WARRANT A REDEEMED HOLDER") of its intent to purchase Warrant A. The
        Warrant A Purchase Notice shall state the proposed closing date of such
        purchase which shall be a Business Day at least ten and no more than
        thirty Business Days from the date of such notice. In the event that the
        Warrant A Redeemed Holder properly exercises Warrant A in full prior to
        the closing date set forth in the Warrant A Purchase Notice, the
        Company's option to purchase set forth in this Section 7.3 shall lapse
        and be of no further force and effect.

               (b) Purchase Price. The purchase price for Warrant A shall be the
        Warrant A Put

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        Purchase Price.

               (c) Closing. The closing of any purchase pursuant to this Section
        7.3 shall be held at the principal executive offices of the Company at
        10:00 a.m., local time, on the date specified in the Warrant A Purchase
        Notice, or such other time and place as the Company and Purchaser shall
        agree in writing. At the closing, the Company shall pay the Warrant A
        Redeemed Holder the Warrant A Purchase Price by cashier's check or wire
        transfer of immediately available funds. The Warrant A Redeemed Holder
        shall deliver Warrant A duly endorsed for transfer to the Company.

               (d) Representations and Warranties. At the Closing, the Warrant A
        Redeemed Holder shall make the representations and warranties specified
        in Section 7.1(d) and the Company shall make the representations and
        warranties specified in 7.1(e).

               (e) Legend. Purchaser agrees to maintain a legend on Warrant A
        referring to the right and option set forth in this Section.

               (f) Restrictions on Purchases. The Company shall not have the
        right and option to purchase Warrant A as provided in this Section
        unless the Company is legally able to purchase all of Warrant A
        outstanding under applicable corporate law.

               (g) No Restriction on Transfer. Nothing in this Article VII shall
        restrict or limit the ability of the holder to sell Warrant A, except
        that from and after receipt of the Warrant A Purchase Notice until the
        purchase of Warrant A as provided in this Section, the holder shall not
        sell, assign, transfer or pledge Warrant A.

               (h) Breach of Loan Agreement or Other Documents. Notwithstanding
        any other provision herein, the Company shall not have the right or
        option to cause the holder to sell Warrant A to the Company if the
        Company has breached, is in default or an event of default has occurred
        under the Loan Agreement, this Agreement, the Shareholders' Agreement,
        the Registration Rights Agreement or Warrant A, which default has not
        been cured.

                  ARTICLE VIII. WARRANT B PUT AND CALL OPTIONS

        Section 8.1 Purchaser's Option to Cause Purchase. From and after the
earlier to occur of (i) the three-year anniversary of the Closing Date and (ii)
the date the Indebtedness (as defined in the Loan Agreement) is paid in full
("WARRANT B COMMENCEMENT DATE") but before the fifth anniversary of the Closing,
Purchaser shall have the right and option to cause the Company to purchase all
(and not any portion) of Warrant B, in the following manner:

               (a) Exercise Notice. In order to exercise its right and option to
        cause the Company to purchase Warrant B, a holder desiring to cause the
        Company to purchase Warrant B (a "WARRANT B SELLING HOLDER"), shall
        notify ("WARRANT B EXERCISE NOTICE") the Company of its intent to sell
        Warrant B to the Company. The Warrant B Exercise Notice shall specify
        the proposed closing date of such purchase which shall be a Business Day
        at least ten and no more than thirty Business Days from the date of such
        notice.

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<PAGE>

               (b) Purchase Price. The purchase price (the "Warrant B Put
        Purchase Price") for Warrant B shall be $900,000.

               (c) Closing. The closing shall be held at the principal executive
        offices of the Company at 10:00 a.m., local time on the date specified
        in the Warrant B Exercise Notice, or such other time and place as the
        Warrant B Selling Holder and the Company shall agree in writing. At the
        closing, the Company shall pay the Warrant B Selling Holder the purchase
        price by cashier's check or wire transfer of immediately available
        funds. The Warrant B Selling Holder shall deliver Warrant B duly
        endorsed for transfer to the Company.

               (d) Purchaser's Representations and Warranties. At the closing,
        the Warrant B Selling Holder shall make customary representations and
        warranties as to the following, and shall not be required to make any
        additional representations or warranties:

                   (i) That Warrant B Selling Holder has the power and authority
               to transfer Warrant B to the Company;

                   (ii) That the transfer of Warrant B has been duly authorized
               by the Warrant B Selling Holder; and

                   (iii) That Warrant B will be transferred to the Company free
               and clear of any liens, claims, pledges, and encumbrances created
               by the Warrant B Selling Holder.

               (e) Company's Representations and Warranties. At the closing, the
        Company shall make customary representations and warranties as to the
        following, and shall not be required to make any additional
        representations or warranties:

                   (i) That the Company has the power and authority to purchase
               Warrant B from the Warrant B Selling Holder;

                   (ii) That the purchase of Warrant B has been duly authorized
               by the Company;

                   (iii) That the purchase of Warrant B is in compliance with
               applicable state corporate laws governing the Company's
               repurchase of its securities;

                   (iv) That Warrant B is not being purchased with a view toward
               distribution in violation of applicable securities laws; and

                   (v) That purchase of Warrant B does not render the Company
               insolvent.

        Section 8.2.  Restrictions on Company's Ability to Purchase.

               (a) Dividend Restriction. Whenever Warrant B is required to be
        purchased by the Company pursuant to this Agreement, if the Company
        shall not be able lawfully to purchase the

                                      178
<PAGE>

        entire Warrant on the closing date under the provisions of applicable
        state corporate law dealing with impairment of surplus, the Company
        shall purchase on the closing date so much of Warrant B as it may
        lawfully purchase. In the event the Company purchases less than all of
        Warrant B on the closing date, then the Company shall not, without the
        written consent of the Warrant B Selling Holder, pay dividends,
        distributions or other payments to any stockholder or make any loans to
        stockholders, other than reasonable salary and benefits payments, until
        the remainder of Warrant B is purchased in accordance with the terms of
        this Agreement.

               (b) Restrictions on Certain Capital Transactions. The Company
        will not, without the written consent of the holder of Warrant B,
        increase the par value of any Shares or effect a transfer from the
        retained earnings account of the Company to the capital or additional
        paid in capital accounts of the Company if, at the time of such transfer
        and after giving effect thereto and to any concurrent or then
        contemplated transactions, the ability of the Company to lawfully
        discharge its obligations to purchase Warrant B pursuant to this
        Agreement would be materially or adversely impaired.

               (c) Continuing Obligation. If the Company is unable on the
        closing date lawfully to purchase all of Warrant B, the obligation of
        the Company to purchase such portion of Warrant B that the Company could
        not lawfully purchase shall continue until such time as the Company may
        lawfully discharge such obligation; provided, however, that the purchase
        price shall be increased by an amount equal to interest on the purchase
        price at the rate of 20% per annum.

        Section 8.3 Company's Option to Purchase. On the fifth anniversary of
the Closing, if Warrant B has not previously been exercised or put to the
Company, the Company shall have the right and option to purchase all, but not
less than all, of Warrant B, in the following manner:

               (a) Purchase Notice. In order to exercise its right and option to
        cause the holder of Warrant B to sell all of Warrant B to the Company,
        the Company shall notify ("WARRANT B PURCHASE NOTICE") the holder
        ("WARRANT B REDEEMED HOLDER") of its intent to purchase Warrant B. The
        Warrant B Purchase Notice shall state the proposed closing date of such
        purchase which shall be a Business Day at least ten and no more than
        thirty Business Days from the date of such notice. In the event that the
        Warrant B Redeemed Holder properly exercises Warrant B in full prior to
        the closing date set forth in the Warrant B Purchase Notice, the
        Company's option to purchase set forth in this Section 8.3 shall lapse
        and be of no further force and effect.

               (b) Purchase Price. The purchase price for Warrant B shall be the
        Warrant B Put Purchase Price.

               (c) Closing. The closing of any purchase pursuant to this Section
        8.3 shall be held at the principal executive offices of the Company at
        10:00 a.m., local time, on the date specified in the Warrant B Purchase
        Notice, or such other time and place as the Company and Purchaser shall
        agree in writing. At the closing, the Company shall pay the Warrant B
        Redeemed Holder the Warrant B Purchase Price by cashier's check or wire
        transfer of immediately available funds. The Warrant B Redeemed Holder
        shall deliver Warrant B duly endorsed for transfer to the Company.

                                      179
<PAGE>

               (d) Representations and Warranties. At the Closing, the Warrant B
        Redeemed Holder shall make the representations and warranties specified
        in Section 8.1(d) and the Company shall make the representations and
        warranties specified in 8.1(e).

               (e) Legend. Purchaser agrees to maintain a legend on Warrant B
        referring to the right and option set forth in this Section.

               (f) Restrictions on Purchases. The Company shall not have the
        right and option to purchase Warrant B as provided in this Section
        unless the Company is legally able to purchase all of Warrant B
        outstanding under applicable corporate law.

               (g) No Restriction on Transfer. Nothing in this Article VIII
        shall restrict or limit the ability of the holder to sell Warrant B,
        except that from and after receipt of the Warrant B Purchase Notice
        until the purchase of Warrant B as provided in this Section, the holder
        shall not sell, assign, transfer or pledge Warrant B.

               (h) Breach of Loan Agreement or Other Documents. Notwithstanding
        any other provision herein, the Company shall not have the right or
        option to cause the holder to sell Warrant B to the Company if the
        Company has breached, is in default or an event of default has occurred
        under the Loan Agreement, this Agreement, the Shareholders' Agreement,
        the Registration Rights Agreement or Warrant B, which default has not
        been cured.

                            ARTICLE IX. MISCELLANEOUS

        Section 9.1. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS BY THE INTERNAL LAWS OF THE STATE OF TEXAS.

        Section 9.2. Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by Purchaser and the
closing of the transactions contemplated hereby.

        Section 9.3. Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.

        Section 9.4. Entire Agreement, Amendment. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.

        Section 9.5. Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to Purchaser, at: Wells Fargo Energy Capital, Inc., 1000
Louisiana, Sixth Floor, Houston, Texas 77002, Attention: Gary Milavec, Senior
Vice President,

                                      180
<PAGE>

or at such other address as Purchaser shall have furnished to the Company in
writing, or (b) if to any other holder of any Warrants or Shares, at such
address as such holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such Warrants or Shares who has so furnished an
address to the Company, or (c) if to the Company, to its address set forth on
the signature page of this Agreement and addressed to the attention of the
Corporate Secretary, or at such other address as the Company shall have
furnished to Purchaser.

        Section 9.6. Delays or Omissions. Except as expressly provided herein,
no delay or omission to exercise any right, power or remedy accruing to any
holder of any Shares, upon any breach or default of the Company under this
Agreement, shall impair any such right, power or remedy of such holder nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
breach or default under this Agreement, or any waiver on the part of any holder
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.

        Section 9.7. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and all of which together
shall constitute one agreement.

        Section 9.8. Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.

        Section 9.9. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.

        Section 9.10 Specific Performance. The Company acknowledges that any
breaches of the agreements and covenants contained in of this Agreement would
cause irreparable injury to Purchaser for which Purchaser would have no adequate
remedy at law. In addition to any other remedy that Purchaser may be entitled
to, the parties agree that Purchaser shall be entitled to the remedy of specific
performance.

                                      181
<PAGE>

        The foregoing Agreement is hereby executed as of the date first above
written. Mountain Compressed Air, Inc. is executing solely for purposes of
Sections 1.3 and 1.4 herein. OilQuip Rentals, Inc. is executing solely for
purposes of Section 1.4 herein. Munawar H. Hidayatallah, individually, and
Energy Spectrum Partners, LP are executing solely for purposes of Section 1.5
herein.

Address: ____________________________    Allis-Chalmers Corporation
         ____________________________

                                         By:____________________________________
                                            Munawar H. Hidayatallah
                                            Chairman and Chief Executive Officer

Address: 1000 Louisiana, Sixth Floor     Wells Fargo Energy Capital, Inc.
         Houston, Texas 77002

                                         By:____________________________________
                                            Gary Milavec
                                            Senior Vice President

Address: 2466 Commerce Boulevard         Mountain Compressed Air, Inc.
         Grand Junction, Colorado 81505

                                         By:____________________________________
                                            Munawar H. Hidayatallah
                                            Chairman and Chief Executive Officer

Address: 2466 Commerce Boulevard         OilQuip Rentals, Inc.
         Grand Junction, Colorado 81505

                                         By:____________________________________
                                            Munawar H. Hidayatallah
                                            Chairman and Chief Executive Officer

Address: ____________________________
         ____________________________       ____________________________________
                                            Munawar H. Hidayatallah

                                      182
<PAGE>

Address: ____________________________    Energy Spectrum Partners, LP
         ____________________________

                                         By:____________________________________
                                         Name:__________________________________
                                         Title:_________________________________

                                      183
<PAGE>

                                  EXHIBIT A TO

                           WARRANT PURCHASE AGREEMENT

================================================================================

                                     WARRANT

                           ALLIS-CHALMERS CORPORATION
                             A DELAWARE CORPORATION
                                 (THE "COMPANY")

                               TO PURCHASE 465,000

                      SHARES OF THE COMPANY'S COMMON STOCK

                                    ISSUED TO

                        WELLS FARGO ENERGY CAPITAL, INC.
                               A TEXAS CORPORATION
                                ("WARRANTHOLDER")

                           EFFECTIVE FEBRUARY 1, 2002

        This Warrant and the Shares issued upon exercise thereof are subject to
repurchase by the Company as provided in the Warrant Purchase Agreement dated
effective February 1, 2002.

        This Warrant and any Shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended, and may
not be transferred, sold or otherwise disposed of in the absence of such
registration or an exemption therefrom under such Act. This Warrant and such
Shares may be transferred only in compliance with the conditions specified in
this Warrant and the Warrant Purchase Agreement, a copy of which is available
from the Company to holders of this Warrant.

================================================================================

                                      184
<PAGE>

                           Allis-Chalmers Corporation

                                     Warrant

No. W-A                                                         February 1, 2002

        Allis-Chalmers Corporation (the "Company"), a Delaware corporation, for
value received, hereby certifies that Wells Fargo Energy Capital, Inc., a Texas
Corporation, or registered assigns, is entitled to purchase from the Company
465,000 duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock, $0.15 par value (the "Common Stock") at any time or from time to
time prior to 5:00 p.m., Houston, Texas time, on the Expiration Date (as herein
defined), all subject to terms, conditions and adjustments set forth in this
Warrant.

        This is the Warrant (the "Warrant") (such term to include any warrants
issued in substitution therefor) originally issued pursuant to the Warrant
Purchase Agreement. Certain capitalized terms used in this Warrant are defined
in Article VII; unless otherwise specified, references to an "Exhibit" mean one
of the exhibits attached to this Warrant, references to an "Article" mean one of
the articles in this Warrant and references to a "Section" mean one of the
sections of this Warrant.

                         ARTICLE I. EXERCISE OF WARRANT

        Section 1.1. Manner of Exercise. This Warrant may be exercised by the
holder hereof, in whole or in part, during normal business hours on any Business
Day, by surrender of this Warrant to the Company at its office maintained
pursuant to subdivision (a) of Section 6.2, accompanied by a subscription in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder and accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company in the
amount obtained by multiplying (a) the number of shares of Common Stock (without
giving effect to any adjustment thereof) designated in such subscription by (b)
the Initial Price, and such holder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) determined as provided in Articles II
through IV.

        Section 1.2. When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1, and at such time the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
Section 1.3 shall be deemed to have become the holder or holders of record
thereof.

        Section 1.3. Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, and in any event
within five Business Days thereafter, the Company, at its expense (including the
payment by it of any applicable issue taxes), will cause to be issued in the
name of and delivered to the holder hereof, subject to Article V, as such holder
(upon payment by such holder of any applicable transfer taxes) may direct, the
following:

                                      185
<PAGE>

               (a) Certificates. A certificate or certificates for the number of
        duly authorized, validly issued, fully paid and nonassessable shares of
        Common Stock (or Other Securities) to which such holder shall be
        entitled upon such exercise plus, in lieu of any fractional share to
        which such holder would otherwise be entitled, cash in an amount equal
        to the same fraction of the Market Price per share on the Business Day
        next preceding the date of such exercise.

               (b) Warrant. In case such exercise is in part only, a new Warrant
        or Warrants of like tenor dated the date hereof, calling in the
        aggregate on the face or faces thereof for the number of shares of
        Common Stock equal (without giving effect to any adjustment thereof) to
        the number of such shares called for on the face of this Warrant minus
        the number of such shares designated by the holder upon such exercise as
        provided in Section 1.1.

          ARTICLE II. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE

        Section 2.1. General; Warrant Price. The number of shares of Common
Stock which the holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Article II)
be issuable upon such exercise, as designated by the holder hereof pursuant to
Section 1.1, by a fraction (the "Dilution Factor") (a) the numerator of which is
the Initial Price and (b) the denominator of which is the Warrant Price in
effect at the effective time of such exercise (as provided in Section 1.2). The
"Warrant Price" shall initially be the Initial Price, shall be adjusted and
readjusted from time to time as provided in this Article II and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Article II.

        Section 2.2. Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.4 or 2.5) without consideration
or for a consideration per share less than the Dilutive Basis, then, and in each
such case, such Warrant Price shall be reduced, concurrently with such issue or
sale, to the lower of the prices (calculated to the nearest cent) determined as
follows:

               (a) by multiplying the Warrant Price then in existence by a
        fraction, the numerator of which shall be (i) the number of shares of
        Common Stock outstanding immediately prior to such issue or sale plus
        (ii) the number of shares of Common Stock which the aggregate
        consideration received by the Company for the total number of such
        Additional Shares of Common Stock so issued or sold would purchase at
        the Current Market Price, and the denominator of which shall be the
        number of shares of Common Stock outstanding immediately after such
        issue or sale, provided that, for the purposes of this Section 2.2, (i)
        immediately after any Additional Shares of Common Stock are deemed to
        have been issued pursuant to Section 2.4 or 2.5, such Additional Shares
        of Common Stock shall be deemed to be outstanding, and (ii) treasury
        shares shall not be deemed to be outstanding; and

               (b) by dividing (i) an amount equal to the sum of (1) the number
        of shares of Common Stock outstanding immediately prior to such issuance
        or sale multiplied times the then effective

                                      186

<PAGE>

        Warrant Price plus (2) the total consideration, if any, received and
        deemed received by the Company upon such issue or sale, by (ii) the
        total number of shares of Common Stock outstanding and deemed
        outstanding immediately after such issue or sale.

        Section 2.3. Extraordinary Dividends and Distributions. If the Company
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or Other Securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a dividend payable in cash
or other property and declared out of the earned surplus of the Company as at
the date thereof as increased by any credits (other than credits resulting from
a revaluation of property) and decreased by any debits made thereto, then, and
in each such case, the Warrant Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
of securities entitled to receive such dividend or distribution shall be
reduced, effective as of the close of business on such record date, to a price
(calculated to the nearest cent) determined by multiplying such Warrant Price by
a fraction:

               (a) the numerator of which shall be the Current Market Price in
        effect on such record date or, if the Common Stock trades on an
        ex-dividend basis, on the date prior to the commencement of ex-dividend
        trading, less the amount of such dividend or distribution (as determined
        in good faith by the Board of Directors of the Company) applicable to
        one share of Common Stock, and

               (b) the denominator of which shall be the Current Market Price on
        such record date, or if the Common Stock trades on an ex-dividend basis,
        on the date prior to the commencement of ex-dividend trading.

        Section 2.4. Treatment of Options and Convertible Securities. In case
the Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, or, in the case of Appreciation Rights, the
number computed in Section 2.9, shall be deemed to be the number of Additional
Shares of Common Stock issued as of the time of such issue, sale, grant or
assumption or, in case such a record date shall have been fixed, as of the close
of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading); provided that such Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 2.6) of such shares would be less than the Dilutive Basis in
effect on the date of and immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business on such record date
(or, if the Common Stock trades on an ex-dividend basis, on the date prior to
the commencement of ex-dividend trading), as the case may be; and provided,
further, that in any such case in which Additional Shares of Common Stock are
deemed to be issued no further adjustment of the Warrant Price shall be made
upon the subsequent issue or sale of Convertible Securities or

                                      187

<PAGE>

Additional Shares of Common Stock upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.

        Section 2.5. Treatment of Stock Dividends, Stock Splits, etc. In case
the Company at any time or from time to time after the date hereof shall declare
or pay any dividend on the Common Stock payable in Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.

        Section 2.6. Computation of Consideration. For the purpose of Article
II, the following shall be used to determine the consideration received or
deemed received by the Company:

               (a) Shares Actually Issued. The consideration for the issue or
        sale of any Additional Shares of Common Stock shall, irrespective of the
        accounting treatment of such consideration,

                      (i) insofar as it consists of cash, be computed at the net
               amount of cash received by the Company, without deducting any
               expenses paid or incurred by the Company or any commissions or
               compensations paid or concessions or discounts allowed to
               underwriters, dealers or others performing similar services in
               connection with such issue or sale,

                      (ii) insofar as it consists of property (including
               securities) other than cash, be computed at the fair value
               thereof at the time of such issue or sale, as determined in good
               faith by the Board of Directors of the Company, and

                      (iii) in case Additional Shares of Common Stock are issued
               or sold together with other stock or securities or other assets
               of the Company for a consideration which covers both, be the
               portion of such consideration so received, computed as provided
               in clauses (i) and (ii) above, applicable to such Additional
               Shares of Common Stock, all as determined in good faith by the
               Board of Directors of the Company.

               (b) Shares Deemed Issued. Additional Shares of Common Stock
        deemed to have been issued pursuant to Section 2.4, relating to Options
        and Convertible Securities, shall be deemed to have been issued for a
        consideration per share determined by dividing,

                      (i) the present value (using a discount factor equal to
               the average interest rate on the Company's outstanding
               indebtedness to financial institutions and assuming any
               consideration receivable by the Company shall be received at the
               latest date possible under the terms of such Options or
               Convertible Securities) of the total amount, if any, received and
               receivable by the Company as consideration for the issue, sale,
               grant or assumption of the Options or Convertible Securities in

                                      188
<PAGE>

               question, plus the present value (using a discount factor equal
               to the average interest rate on the Company's outstanding
               indebtedness to financial institutions and assuming any
               consideration receivable by the Company shall be received at the
               latest date possible under the terms of the Options and
               Convertible Securities) of the minimum aggregate amount of
               additional consideration (as set forth in the instruments
               relating thereto, without regard to any provision contained
               therein for a subsequent adjustment of such consideration to
               protect against dilution) payable to the Company upon the
               exercise in full of such Options or the conversion or exchange of
               such Convertible Securities or, in the case of Options for
               Convertible Securities, the exercise of such Options for
               Convertible Securities and the conversion or exchange of such
               Convertible Securities, in each case computing such consideration
               as provided in the foregoing subdivision (a),

                      by

                      (ii) the maximum number of Additional Shares of Common
               Stock (as set forth in the instruments relating thereto, without
               regard to any provision contained therein for a subsequent
               adjustment of such number to protect against dilution) issuable
               upon the exercise of such Options or the conversion or exchange
               of such Convertible Securities.

               (c) Stock Dividends, Etc. Additional Shares of Common Stock
        issued or deemed to have been issued pursuant to Section 2.5, relating
        to stock dividends, stock splits, etc., shall be deemed to have been
        issued for no consideration.

               (d) Services. Additional Shares of Common Stock issued or sold or
        deemed issued or sold in exchange for services or the promise of future
        services shall be deemed to have been issued for no consideration.

        Section 2.7. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.

        Section 2.8. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Article II) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Article II, the purchase rights granted by this
Warrant, then, and in each such case, the computations, adjustments and
readjustments provided for in this Article II with respect to the Warrant Price
shall be made as nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time receivable upon the
exercise of the Warrant, so as to protect the holder of the Warrant against the
effect of such dilution.

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        Section 2.9. Appreciation Rights. If the Company issues or sells
Appreciation Rights, a number of Additional Shares of Common Stock shall be
deemed issued for purposes of this Article II and shall be computed as follows:

               (a) Value Based on Dividends. If the Appreciation Rights entitle
        the holder thereof to distributions or payments based on or determined
        with reference to dividends paid or payable on Common Stock, the number
        of Additional Shares of Common Stock deemed issued will be the number of
        shares of Common Stock that would be required to be issued such that the
        holder thereof would receive distribution payments equal to those paid
        or payable with respect to such Appreciation Rights.

               (b) Value Based on Liquidating Distributions. If the Appreciation
        Rights entitle the holder thereof to distributions or payments based on
        or determined with reference to liquidation distributions paid or
        payable on, or consideration received, in connection with the sale,
        exchange or transfer of Common Stock, the number of Additional Shares of
        Common Stock deemed issued will be the number of shares of Common Stock
        that would be required to be issued such that the holder thereof would
        receive distributions or payments equal to those paid or payable with
        respect to such Appreciation rights.

               (c) Value Based on Dividends and Liquidating Distributions. If
        the Appreciation Rights entitle the holder thereof to distributions
        based on or determined with reference to either dividends paid or
        payable on Common Stock and liquidating distributions paid or payable or
        on consolidation received in connection with the sale, exchange or
        transfer of Common Stock, the number of Additional Shares of Common
        Stock deemed issued will be the greater of the amount computed under (a)
        or (b) above.

               (d) Other Profits. If the Appreciation Rights entitle the holder
        thereof to distributions based on or determined with reference to any
        other measure of profit of the Company, the number of Additional Shares
        of Common Stock deemed issued will be the value of the Appreciation
        Right, as determined in the good faith judgment of the Board of
        Directors, divided by the Current Market Price of the Common Stock on
        the date of issuance of the Appreciation Right.

                    ARTICLE III. CONSOLIDATION, MERGER, ETC.

        Section 3.1. Assumption of Obligations. Notwithstanding anything
contained in this Warrant to the contrary, the Company will not (a) consolidate
with or merge into any other Person if the Company is not the continuing or
surviving corporation of such consolidation or merger, or (b) permit any other
Person to consolidate with or merge into the Company even though the Company
shall be the continuing or surviving Person if, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) transfer all or substantially all of its properties
or asset to any other Person, or (d) effect a capital reorganization or
reclassification of the Common Stock or Other Securities (other than a capital
reorganization or reclassification resulting in the issue of Additional Shares
of Common Stock for which adjustment in the Warrant Price is provided in Section
2.2 or 2.3) of Section 3.1 unless, prior to the consummation thereof, each
Person (other than the Company) which may be required to deliver any stock,

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securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the holder of this Warrant, (i) the obligations of the Company
under this Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant) and
(ii) the obligation to deliver to such holder such shares of stock, securities,
cash or property as such holder may be entitled to receive. Nothing in this
Article III shall be deemed to authorize the Company to enter into any
transaction not otherwise permitted by the Loan Agreement (as defined in the
Warrant Purchase Agreement).

                ARTICLE IV. OTHER PROVISIONS CONCERNING DILUTION

        Section 4.1. Other Dilutive Events. In case any event shall occur as to
which the provisions of Article II or III are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in Articles II and III, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the holder of this Warrant and shall make the adjustments described therein.

        Section 4.2. No Dilution or Impairment. The Company will not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not permit the
par value of any shares of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock on the
exercise of the Warrant from time to time outstanding, and (c) will not take any
action which results in any adjustment of the Warrant Price if the total number
of shares of Common Stock (or Other Securities) issuable after the action upon
the exercise of the Warrant would exceed the total number of shares of Common
Stock (or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issuance upon such exercise.

        Section 4.3. Accountant's and Company's Report as to Adjustments. In
each case of any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable upon the exercise of this Warrant, the Company at its
expense will promptly compute such adjustment or readjustment in accordance with
the terms of this Warrant and cause independent certified public accountants of
recognized national standing (which may be the regular auditors of the Company)
selected by the Company to verify such computation (other than any computation
of the fair value of property as determined in good faith by the Board of
Directors of the Company) and prepare a report setting forth such adjustment or
readjustment and showing in reasonable detail the method of calculation thereof
and the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or to be

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received by the Company for any Additional Shares of Common Stock issued or sold
or deemed to have been issued, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (c) the Warrant Price in effect
immediately prior to such issue or sale and as adjusted and readjusted (if
required by Article II) on account thereof. The Company shall also prepare and
certify a report stating that any computation of the fair value of property by
the Board of Directors was done in good faith by the Board of Directors as
required herein. The Company will forthwith mail a copy of each such report to
each holder of a Warrant and will, upon the written request at any time of any
holder of a Warrant, furnish to such holder a like report setting forth the
Warrant Price at the time in effect and showing in reasonable detail the manner
in which it was calculated. The Company will also keep copies of all such
reports at its office maintained pursuant to subdivision (a) of Section 6.2 and
will cause the same to be available for inspection at such office during normal
business hours by any holder of a Warrant or any prospective purchaser of a
Warrant designated by the holder thereof.

        Section 4.4. Notices of Corporate Action. In the event that any of the
following occurs,

               (a) any taking by the Company of a record of the holders of any
        class of securities for the purpose of determining the holders thereof
        who are entitled to receive any dividend (other than a regular periodic
        dividend payable in cash out of earned surplus in an amount not
        exceeding the amount of the immediately preceding cash dividend for such
        period) or other distribution, or any right to subscribe for, purchase
        or otherwise acquire any shares of stock of any class or any other
        securities or property, or to receive any other right, or

               (b) any capital reorganization of the Company, any
        reclassification or recapitalization of the capital stock of the Company
        or any consolidation or merger involving the Company and any other
        Person or any transfer of all or substantially all the assets of the
        company to any other Person, or

               (c) any voluntary or involuntary dissolution, liquidation or
        winding-up of the Company,

the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date as of which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification,

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recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 20 days prior to the date
therein specified.

        Section 4.5. Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company will, at its expense and as expeditiously as possible, use
its best efforts to cause such shares to be duly registered or approved, as the
case may be. At any such time as Common Stock is listed on any national
securities exchange, the Company will, at its expense, obtain the a notice of
issuance, of the shares of Common Stock issuable upon exercise of the Warrant
and maintain the listing of such shares after their issuance; and the Company
will also list on such national securities exchange, will register under the
Exchange Act and will maintain such listing of, any Other Securities that at any
time are issuable upon exercise of the Warrant, if and at the time that any
securities of the same class shall be listed on such national securities
exchange by the Company.

        Section 4.6. Availability of Information. The Company will cooperate
with each holder of any Warrant or Restricted Security in supplying such
information as may be reasonably requested by such holder to complete and file
any information reporting forms presently or hereafter required by the
Commission to report such holder's beneficial ownership of Common Stock or Other
Securities or as a condition to the availability of an exemption from the
provisions of the Securities Act for the sale of any Restricted Securities.

        Section 4.7. Reservation of Stock, etc. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrant, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of the Warrant. All shares of Common Stock
(or Other Securities) issuable upon exercise of the Warrant shall be duly
authorized and, when issued upon such exercise, shall be validly issued and, in
the case of shares, fully paid and non-assessable with no liability on the part
of the holders thereof.

                       ARTICLE V. RESTRICTIONS ON TRANSFER

        Section 5.1. Restrictive Legends. Except as otherwise permitted by this
Article V, each Warrant (including each Warrant issued upon the transfer of any
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:

               "This Warrant and any shares acquired upon the exercise of this
        Warrant have not been registered under the Securities Act of 1933, as
        amended, and may not be transferred, sold or otherwise disposed of in
        the absence of such registration or an exemption therefrom under such
        Act. This Warrant and such Shares may be transferred only in compliance
        with the conditions specified in this Warrant."

Except as otherwise permitted by this Article V, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:

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               "The shares represented by this certificate have not been
        registered under the Securities Act of 1933 and may not be transferred
        in the absence of such registration or an exemption therefrom under such
        Act."

        Section 5.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to
any transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof,
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this Section 5.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer and (b) shall include an opinion of legal counsel addressed to the
Company, in form and substance reasonably satisfactory to the Company, to the
effect that such transfer does not violate the Securities Act of 1933 and
applicable state securities laws.

        Section 5.3. Termination of Restrictions. The restrictions imposed by
this Article V upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities when such securities shall
have been sold pursuant to an effective registration statement under the
Securities Act or otherwise become freely transferable by the holder thereof.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new certificates
representing the securities not bearing the applicable legends required by
Section 5.1.

           ARTICLE VI. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANT

        Section 6.1. Ownership of Warrant. The Company may treat the person in
whose name any Warrant is registered on the register kept at the office of the
Company maintained pursuant to subdivision (a) of Section 6.2 as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary,
except that, if and when any Warrant is properly assigned in blank, the Company
may (but shall not be obligated to) treat the bearer thereof as the owner of
such Warrant for all purposes, notwithstanding any notice to the contrary.
Subject to Article V, a Warrant, if properly assigned, may be exercised by a new
holder without a new Warrant first having been issued.

        Section 6.2. Office, Transfer and Exchange of Warrant.

               (a) Office. The Company will maintain an office in where notices,
        presentations and demands in respect of this Warrant may be made upon
        it. Such office shall be maintained at 8150 Lawndale, Houston, Texas
        77012, until such time as the Company shall notify each holder of the
        Warrant of any change of location of such office.

               (b) New Warrant. Upon the surrender of any Warrant, properly
        endorsed, for registration of transfer or for exchange at the office of
        the Company maintained pursuant to subdivision (a) of this Section 6.2,
        the Company at its expense will (subject to compliance with Article V,
        if applicable) execute and deliver to or upon the order of the holder
        thereof a new Warrant or Warrants of like tenor, in the name of such
        holder or as such holder (upon payment by such holder of any applicable
        transfer taxes) may direct, calling in the aggregate on the face or
        faces

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        thereof for the number of shares of Common Stock called for on the face
        or faces of the Warrant or Warrants so surrendered.

        Section 6.3. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to subdivision (a)
of Section 6.2, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.

                            ARTICLE VII. DEFINITIONS

        As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:

        Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or pursuant to Section 2.4, 2.5 or 2.9,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than

               (a) shares issued, (i) upon exercise of this Warrant, (ii) upon
        exercise of options and warrants described in Schedule 3.1(d) to the
        Warrant Purchase Agreement, on the terms and conditions currently in
        effect, (iii) to Munawar H. Hidayatallah, or his assignees, pursuant to
        the terms of the compensation agreement described in Schedule 3.1(d) to
        the Warrant Purchase Agreement, on the terms and conditions currently in
        effect, (iv) pursuant to any employee benefit plan or plans subsequently
        adopted by the Company, to the extent that such plans do not provide for
        the issuance of shares constituting in excess of 10% of the outstanding
        common stock of the Company on a fully-diluted basis.

               (b) such additional number of shares as may become issuable upon
        the exercise of any of the securities referred to in the foregoing
        clause (a) by reason of adjustments required pursuant to anti-dilution
        provisions applicable to such securities as in effect on the date
        hereof, but only if and to the extent that such adjustments are required
        as the result of the original issuance of the Warrant, and

               (c) such additional number of shares as may become issuable upon
        the exercise of any of the securities referred to in the foregoing
        clause (a) by reason of adjustments required pursuant to anti-dilution
        provisions applicable to such securities as in effect on the date
        hereof, in order to reflect any subdivision or combination of Common
        Stock, by reclassification or otherwise, or any dividend on Common Stock
        payable in Common Stock.

        Appreciation Rights: All stock appreciation rights, net profits
interests or other rights entitling the holder or owner thereof to receive
payments based upon or determined with reference to the distributions to holders
of Common Stock or the profits of the Company.

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        Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the States of Texas or New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.

        Commission: The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.

        Common Stock: As defined in the introduction to this Warrant, such term
to include (i) any stock into which such Common Stock shall have been changed or
any stock resulting from any reclassification of such Common Stock, (ii) all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference and (iii) all stock appreciation rights, phantom stock and similar
contract rights the holders of which are entitled to payments based on or
determined by reference to the value of the Common Stock, dividends payable with
respect to Common Stock, or liquidating distributions payable with respect to
Common Stock.

        Company: As defined in the introduction to this Warrant, such term to
include any Person which shall succeed to or assume the obligations of the
Company hereunder in compliance with Article III.

        Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.

        Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.

        Dilution Factor: As defined in Section 2.1.

        Dilutive Basis: With respect to any issuance or sale or any deemed
issuance or sale of Additional Shares of Common Stock from and after the date
hereof, the greater of (i) the Current Market Price on the day immediately
before issuance or deemed issuance and (ii) the Warrant Price on the day before
issuance or deemed issuance.

        Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.

        Expiration Date: February 6, 2011.

        GAAP: Generally accepted accounting principles set forth in the Opinions
of the Accounting Principles Board of the American Institute of Certified Public
Accountants and in statements by the Financial Accounting Standards Board or in
such other statement by such other entity as may be approved

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by a significant segment of the accounting profession; and the requirement that
such principles be applied on a consistent basis shall mean that the accounting
principles observed in a current period are comparable in all material respects
to those applied in a preceding period.

        Initial Price: $0.15.

        Market Price: On any date specified herein, the amount per share of the
Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof determined in good faith by the
Board of Directors of the Company as of a date which is within 20 days of the
date as of which the determination is to be made.

        NASD: The National Association of Securities Dealers, Inc.

        Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.

        Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received upon the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Article III or otherwise.

        Person: Any corporation, association, partnership, joint venture, trust,
estate, limited liability company, organization, business, individual,
government or political subdivision thereof or governmental agency.

        Restricted Securities: All of the following: (a) any Warrant bearing the
applicable legend or legends referred to in Section 5.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
the Warrant and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of the Warrant and which, when
so issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.

        Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.

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        Subsidiary: With respect to any Person, any corporation with respect to
which more than 50% of the outstanding shares of stock of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned, directly or indirectly, by
such Person or by one or more Subsidiaries of such Person.

        Transfer: Any sale, assignment, pledge or other disposition of any
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.

        Purchaser: Wells Fargo Energy Capital, Inc..

        Warrant Price: As defined in Section 2.1 of this Warrant.

        Warrant Purchase Agreement: That certain Warrant Purchase Agreement by
and between the Company and Purchaser, dated of even date herewith.

                           ARTICLE VIII. MISCELLANEOUS

        Section 8.1. Remedies. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.

        Section 8.2. No Rights or Liabilities as Stockholder. The holder of this
Warrant and all subsequent holders thereof hereby agree that except to the
extent set forth herein, no provision of this Warrant shall be construed as
conferring upon the holder hereof any rights as a stockholder of the Company or
as imposing any obligation on such holder to purchase any securities or as
imposing any liabilities on such holder as a stockholder of the Company, whether
such obligation or liabilities are asserted by the Company or by creditors of
the Company.

        Section 8.3. Notices. All notices and other communications under this
Warrant shall be in writing and shall be mailed by registered or certified mail,
return receipt requested, addressed (a) if to any holder of any Warrant, to the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if the Company, to the attention of its
President at its office maintained pursuant to subdivision (a) of Section 6.2,
provided that the exercise of any Warrant shall be effective in the manner
provided in Article I.

        Section 8.4. Miscellaneous.

               (a) This Warrant may be amended, waived, discharged or terminated
        and the Company may take any action herein required to be performed by
        it, only if the Company shall have obtained the written consent to such
        amendment, action or omission to act, of the holder of the Warrant.

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               (b) THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
        WITH THE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

               (c) The section headings in this Warrant are for purposes of
        convenience only and shall not constitute a part hereof.

        Section 8.5. Option, Warrants and Other Securities. The Company has
outstanding the following options and warrants:

               (a) Options issued to Leonard Toboroff to purchase 500,000 shares
        of Common Stock at $.50 per share.

               (b) Warrants to Energy Spectrum Partners, LP, a Delaware limited
        partnership ("ENERGY SPECTRUM"), for 437,500 shares of Common Stock at
        $.15 per share and an agreement to issue an additional 875,000 warrants
        at the same price pursuant to this Agreement in the event that the
        Series A Preferred Stock of the Company held by Energy Spectrum is not
        redeemed on or before the first anniversary of the date of issue.
        Pursuant to its Certificate of Designation, the Series A Preferred Stock
        has conversion rights, adjustments of the conversion price, certain
        voting rights including the right to elect directors and both mandatory
        and optional redemption. Energy Spectrum has certain demand and
        piggyback registration rights pursuant to that certain Registration
        Right Agreement with the Company.

               (c) In connection with that certain Stock Purchase Agreement
        ("SPA") between the Company and Jens H. Mortensen, Jr. ("MORTENSEN"),
        (i) the Company is issuing to Mortensen $1,625,000 in shares of Common
        Stock valued at the average of the closing bid and offer price for
        Common Stock 30 days prior to the closing date of the SPA, (ii)
        Mortensen has an option to convert his 19% in stock of Jens' Oil Field
        Service, Inc., Texas corporation, into shares of Common Stock in
        accordance with terms of the option, and (iii) Mortensen has one demand
        registration right at his cost and piggyback registration rights.

               (d) Employment Agreement of Munawar H. Hidayatallah provides that
        his incentive compensation may be paid in common stock of OilQuip
        Rentals, Inc., a Delaware corporation ("OILQUIP") and wholly-owned
        subsidiary of the Company. This may provide for such incentive
        compensation to be paid in Common Stock.

               (e) Mountain Compressed Air, Inc., a Texas corporation ("MCAI")
        and wholly-owned subsidiary of OilQuip, issued warrants to Houlihan,
        Lokey, Howard & Zukin for 620,000 shares of its common stock, par value
        $0.01 per share.

               (f) The Company has entered into that certain letter agreement
        dated November 14, 2001 with Jefferies & Company, Inc. ("JEFFERIES"),
        whereby Jefferies will act as exclusive financial adviser to the Company
        and placement agent for up to $25,000,000 in securities of the Company.
        There are fees and reimbursements of expenses for services thereunder
        along with rights to manage or co-manage offerings, act as adviser in
        mergers and receive fees described

                                      199
<PAGE>

        therein.

               (g) The Company has entered into an agreement dated October 4,
        2001 with Virginia A. Muller ("MULLER") whereby Muller will act as a
        financial advisor to the Company regarding a private placement offering.
        Muller will be entitled to (i) a success fee of 2.5% of funds raised in
        the offering if the investors are originated by the Company or Muller,
        or (ii) a success fee of 1% of funds raised in the offering if the
        investors are originated by a third party.

               (h) The Company has issued options to purchase 24,000 shares of
        Common Stock at $2.75 per share to eight current or former directors
        and/or officers of the Company, which expire March, 2010 and are not
        subject to any plan. The Company has a Long Term Incentive Plan (1989)
        (the "PLAN") which provides for grants to officers and key employees of
        stock options, stock appreciation rights, performance shares, restricted
        stock, restricted stock units and other stock-based awards. The maximum
        number of shares of Common Stock which may be granted pursuant to the
        plan is 50,000. No stock options or stock appreciation rights have been
        granted to date under the Plan and the Plan should have terminated by
        its terms.

               (i) The Company has issued options to John T. Grigsby, Jr. to
        purchase 10,000 shares of Common Stock at $2.75 per share.

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<PAGE>

        This Warrant is hereby executed as of the date first above written.

                                    Allis-Chalmers Corporation

                                    By: ________________________________________
                                            Munawar H. Hidayatallah
                                            Chairman and Chief Executive Officer

                                       201
<PAGE>

                              FORM OF SUBSCRIPTION

To ___________________________:

        The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases _________* shares of
Common Stock of _________________, and herewith makes payment of $___________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to ___________________________, whose address is
______________________________ ___________.

Dated: ____________________________            _________________________________
                                               (Signature must conform in all
                                               respects to name of holder as
                                               specified on the face or Warrant)

                                               _________________________________
                                               (Street Address)

                                               _________________________________
                                               (City) (State) (Zip Code)

                                               _________________________________

        *Insert the number of shares called for on the face of this Warrant (or,
in the case of a partial exercise, the portion thereof as to which this Warrant
is being exercised), in either case without making any adjustment for Additional
Shares of Common Stock or any other stock or other securities or property or
cash which, pursuant to the adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the unexercised portion of
the Warrant, to the holder surrendering the Warrant.

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<PAGE>

                               FORM OF ASSIGNMENT

                 [To be executed only upon transfer of Warrant]

        For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _________________ the right
represented by such Warrant to purchase shares of Common Stock of to which such
Warrant relates, and appoints Attorney to make such transfer on the books of
maintained for such purpose, with full power of substitution in the premises.

Dated: ____________________________            _________________________________
                                               (Signature must conform in all
                                               respects to name of holder as
                                               specified on the face or Warrant)

                                               _________________________________
                                               (Street Address)

                                               _________________________________
                                               (City) (State) (Zip Code)

                                               _________________________________

Signed in the presence of:

___________________________________

                                      203

<PAGE>

                                  EXHIBIT B TO
                           WARRANT PURCHASE AGREEMENT

================================================================================

                                     WARRANT

                           ALLIS-CHALMERS CORPORATION
                             A DELAWARE CORPORATION
                                 (THE "COMPANY")

                               TO PURCHASE 700,000

                      SHARES OF THE COMPANY'S COMMON STOCK

                                    ISSUED TO

                        WELLS FARGO ENERGY CAPITAL, INC.
                               A TEXAS CORPORATION
                                ("WARRANTHOLDER")

                           EFFECTIVE FEBRUARY 1, 2002

        This Warrant and the Shares issued upon exercise thereof are subject to
repurchase by the Company as provided in the Warrant Purchase Agreement dated
effective February 1, 2002.

        This Warrant and any Shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended, and may
not be transferred, sold or otherwise disposed of in the absence of such
registration or an exemption therefrom under such Act. This Warrant and such
Shares may be transferred only in compliance with the conditions specified in
this Warrant and the Warrant Purchase Agreement, a copy of which is available
from the Company to holders of this Warrant.

================================================================================

                                      204

<PAGE>

                           Allis-Chalmers Corporation

                                     Warrant

No. W-B                                                         February 1, 2002

        Allis-Chalmers Corporation (the "Company"), a Delaware corporation, for
value received, hereby certifies that Wells Fargo Energy Capital, Inc., a Texas
Corporation, or registered assigns, is entitled to purchase from the Company
700,000 duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock, $0.15 par value (the "Common Stock") at any time or from time to
time prior to 5:00 p.m., Houston, Texas time, on the Expiration Date (as herein
defined), all subject to terms, conditions and adjustments set forth in this
Warrant.

        This is the Warrant (the "Warrant") (such term to include any warrants
issued in substitution therefor) originally issued pursuant to the Warrant
Purchase Agreement. Certain capitalized terms used in this Warrant are defined
in Article VII; unless otherwise specified, references to an "Exhibit" mean one
of the exhibits attached to this Warrant, references to an "Article" mean one of
the articles in this Warrant and references to a "Section" mean one of the
sections of this Warrant.

                         ARTICLE I. EXERCISE OF WARRANT

        Section 1.1. Manner of Exercise. This Warrant may be exercised by the
holder hereof, in whole or in part, during normal business hours on any Business
Day, by surrender of this Warrant to the Company at its office maintained
pursuant to subdivision (a) of Section 6.2, accompanied by a subscription in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder and accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company in the
amount obtained by multiplying (a) the number of shares of Common Stock (without
giving effect to any adjustment thereof) designated in such subscription by (b)
the Initial Price, and such holder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) determined as provided in Articles II
through IV.

        Section 1.2. When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1, and at such time the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
Section 1.3 shall be deemed to have become the holder or holders of record
thereof.

        Section 1.3. Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, and in any event
within five Business Days thereafter, the Company, at its expense (including the
payment by it of any applicable issue taxes), will cause to be issued in the
name of and delivered to the holder hereof, subject to Article V, as such holder
(upon payment by such holder of any applicable transfer taxes) may direct, the
following:

                                      205

<PAGE>

               (a) Certificates. A certificate or certificates for the number of
        duly authorized, validly issued, fully paid and nonassessable shares of
        Common Stock (or Other Securities) to which such holder shall be
        entitled upon such exercise plus, in lieu of any fractional share to
        which such holder would otherwise be entitled, cash in an amount equal
        to the same fraction of the Market Price per share on the Business Day
        next preceding the date of such exercise.

               (b) Warrant. In case such exercise is in part only, a new Warrant
        or Warrants of like tenor dated the date hereof, calling in the
        aggregate on the face or faces thereof for the number of shares of
        Common Stock equal (without giving effect to any adjustment thereof) to
        the number of such shares called for on the face of this Warrant minus
        the number of such shares designated by the holder upon such exercise as
        provided in Section 1.1.

          ARTICLE II. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE

        Section 2.1. General; Warrant Price. The number of shares of Common
Stock which the holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Article II)
be issuable upon such exercise, as designated by the holder hereof pursuant to
Section 1.1, by a fraction (the "Dilution Factor") (a) the numerator of which is
the Initial Price and (b) the denominator of which is the Warrant Price in
effect at the effective time of such exercise (as provided in Section 1.2). The
"Warrant Price" shall initially be the Initial Price, shall be adjusted and
readjusted from time to time as provided in this Article II and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Article II.

        Section 2.2. Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.4 or 2.5) without consideration
or for a consideration per share less than the Dilutive Basis, then, and in each
such case, such Warrant Price shall be reduced, concurrently with such issue or
sale, to the lower of the prices (calculated to the nearest cent) determined as
follows:

               (a) by multiplying the Warrant Price then in existence by a
        fraction, the numerator of which shall be (i) the number of shares of
        Common Stock outstanding immediately prior to such issue or sale plus
        (ii) the number of shares of Common Stock which the aggregate
        consideration received by the Company for the total number of such
        Additional Shares of Common Stock so issued or sold would purchase at
        the Current Market Price, and the denominator of which shall be the
        number of shares of Common Stock outstanding immediately after such
        issue or sale, provided that, for the purposes of this Section 2.2, (i)
        immediately after any Additional Shares of Common Stock are deemed to
        have been issued pursuant to Section 2.4 or 2.5, such Additional Shares
        of Common Stock shall be deemed to be outstanding, and (ii) treasury
        shares shall not be deemed to be outstanding; and

               (b) by dividing (i) an amount equal to the sum of (1) the number
        of shares of Common Stock outstanding immediately prior to such issuance
        or sale multiplied times the then effective

                                      206
<PAGE>

        Warrant Price plus (2) the total consideration, if any, received and
        deemed received by the Company upon such issue or sale, by (ii) the
        total number of shares of Common Stock outstanding and deemed
        outstanding immediately after such issue or sale.

        Section 2.3. Extraordinary Dividends and Distributions. If the Company
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or Other Securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a dividend payable in cash
or other property and declared out of the earned surplus of the Company as at
the date thereof as increased by any credits (other than credits resulting from
a revaluation of property) and decreased by any debits made thereto, then, and
in each such case, the Warrant Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
of securities entitled to receive such dividend or distribution shall be
reduced, effective as of the close of business on such record date, to a price
(calculated to the nearest cent) determined by multiplying such Warrant Price by
a fraction:

               (a) the numerator of which shall be the Current Market Price in
        effect on such record date or, if the Common Stock trades on an
        ex-dividend basis, on the date prior to the commencement of ex-dividend
        trading, less the amount of such dividend or distribution (as determined
        in good faith by the Board of Directors of the Company) applicable to
        one share of Common Stock, and

               (b) the denominator of which shall be the Current Market Price on
        such record date, or if the Common Stock trades on an ex-dividend basis,
        on the date prior to the commencement of ex-dividend trading.

        Section 2.4. Treatment of Options and Convertible Securities. In case
the Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, or, in the case of Appreciation Rights, the
number computed in Section 2.9, shall be deemed to be the number of Additional
Shares of Common Stock issued as of the time of such issue, sale, grant or
assumption or, in case such a record date shall have been fixed, as of the close
of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading); provided that such Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 2.6) of such shares would be less than the Dilutive Basis in
effect on the date of and immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business on such record date
(or, if the Common Stock trades on an ex-dividend basis, on the date prior to
the commencement of ex-dividend trading), as the case may be; and provided,
further, that in any such case in which Additional Shares of Common Stock are
deemed to be issued no further adjustment of the Warrant Price shall be made
upon the subsequent issue or sale of Convertible Securities or

                                      207

<PAGE>

Additional Shares of Common Stock upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.

        Section 2.5. Treatment of Stock Dividends, Stock Splits, etc. In case
the Company at any time or from time to time after the date hereof shall declare
or pay any dividend on the Common Stock payable in Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.

        Section 2.6. Computation of Consideration. For the purpose of Article
II, the following shall be used to determine the consideration received or
deemed received by the Company:

               (a) Shares Actually Issued. The consideration for the issue or
        sale of any Additional Shares of Common Stock shall, irrespective of the
        accounting treatment of such consideration,

                   (i) insofar as it consists of cash, be computed at the net
               amount of cash received by the Company, without deducting any
               expenses paid or incurred by the Company or any commissions or
               compensations paid or concessions or discounts allowed to
               underwriters, dealers or others performing similar services in
               connection with such issue or sale,

                   (ii) insofar as it consists of property (including
               securities) other than cash, be computed at the fair value
               thereof at the time of such issue or sale, as determined in good
               faith by the Board of Directors of the Company, and

                   (iii) in case Additional Shares of Common Stock are issued or
               sold together with other stock or securities or other assets of
               the Company for a consideration which covers both, be the portion
               of such consideration so received, computed as provided in
               clauses (i) and (ii) above, applicable to such Additional Shares
               of Common Stock, all as determined in good faith by the Board of
               Directors of the Company.

               (b) Shares Deemed Issued. Additional Shares of Common Stock
        deemed to have been issued pursuant to Section 2.4, relating to Options
        and Convertible Securities, shall be deemed to have been issued for a
        consideration per share determined by dividing,

                   (i) the present value (using a discount factor equal to the
               average interest rate on the Company's outstanding indebtedness
               to financial institutions and assuming any consideration
               receivable by the Company shall be received at the latest date
               possible under the terms of such Options or Convertible
               Securities) of the total amount, if any, received and receivable
               by the Company as consideration for the issue, sale, grant or
               assumption of the Options or Convertible Securities in

                                      208
<PAGE>

               question, plus the present value (using a discount factor equal
               to the average interest rate on the Company's outstanding
               indebtedness to financial institutions and assuming any
               consideration receivable by the Company shall be received at the
               latest date possible under the terms of the Options and
               Convertible Securities) of the minimum aggregate amount of
               additional consideration (as set forth in the instruments
               relating thereto, without regard to any provision contained
               therein for a subsequent adjustment of such consideration to
               protect against dilution) payable to the Company upon the
               exercise in full of such Options or the conversion or exchange of
               such Convertible Securities or, in the case of Options for
               Convertible Securities, the exercise of such Options for
               Convertible Securities and the conversion or exchange of such
               Convertible Securities, in each case computing such consideration
               as provided in the foregoing subdivision (a),

               by

                   (ii) the maximum number of Additional Shares of Common Stock
               (as set forth in the instruments relating thereto, without regard
               to any provision contained therein for a subsequent adjustment of
               such number to protect against dilution) issuable upon the
               exercise of such Options or the conversion or exchange of such
               Convertible Securities.

               (c) Stock Dividends, Etc. Additional Shares of Common Stock
        issued or deemed to have been issued pursuant to Section 2.5, relating
        to stock dividends, stock splits, etc., shall be deemed to have been
        issued for no consideration.

               (d) Services. Additional Shares of Common Stock issued or sold or
        deemed issued or sold in exchange for services or the promise of future
        services shall be deemed to have been issued for no consideration.

        Section 2.7. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.

        Section 2.8. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Article II) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Article II, the purchase rights granted by this
Warrant, then, and in each such case, the computations, adjustments and
readjustments provided for in this Article II with respect to the Warrant Price
shall be made as nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time receivable upon the
exercise of the Warrant, so as to protect the holder of the Warrant against the
effect of such dilution.

                                      209
<PAGE>

        Section 2.9. Appreciation Rights. If the Company issues or sells
Appreciation Rights, a number of Additional Shares of Common Stock shall be
deemed issued for purposes of this Article II and shall be computed as follows:

               (a) Value Based on Dividends. If the Appreciation Rights entitle
        the holder thereof to distributions or payments based on or determined
        with reference to dividends paid or payable on Common Stock, the number
        of Additional Shares of Common Stock deemed issued will be the number of
        shares of Common Stock that would be required to be issued such that the
        holder thereof would receive distribution payments equal to those paid
        or payable with respect to such Appreciation Rights.

               (b) Value Based on Liquidating Distributions. If the Appreciation
        Rights entitle the holder thereof to distributions or payments based on
        or determined with reference to liquidation distributions paid or
        payable on, or consideration received, in connection with the sale,
        exchange or transfer of Common Stock, the number of Additional Shares of
        Common Stock deemed issued will be the number of shares of Common Stock
        that would be required to be issued such that the holder thereof would
        receive distributions or payments equal to those paid or payable with
        respect to such Appreciation rights.

               (c) Value Based on Dividends and Liquidating Distributions. If
        the Appreciation Rights entitle the holder thereof to distributions
        based on or determined with reference to either dividends paid or
        payable on Common Stock and liquidating distributions paid or payable or
        on consolidation received in connection with the sale, exchange or
        transfer of Common Stock, the number of Additional Shares of Common
        Stock deemed issued will be the greater of the amount computed under (a)
        or (b) above.

               (d) Other Profits. If the Appreciation Rights entitle the holder
        thereof to distributions based on or determined with reference to any
        other measure of profit of the Company, the number of Additional Shares
        of Common Stock deemed issued will be the value of the Appreciation
        Right, as determined in the good faith judgment of the Board of
        Directors, divided by the Current Market Price of the Common Stock on
        the date of issuance of the Appreciation Right.

                    ARTICLE III. CONSOLIDATION, MERGER, ETC.

        Section 3.1. Assumption of Obligations. Notwithstanding anything
contained in this Warrant to the contrary, the Company will not (a) consolidate
with or merge into any other Person if the Company is not the continuing or
surviving corporation of such consolidation or merger, or (b) permit any other
Person to consolidate with or merge into the Company even though the Company
shall be the continuing or surviving Person if, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) transfer all or substantially all of its properties
or asset to any other Person, or (d) effect a capital reorganization or
reclassification of the Common Stock or Other Securities (other than a capital
reorganization or reclassification resulting in the issue of Additional Shares
of Common Stock for which adjustment in the Warrant Price is provided in Section
2.2 or 2.3) of Section 3.1 unless, prior to the consummation thereof, each
Person (other than the Company) which may be required to deliver any stock,

                                      210
<PAGE>

securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the holder of this Warrant, (i) the obligations of the Company
under this Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant) and
(ii) the obligation to deliver to such holder such shares of stock, securities,
cash or property as such holder may be entitled to receive. Nothing in this
Article III shall be deemed to authorize the Company to enter into any
transaction not otherwise permitted by the Loan Agreement (as defined in the
Warrant Purchase Agreement).

                ARTICLE IV. OTHER PROVISIONS CONCERNING DILUTION

        Section 4.1. Other Dilutive Events. In case any event shall occur as to
which the provisions of Article II or III are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in Articles II and III, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the holder of this Warrant and shall make the adjustments described therein.

        Section 4.2. No Dilution or Impairment. The Company will not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not permit the
par value of any shares of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock on the
exercise of the Warrant from time to time outstanding, and (c) will not take any
action which results in any adjustment of the Warrant Price if the total number
of shares of Common Stock (or Other Securities) issuable after the action upon
the exercise of the Warrant would exceed the total number of shares of Common
Stock (or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issuance upon such exercise.

        Section 4.3. Accountant's and Company's Report as to Adjustments. In
each case of any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable upon the exercise of this Warrant, the Company at its
expense will promptly compute such adjustment or readjustment in accordance with
the terms of this Warrant and cause independent certified public accountants of
recognized national standing (which may be the regular auditors of the Company)
selected by the Company to verify such computation (other than any computation
of the fair value of property as determined in good faith by the Board of
Directors of the Company) and prepare a report setting forth such adjustment or
readjustment and showing in reasonable detail the method of calculation thereof
and the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or to be

                                      211

<PAGE>

received by the Company for any Additional Shares of Common Stock issued or sold
or deemed to have been issued, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (c) the Warrant Price in effect
immediately prior to such issue or sale and as adjusted and readjusted (if
required by Article II) on account thereof. The Company shall also prepare and
certify a report stating that any computation of the fair value of property by
the Board of Directors was done in good faith by the Board of Directors as
required herein. The Company will forthwith mail a copy of each such report to
each holder of a Warrant and will, upon the written request at any time of any
holder of a Warrant, furnish to such holder a like report setting forth the
Warrant Price at the time in effect and showing in reasonable detail the manner
in which it was calculated. The Company will also keep copies of all such
reports at its office maintained pursuant to subdivision (a) of Section 6.2 and
will cause the same to be available for inspection at such office during normal
business hours by any holder of a Warrant or any prospective purchaser of a
Warrant designated by the holder thereof.

        Section 4.4. Notices of Corporate Action. In the event that any of the
following occurs,

               (a) any taking by the Company of a record of the holders of any
        class of securities for the purpose of determining the holders thereof
        who are entitled to receive any dividend (other than a regular periodic
        dividend payable in cash out of earned surplus in an amount not
        exceeding the amount of the immediately preceding cash dividend for such
        period) or other distribution, or any right to subscribe for, purchase
        or otherwise acquire any shares of stock of any class or any other
        securities or property, or to receive any other right, or

               (b) any capital reorganization of the Company, any
        reclassification or recapitalization of the capital stock of the Company
        or any consolidation or merger involving the Company and any other
        Person or any transfer of all or substantially all the assets of the
        company to any other Person, or

               (c) any voluntary or involuntary dissolution, liquidation or
        winding-up of the Company,

the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date as of which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date therein specified.

        Section 4.5. Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company will, at its expense and as expeditiously as possible, use
its best efforts to cause such shares to be duly registered or approved, as the
case may be. At any such time as Common Stock is

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<PAGE>

listed on any national securities exchange, the Company will, at its expense,
obtain the a notice of issuance, of the shares of Common Stock issuable upon
exercise of the Warrant and maintain the listing of such shares after their
issuance; and the Company will also list on such national securities exchange,
will register under the Exchange Act and will maintain such listing of, any
Other Securities that at any time are issuable upon exercise of the Warrant, if
and at the time that any securities of the same class shall be listed on such
national securities exchange by the Company.

        Section 4.6. Availability of Information. The Company will cooperate
with each holder of any Warrant or Restricted Security in supplying such
information as may be reasonably requested by such holder to complete and file
any information reporting forms presently or hereafter required by the
Commission to report such holder's beneficial ownership of Common Stock or Other
Securities or as a condition to the availability of an exemption from the
provisions of the Securities Act for the sale of any Restricted Securities.

        Section 4.7. Reservation of Stock, etc. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrant, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of the Warrant. All shares of Common Stock
(or Other Securities) issuable upon exercise of the Warrant shall be duly
authorized and, when issued upon such exercise, shall be validly issued and, in
the case of shares, fully paid and non-assessable with no liability on the part
of the holders thereof.

                       ARTICLE V. RESTRICTIONS ON TRANSFER

        Section 5.1. Restrictive Legends. Except as otherwise permitted by this
Article V, each Warrant (including each Warrant issued upon the transfer of any
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:

               "This Warrant and any shares acquired upon the exercise of this
        Warrant have not been registered under the Securities Act of 1933, as
        amended, and may not be transferred, sold or otherwise disposed of in
        the absence of such registration or an exemption therefrom under such
        Act. This Warrant and such Shares may be transferred only in compliance
        with the conditions specified in this Warrant."

Except as otherwise permitted by this Article V, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:

               "The shares represented by this certificate have not been
        registered under the Securities Act of 1933 and may not be transferred
        in the absence of such registration or an exemption therefrom under such
        Act."

        Section 5.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to
any transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof,
will give written notice to the Company of such holder's intention to effect
such

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<PAGE>

transfer and to comply in all other respects with this Section 5.2. Each such
notice (a) shall describe the manner and circumstances of the proposed transfer
and (b) shall include an opinion of legal counsel addressed to the Company, in
form and substance reasonably satisfactory to the Company, to the effect that
such transfer does not violate the Securities Act of 1933 and applicable state
securities laws.

        Section 5.3. Termination of Restrictions. The restrictions imposed by
this Article V upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities when such securities shall
have been sold pursuant to an effective registration statement under the
Securities Act or otherwise become freely transferable by the holder thereof.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new certificates
representing the securities not bearing the applicable legends required by
Section 5.1.

           ARTICLE VI. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANT

        Section 6.1. Ownership of Warrant. The Company may treat the person in
whose name any Warrant is registered on the register kept at the office of the
Company maintained pursuant to subdivision (a) of Section 6.2 as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary,
except that, if and when any Warrant is properly assigned in blank, the Company
may (but shall not be obligated to) treat the bearer thereof as the owner of
such Warrant for all purposes, notwithstanding any notice to the contrary.
Subject to Article V, a Warrant, if properly assigned, may be exercised by a new
holder without a new Warrant first having been issued.

        Section 6.2. Office, Transfer and Exchange of Warrant.

               (a) Office. The Company will maintain an office in where notices,
        presentations and demands in respect of this Warrant may be made upon
        it. Such office shall be maintained at 8150 Lawndale, Houston, Texas
        77012, until such time as the Company shall notify each holder of the
        Warrant of any change of location of such office.

               (b) New Warrant. Upon the surrender of any Warrant, properly
        endorsed, for registration of transfer or for exchange at the office of
        the Company maintained pursuant to subdivision (a) of this Section 6.2,
        the Company at its expense will (subject to compliance with Article V,
        if applicable) execute and deliver to or upon the order of the holder
        thereof a new Warrant or Warrants of like tenor, in the name of such
        holder or as such holder (upon payment by such holder of any applicable
        transfer taxes) may direct, calling in the aggregate on the face or
        faces thereof for the number of shares of Common Stock called for on the
        face or faces of the Warrant or Warrants so surrendered.

        Section 6.3. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained

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<PAGE>

pursuant to subdivision (a) of Section 6.2, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

                            ARTICLE VII. DEFINITIONS

        As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:

        Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or pursuant to Section 2.4, 2.5 or 2.9,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than

               (a) shares issued, (i) upon exercise of this Warrant, (ii) upon
        exercise of options and warrants described in Schedule 3.1(d) to the
        Warrant Purchase Agreement, on the terms and conditions currently in
        effect, (iii) to Munawar H. Hidayatallah, or his assignees, pursuant to
        the terms of the compensation agreement described in Schedule 3.1(d) to
        the Warrant Purchase Agreement, on the terms and conditions currently in
        effect, (iv) pursuant to any employee benefit plan or plans subsequently
        adopted by the Company, to the extent that such plans do not provide for
        the issuance of shares constituting in excess of 10% of the outstanding
        common stock of the Company on a fully-diluted basis.

               (b) such additional number of shares as may become issuable upon
        the exercise of any of the securities referred to in the foregoing
        clause (a) by reason of adjustments required pursuant to anti-dilution
        provisions applicable to such securities as in effect on the date
        hereof, but only if and to the extent that such adjustments are required
        as the result of the original issuance of the Warrant, and

               (c) such additional number of shares as may become issuable upon
        the exercise of any of the securities referred to in the foregoing
        clause (a) by reason of adjustments required pursuant to anti-dilution
        provisions applicable to such securities as in effect on the date
        hereof, in order to reflect any subdivision or combination of Common
        Stock, by reclassification or otherwise, or any dividend on Common Stock
        payable in Common Stock.

        Appreciation Rights: All stock appreciation rights, net profits
interests or other rights entitling the holder or owner thereof to receive
payments based upon or determined with reference to the distributions to holders
of Common Stock or the profits of the Company.

        Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the States of Texas or New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.

        Commission: The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.

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<PAGE>

        Common Stock: As defined in the introduction to this Warrant, such term
to include (i) any stock into which such Common Stock shall have been changed or
any stock resulting from any reclassification of such Common Stock, (ii) all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference and (iii) all stock appreciation rights, phantom stock and similar
contract rights the holders of which are entitled to payments based on or
determined by reference to the value of the Common Stock, dividends payable with
respect to Common Stock, or liquidating distributions payable with respect to
Common Stock.

        Company: As defined in the introduction to this Warrant, such term to
include any Person which shall succeed to or assume the obligations of the
Company hereunder in compliance with Article III.

        Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.

        Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.

        Dilution Factor: As defined in Section 2.1.

        Dilutive Basis: With respect to any issuance or sale or any deemed
issuance or sale of Additional Shares of Common Stock from and after the date
hereof, the greater of (i) the Current Market Price on the day immediately
before issuance or deemed issuance and (ii) the Warrant Price on the day before
issuance or deemed issuance.

        Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.

        Expiration Date: The tenth anniversary of the date of issuance of this
Warrant.

        GAAP: Generally accepted accounting principles set forth in the Opinions
of the Accounting Principles Board of the American Institute of Certified Public
Accountants and in statements by the Financial Accounting Standards Board or in
such other statement by such other entity as may be approved by a significant
segment of the accounting profession; and the requirement that such principles
be applied on a consistent basis shall mean that the accounting principles
observed in a current period are comparable in all material respects to those
applied in a preceding period.

        Initial Price: $0.15.

                                      216
<PAGE>

        Market Price: On any date specified herein, the amount per share of the
Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof determined in good faith by the
Board of Directors of the Company as of a date which is within 20 days of the
date as of which the determination is to be made.

        NASD: The National Association of Securities Dealers, Inc.

        Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.

        Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received upon the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Article III or otherwise.

        Person: Any corporation, association, partnership, joint venture, trust,
estate, limited liability company, organization, business, individual,
government or political subdivision thereof or governmental agency.

        Restricted Securities: All of the following: (a) any Warrant bearing the
applicable legend or legends referred to in Section 5.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
the Warrant and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of the Warrant and which, when
so issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.

        Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.

        Subsidiary: With respect to any Person, any corporation with respect to
which more than 50% of the outstanding shares of stock of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned, directly or indirectly, by
such Person or by one or more Subsidiaries of such Person.

                                      217

<PAGE>

        Transfer: Any sale, assignment, pledge or other disposition of any
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.

        Purchaser: Wells Fargo Energy Capital, Inc..

        Warrant Price: As defined in Section 2.1 of this Warrant.

        Warrant Purchase Agreement: That certain Warrant Purchase Agreement by
and between the Company and Purchaser, dated of even date herewith.

                           ARTICLE VIII. MISCELLANEOUS

        Section 8.1. Remedies. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.

        Section 8.2. No Rights or Liabilities as Stockholder. The holder of this
Warrant and all subsequent holders thereof hereby agree that except to the
extent set forth herein, no provision of this Warrant shall be construed as
conferring upon the holder hereof any rights as a stockholder of the Company or
as imposing any obligation on such holder to purchase any securities or as
imposing any liabilities on such holder as a stockholder of the Company, whether
such obligation or liabilities are asserted by the Company or by creditors of
the Company.

        Section 8.3. Notices. All notices and other communications under this
Warrant shall be in writing and shall be mailed by registered or certified mail,
return receipt requested, addressed (a) if to any holder of any Warrant, to the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if the Company, to the attention of its
President at its office maintained pursuant to subdivision (a) of Section 6.2,
provided that the exercise of any Warrant shall be effective in the manner
provided in Article I.

                Section 8.4. Miscellaneous.

               (a) This Warrant may be amended, waived, discharged or terminated
        and the Company may take any action herein required to be performed by
        it, only if the Company shall have obtained the written consent to such
        amendment, action or omission to act, of the holder of the Warrant.

               (b) THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
        WITH THE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

               (c) The section headings in this Warrant are for purposes of
        convenience only and shall not constitute a part hereof.

                                      218

<PAGE>

                Section 8.5. Option, Warrants and Other Securities. The Company
        has outstanding the following options and warrants:

               (a) Options issued to Leonard Toboroff to purchase 500,000 shares
        of Common Stock at $.50 per share.

               (b) Warrants to Energy Spectrum Partners, LP, a Delaware limited
        partnership ("ENERGY SPECTRUM"), for 437,500 shares of Common Stock at
        $.15 per share and an agreement to issue an additional 875,000 warrants
        at the same price pursuant to this Agreement in the event that the
        Series A Preferred Stock of the Company held by Energy Spectrum is not
        redeemed on or before the first anniversary of the date of issue.
        Pursuant to its Certificate of Designation, the Series A Preferred Stock
        has conversion rights, adjustments of the conversion price, certain
        voting rights including the right to elect directors and both mandatory
        and optional redemption. Energy Spectrum has certain demand and
        piggyback registration rights pursuant to that certain Registration
        Right Agreement with the Company.

               (c) In connection with that certain Stock Purchase Agreement
        ("SPA") between the Company and Jens H. Mortensen, Jr. ("MORTENSEN"),
        (i) the Company is issuing to Mortensen $1,625,000 in shares of Common
        Stock valued at the average of the closing bid and offer price for
        Common Stock 30 days prior to the closing date of the SPA, (ii)
        Mortensen has an option to convert his 19% in stock of Jens' Oil Field
        Service, Inc., Texas corporation, into shares of Common Stock in
        accordance with terms of the option, and (iii) Mortensen has one demand
        registration right at his cost and piggyback registration rights.

               (d) Employment Agreement of Munawar H. Hidayatallah provides that
        his incentive compensation may be paid in common stock of OilQuip
        Rentals, Inc., a Delaware corporation ("OILQUIP") and wholly-owned
        subsidiary of the Company. This may provide for such incentive
        compensation to be paid in Common Stock.

               (e) Mountain Compressed Air, Inc., a Texas corporation ("MCAI")
        and wholly-owned subsidiary of OilQuip, issued warrants to Houlihan,
        Lokey, Howard & Zukin for 620,000 shares of its common stock, par value
        $0.01 per share.

               (f) The Company has entered into that certain letter agreement
        dated November 14, 2001 with Jefferies & Company, Inc. ("JEFFERIES"),
        whereby Jefferies will act as exclusive financial adviser to the Company
        and placement agent for up to $25,000,000 in securities of the Company.
        There are fees and reimbursements of expenses for services thereunder
        along with rights to manage or co-manage offerings, act as adviser in
        mergers and receive fees described therein.

               (g) The Company has entered into an agreement dated October 4,
        2001 with Virginia A. Muller ("MULLER") whereby Muller will act as a
        financial advisor to the Company regarding a private placement offering.
        Muller will be entitled to (i) a success fee of 2.5% of funds raised in
        the offering if the investors are originated by the Company or Muller,
        or (ii) a success fee of 1% of funds raised in the offering if the
        investors are originated by a third party.

                                      219

<PAGE>

               (h) The Company has issued options to purchase 24,000 shares of
        Common Stock at $2.75 per share to eight current or former directors
        and/or officers of the Company, which expire March, 2010 and are not
        subject to any plan. The Company has a Long Term Incentive Plan (1989)
        (the "PLAN") which provides for grants to officers and key employees of
        stock options, stock appreciation rights, performance shares, restricted
        stock, restricted stock units and other stock-based awards. The maximum
        number of shares of Common Stock which may be granted pursuant to the
        plan is 50,000. No stock options or stock appreciation rights have been
        granted to date under the Plan and the Plan should have terminated by
        its terms.

               (i) The Company has issued options to John T. Grigsby, Jr. to
        purchase 10,000 shares of Common Stock at $2.75 per share. 500 shares at
        $0.15 per share, to be issued to Energy Spectrum Partners, LP in
        connection with the transactions contemplated by the Loan Agreement,
        such warrant to expire January 2012.

                                      220

<PAGE>

        This Warrant is hereby executed as of the date first above written.

                                      Allis-Chalmers Corporation

                                      By:_______________________________________
                                            Munawar H. Hidayatallah
                                            Chairman and Chief Executive Officer

                                      221

<PAGE>

                              FORM OF SUBSCRIPTION

To ___________________________:

        The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases _________* shares of
Common Stock of _________________, and herewith makes payment of $___________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to ___________________________, whose address is
______________________________ ___________.

Dated: ____________________________            _________________________________
                                               (Signature must conform in all
                                               respects to name of holder as
                                               specified on the face or Warrant)

                                               _________________________________
                                               (Street Address)

                                               _________________________________
                                               (City) (State) (Zip Code)

                                               _________________________________

        *Insert the number of shares called for on the face of this Warrant (or,
in the case of a partial exercise, the portion thereof as to which this Warrant
is being exercised), in either case without making any adjustment for Additional
Shares of Common Stock or any other stock or other securities or property or
cash which, pursuant to the adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the unexercised portion of
the Warrant, to the holder surrendering the Warrant.

                                      222
<PAGE>

                               FORM OF ASSIGNMENT

                 [To be executed only upon transfer of Warrant]

        For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _________________ the right
represented by such Warrant to purchase shares of Common Stock of to which such
Warrant relates, and appoints Attorney to make such transfer on the books of
maintained for such purpose, with full power of substitution in the premises.

Dated: ____________________________            _________________________________
                                               (Signature must conform in all
                                               respects to name of holder as
                                               specified on the face or Warrant)

                                               _________________________________
                                               (Street Address)

                                               _________________________________
                                               (City) (State) (Zip Code)

                                               _________________________________

Signed in the presence of:

___________________________________

                                      223
<PAGE>
                                  EXHIBIT C TO
                           WARRANT PURCHASE AGREEMENT

================================================================================

                                     WARRANT

                           ALLIS-CHALMERS CORPORATION
                             A DELAWARE CORPORATION
                                 (THE "COMPANY")

                               TO PURCHASE 335,000

                      SHARES OF THE COMPANY'S COMMON STOCK

                                    ISSUED TO

                        WELLS FARGO ENERGY CAPITAL, INC.
                               A TEXAS CORPORATION
                                ("WARRANTHOLDER")

                           EFFECTIVE FEBRUARY 1, 2002

                This Warrant and any Shares acquired upon the exercise of this
        Warrant have not been registered under the Securities Act of 1933, as
        amended, and may not be transferred, sold or otherwise disposed of in
        the absence of such registration or an exemption therefrom under such
        Act. This Warrant and such Shares may be transferred only in compliance
        with the conditions specified in this Warrant and the Warrant Purchase
        Agreement, a copy of which is available from the Company to holders of
        this Warrant.

================================================================================

                                      224
<PAGE>

                           Allis-Chalmers Corporation

                                     Warrant

No. W-C                                                         February 1, 2002

        Allis-Chalmers Corporation (the "Company"), a Delaware corporation, for
value received, hereby certifies that Wells Fargo Energy Capital, Inc., a Texas
Corporation, or registered assigns, is entitled to purchase from the Company
335,000 duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock, $0.15 par value (the "Common Stock") at any time or from time to
time prior to 5:00 p.m., Houston, Texas time, on the Expiration Date (as herein
defined), all subject to terms, conditions and adjustments set forth in this
Warrant.

        This is the Warrant (the "Warrant") (such term to include any warrants
issued in substitution therefor) originally issued pursuant to the Warrant
Purchase Agreement. Certain capitalized terms used in this Warrant are defined
in Article VII; unless otherwise specified, references to an "Exhibit" mean one
of the exhibits attached to this Warrant, references to an "Article" mean one of
the articles in this Warrant and references to a "Section" mean one of the
sections of this Warrant.

                         ARTICLE I. EXERCISE OF WARRANT

        Section 1.1. Manner of Exercise. This Warrant may be exercised by the
holder hereof, in whole or in part, during normal business hours on any Business
Day, by surrender of this Warrant to the Company at its office maintained
pursuant to subdivision (a) of Section 6.2, accompanied by a subscription in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder and accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company in the
amount obtained by multiplying (a) the number of shares of Common Stock (without
giving effect to any adjustment thereof) designated in such subscription by (b)
the Initial Price, and such holder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) determined as provided in Articles II
through IV.

        Section 1.2. When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1, and at such time the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
Section 1.3 shall be deemed to have become the holder or holders of record
thereof.

        Section 1.3. Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, and in any event
within five Business Days thereafter, the Company, at its expense (including the
payment by it of any applicable issue taxes), will cause to be issued in the
name of and delivered to the holder hereof, subject to Article V, as such holder
(upon payment by such holder of any applicable transfer taxes) may direct, the
following:

                                      225
<PAGE>

                (a) Certificates. A certificate or certificates for the number
        of duly authorized, validly issued, fully paid and nonassessable shares
        of Common Stock (or Other Securities) to which such holder shall be
        entitled upon such exercise plus, in lieu of any fractional share to
        which such holder would otherwise be entitled, cash in an amount equal
        to the same fraction of the Market Price per share on the Business Day
        next preceding the date of such exercise.

                (b) Warrant. In case such exercise is in part only, a new
        Warrant or Warrants of like tenor dated the date hereof, calling in the
        aggregate on the face or faces thereof for the number of shares of
        Common Stock equal (without giving effect to any adjustment thereof) to
        the number of such shares called for on the face of this Warrant minus
        the number of such shares designated by the holder upon such exercise as
        provided in Section 1.1.

          ARTICLE II. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE

        Section 2.1. General; Warrant Price. The number of shares of Common
Stock which the holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Article II)
be issuable upon such exercise, as designated by the holder hereof pursuant to
Section 1.1, by a fraction (the "Dilution Factor") (a) the numerator of which is
the Initial Price and (b) the denominator of which is the Warrant Price in
effect at the effective time of such exercise (as provided in Section 1.2). The
"Warrant Price" shall initially be the Initial Price, shall be adjusted and
readjusted from time to time as provided in this Article II and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Article II.

        Section 2.2. Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.4 or 2.5) without consideration
or for a consideration per share less than the Dilutive Basis, then, and in each
such case, such Warrant Price shall be reduced, concurrently with such issue or
sale, to the lower of the prices (calculated to the nearest cent) determined as
follows:

                (a) by multiplying the Warrant Price then in existence by a
        fraction, the numerator of which shall be (i) the number of shares of
        Common Stock outstanding immediately prior to such issue or sale plus
        (ii) the number of shares of Common Stock which the aggregate
        consideration received by the Company for the total number of such
        Additional Shares of Common Stock so issued or sold would purchase at
        the Current Market Price, and the denominator of which shall be the
        number of shares of Common Stock outstanding immediately after such
        issue or sale, provided that, for the purposes of this Section 2.2, (i)
        immediately after any Additional Shares of Common Stock are deemed to
        have been issued pursuant to Section 2.4 or 2.5, such Additional Shares
        of Common Stock shall be deemed to be outstanding, and (ii) treasury
        shares shall not be deemed to be outstanding; and

                (b) by dividing (i) an amount equal to the sum of (1) the number
        of shares of Common Stock outstanding immediately prior to such issuance
        or sale multiplied times the then effective

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        Warrant Price plus (2) the total consideration, if any, received and
        deemed received by the Company upon such issue or sale, by (ii) the
        total number of shares of Common Stock outstanding and deemed
        outstanding immediately after such issue or sale.

        Section 2.3. Extraordinary Dividends and Distributions. If the Company
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or Other Securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a dividend payable in cash
or other property and declared out of the earned surplus of the Company as at
the date thereof as increased by any credits (other than credits resulting from
a revaluation of property) and decreased by any debits made thereto, then, and
in each such case, the Warrant Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
of securities entitled to receive such dividend or distribution shall be
reduced, effective as of the close of business on such record date, to a price
(calculated to the nearest cent) determined by multiplying such Warrant Price by
a fraction:

                (a) the numerator of which shall be the Current Market Price in
        effect on such record date or, if the Common Stock trades on an
        ex-dividend basis, on the date prior to the commencement of ex-dividend
        trading, less the amount of such dividend or distribution (as determined
        in good faith by the Board of Directors of the Company) applicable to
        one share of Common Stock, and

                (b) the denominator of which shall be the Current Market Price
        on such record date, or if the Common Stock trades on an ex-dividend
        basis, on the date prior to the commencement of ex-dividend trading.

        Section 2.4. Treatment of Options and Convertible Securities. In case
the Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, or, in the case of Appreciation Rights, the
number computed in Section 2.9, shall be deemed to be the number of Additional
Shares of Common Stock issued as of the time of such issue, sale, grant or
assumption or, in case such a record date shall have been fixed, as of the close
of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading); provided that such Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 2.6) of such shares would be less than the Dilutive Basis in
effect on the date of and immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business on such record date
(or, if the Common Stock trades on an ex-dividend basis, on the date prior to
the commencement of ex-dividend trading), as the case may be; and provided,
further, that in any such case in which Additional Shares of Common Stock are
deemed to be issued no further adjustment of the Warrant Price shall be made
upon the subsequent issue or sale of Convertible Securities or

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Additional Shares of Common Stock upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.

        Section 2.5. Treatment of Stock Dividends, Stock Splits, etc. In case
the Company at any time or from time to time after the date hereof shall declare
or pay any dividend on the Common Stock payable in Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.

        Section 2.6. Computation of Consideration. For the purpose of Article
II, the following shall be used to determine the consideration received or
deemed received by the Company:

                (a) Shares Actually Issued. The consideration for the issue or
        sale of any Additional Shares of Common Stock shall, irrespective of the
        accounting treatment of such consideration,

                    (i) insofar as it consists of cash, be computed at the net
                amount of cash received by the Company, without deducting any
                expenses paid or incurred by the Company or any commissions or
                compensations paid or concessions or discounts allowed to
                underwriters, dealers or others performing similar services in
                connection with such issue or sale,

                (ii) insofar as it consists of property (including securities)
                other than cash, be computed at the fair value thereof at the
                time of such issue or sale, as determined in good faith by the
                Board of Directors of the Company, and

                (iii) in case Additional Shares of Common Stock are issued or
                sold together with other stock or securities or other assets of
                the Company for a consideration which covers both, be the
                portion of such consideration so received, computed as provided
                in clauses (i) and (ii) above, applicable to such Additional
                Shares of Common Stock, all as determined in good faith by the
                Board of Directors of the Company.

                (b) Shares Deemed Issued. Additional Shares of Common Stock
        deemed to have been issued pursuant to Section 2.4, relating to Options
        and Convertible Securities, shall be deemed to have been issued for a
        consideration per share determined by dividing,

                    (i) the present value (using a discount factor equal to the
                average interest rate on the Company's outstanding indebtedness
                to financial institutions and assuming any consideration
                receivable by the Company shall be received at the latest date
                possible under the terms of such Options or Convertible
                Securities) the total amount, if any, received and receivable by
                the Company as consideration for the issue, sale, grant or
                assumption of the Options or Convertible Securities in

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                question, plus the present value (using a discount factor equal
                to the average interest rate on the Company's outstanding
                indebtedness to financial institutions and assuming any
                consideration receivable by the Company shall be received at the
                latest date possible under the terms of the Options and
                Convertible Securities) of the minimum aggregate amount of
                additional consideration (as set forth in the instruments
                relating thereto, without regard to any provision contained
                therein for a subsequent adjustment of such consideration to
                protect against dilution) payable to the Company upon the
                exercise in full of such Options or the conversion or exchange
                of such Convertible Securities or, in the case of Options for
                Convertible Securities, the exercise of such Options for
                Convertible Securities and the conversion or exchange of such
                Convertible Securities, in each case computing such
                consideration as provided in the foregoing subdivision (a),

                by

                    (ii) the maximum number of Additional Shares of Common Stock
                (as set forth in the instruments relating thereto, without
                regard to any provision contained therein for a subsequent
                adjustment of such number to protect against dilution) issuable
                upon the exercise of such Options or the conversion or exchange
                of such Convertible Securities.

                (c) Stock Dividends, Etc. Additional Shares of Common Stock
        issued or deemed to have been issued pursuant to Section 2.5, relating
        to stock dividends, stock splits, etc., shall be deemed to have been
        issued for no consideration.

                (d) Services. Additional Shares of Common Stock issued or sold
        or deemed issued or sold in exchange for services or the promise of
        future services shall be deemed to have been issued for no
        consideration.

        Section 2.7. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.

        Section 2.8. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Article II) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Article II, the purchase rights granted by this
Warrant, then, and in each such case, the computations, adjustments and
readjustments provided for in this Article II with respect to the Warrant Price
shall be made as nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time receivable upon the
exercise of the Warrant, so as to protect the holder of the Warrant against the
effect of such dilution.

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        Section 2.9. Appreciation Rights. If the Company issues or sells
Appreciation Rights, a number of Additional Shares of Common Stock shall be
deemed issued for purposes of this Article II and shall be computed as follows:

                (a) Value Based on Dividends. If the Appreciation Rights entitle
        the holder thereof to distributions or payments based on or determined
        with reference to dividends paid or payable on Common Stock, the number
        of Additional Shares of Common Stock deemed issued will be the number of
        shares of Common Stock that would be required to be issued such that the
        holder thereof would receive distribution payments equal to those paid
        or payable with respect to such Appreciation Rights.

                (b) Value Based on Liquidating Distributions. If the
        Appreciation Rights entitle the holder thereof to distributions or
        payments based on or determined with reference to liquidation
        distributions paid or payable on, or consideration received, in
        connection with the sale, exchange or transfer of Common Stock, the
        number of Additional Shares of Common Stock deemed issued will be the
        number of shares of Common Stock that would be required to be issued
        such that the holder thereof would receive distributions or payments
        equal to those paid or payable with respect to such Appreciation rights.

                (c) Value Based on Dividends and Liquidating Distributions. If
        the Appreciation Rights entitle the holder thereof to distributions
        based on or determined with reference to either dividends paid or
        payable on Common Stock and liquidating distributions paid or payable or
        on consolidation received in connection with the sale, exchange or
        transfer of Common Stock, the number of Additional Shares of Common
        Stock deemed issued will be the greater of the amount computed under (a)
        or (b) above.

                (d) Other Profits. If the Appreciation Rights entitle the holder
        thereof to distributions based on or determined with reference to any
        other measure of profit of the Company, the number of Additional Shares
        of Common Stock deemed issued will be the value of the Appreciation
        Right, as determined in the good faith judgment of the Board of
        Directors, divided by the Current Market Price of the Common Stock on
        the date of issuance of the Appreciation Right.

                    ARTICLE III. CONSOLIDATION, MERGER, ETC.

        Section 3.1. Assumption of Obligations. Notwithstanding anything
contained in this Warrant to the contrary, the Company will not (a) consolidate
with or merge into any other Person if the Company is not the continuing or
surviving corporation of such consolidation or merger, or (b) permit any other
Person to consolidate with or merge into the Company even though the Company
shall be the continuing or surviving Person if, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) transfer all or substantially all of its properties
or asset to any other Person, or (d) effect a capital reorganization or
reclassification of the Common Stock or Other Securities (other than a capital
reorganization or reclassification resulting in the issue of Additional Shares
of Common Stock for which adjustment in the Warrant Price is provided in Section
2.2 or 2.3) of Section 3.1 unless, prior to the consummation thereof, each
Person (other than the Company) which may be required to deliver any stock,

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securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the holder of this Warrant, (i) the obligations of the Company
under this Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant) and
(ii) the obligation to deliver to such holder such shares of stock, securities,
cash or property as such holder may be entitled to receive. Nothing in this
Article III shall be deemed to authorize the Company to enter into any
transaction not otherwise permitted by the Loan Agreement (as defined in the
Warrant Purchase Agreement).

                ARTICLE IV. OTHER PROVISIONS CONCERNING DILUTION

        Section 4.1. Other Dilutive Events. In case any event shall occur as to
which the provisions of Article II or III are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in Articles II and III, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the holder of this Warrant and shall make the adjustments described therein.

        Section 4.2. No Dilution or Impairment. The Company will not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not permit the
par value of any shares of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock on the
exercise of the Warrant from time to time outstanding, and (c) will not take any
action which results in any adjustment of the Warrant Price if the total number
of shares of Common Stock (or Other Securities) issuable after the action upon
the exercise of the Warrant would exceed the total number of shares of Common
Stock (or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issuance upon such exercise.

        Section 4.3. Accountant's and Company's Report as to Adjustments. In
each case of any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable upon the exercise of this Warrant, the Company at its
expense will promptly compute such adjustment or readjustment in accordance with
the terms of this Warrant and cause independent certified public accountants of
recognized national standing (which may be the regular auditors of the Company)
selected by the Company to verify such computation (other than any computation
of the fair value of property as determined in good faith by the Board of
Directors of the Company) and prepare a report setting forth such adjustment or
readjustment and showing in reasonable detail the method of calculation thereof
and the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or to be

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<PAGE>

received by the Company for any Additional Shares of Common Stock issued or sold
or deemed to have been issued, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (c) the Warrant Price in effect
immediately prior to such issue or sale and as adjusted and readjusted (if
required by Article II) on account thereof. The Company shall also prepare and
certify a report stating that any computation of the fair value of property by
the Board of Directors was done in good faith by the Board of Directors as
required herein. The Company will forthwith mail a copy of each such report to
each holder of a Warrant and will, upon the written request at any time of any
holder of a Warrant, furnish to such holder a like report setting forth the
Warrant Price at the time in effect and showing in reasonable detail the manner
in which it was calculated. The Company will also keep copies of all such
reports at its office maintained pursuant to subdivision (a) of Section 6.2 and
will cause the same to be available for inspection at such office during normal
business hours by any holder of a Warrant or any prospective purchaser of a
Warrant designated by the holder thereof.

        Section 4.4. Notices of Corporate Action. In the event that any of the
following occurs,

                (a) any taking by the Company of a record of the holders of any
        class of securities for the purpose of determining the holders thereof
        who are entitled to receive any dividend (other than a regular periodic
        dividend payable in cash out of earned surplus in an amount not
        exceeding the amount of the immediately preceding cash dividend for such
        period) or other distribution, or any right to subscribe for, purchase
        or otherwise acquire any shares of stock of any class or any other
        securities or property, or to receive any other right, or

                (b) any capital reorganization of the Company, any
        reclassification or recapitalization of the capital stock of the Company
        or any consolidation or merger involving the Company and any other
        Person or any transfer of all or substantially all the assets of the
        company to any other Person, or

                (c) any voluntary or involuntary dissolution, liquidation or
        winding-up of the Company,

the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date as of which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date therein specified.

        Section 4.5. Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company will, at its expense and as expeditiously as possible, use
its best efforts to cause such shares to be duly registered or approved, as the
case may be. At any such time as Common Stock is

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listed on any national securities exchange, the Company will, at its expense,
obtain the a notice of issuance, of the shares of Common Stock issuable upon
exercise of the Warrant and maintain the listing of such shares after their
issuance; and the Company will also list on such national securities exchange,
will register under the Exchange Act and will maintain such listing of, any
Other Securities that at any time are issuable upon exercise of the Warrant, if
and at the time that any securities of the same class shall be listed on such
national securities exchange by the Company.

        Section 4.6. Availability of Information. The Company will cooperate
with each holder of any Warrant or Restricted Security in supplying such
information as may be reasonably requested by such holder to complete and file
any information reporting forms presently or hereafter required by the
Commission to report such holder's beneficial ownership of Common Stock or Other
Securities or as a condition to the availability of an exemption from the
provisions of the Securities Act for the sale of any Restricted Securities.

        Section 4.7. Reservation of Stock, etc. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrant, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of the Warrant. All shares of Common Stock
(or Other Securities) issuable upon exercise of the Warrant shall be duly
authorized and, when issued upon such exercise, shall be validly issued and, in
the case of shares, fully paid and non-assessable with no liability on the part
of the holders thereof.

                       ARTICLE V. RESTRICTIONS ON TRANSFER

        Section 5.1. Restrictive Legends. Except as otherwise permitted by this
Article V, each Warrant (including each Warrant issued upon the transfer of any
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:

                "This Warrant and any shares acquired upon the exercise of this
        Warrant have not been registered under the Securities Act of 1933, as
        amended, and may not be transferred, sold or otherwise disposed of in
        the absence of such registration or an exemption therefrom under such
        Act. This Warrant and such Shares may be transferred only in compliance
        with the conditions specified in this Warrant."

Except as otherwise permitted by this Article V, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:

                "The shares represented by this certificate have not been
        registered under the Securities Act of 1933 and may not be transferred
        in the absence of such registration or an exemption therefrom under such
        Act."

        Section 5.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to
any transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof,
will give written notice to the Company of such holder's intention to effect
such

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<PAGE>

transfer and to comply in all other respects with this Section 5.2. Each such
notice (a) shall describe the manner and circumstances of the proposed transfer
and (b) shall include an opinion of legal counsel addressed to the Company, in
form and substance reasonably satisfactory to the Company, to the effect that
such transfer does not violate the Securities Act of 1933 and applicable state
securities laws.

        Section 5.3. Termination of Restrictions. The restrictions imposed by
this Article V upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities when such securities shall
have been sold pursuant to an effective registration statement under the
Securities Act or otherwise become freely transferable by the holder thereof.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new certificates
representing the securities not bearing the applicable legends required by
Section 5.1.

           ARTICLE VI. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANT

        Section 6.1. Ownership of Warrant. The Company may treat the person in
whose name any Warrant is registered on the register kept at the office of the
Company maintained pursuant to subdivision (a) of Section 6.2 as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary,
except that, if and when any Warrant is properly assigned in blank, the Company
may (but shall not be obligated to) treat the bearer thereof as the owner of
such Warrant for all purposes, notwithstanding any notice to the contrary.
Subject to Article V, a Warrant, if properly assigned, may be exercised by a new
holder without a new Warrant first having been issued.

        Section 6.2. Office, Transfer and Exchange of Warrant.

                (a) Office. The Company will maintain an office in where
        notices, presentations and demands in respect of this Warrant may be
        made upon it. Such office shall be maintained at 8150 Lawndale, Houston,
        Texas 77012, until such time as the Company shall notify each holder of
        the Warrant of any change of location of such office.

                (b) New Warrant. Upon the surrender of any Warrant, properly
        endorsed, for registration of transfer or for exchange at the office of
        the Company maintained pursuant to subdivision (a) of this Section 6.2,
        the Company at its expense will (subject to compliance with Article V,
        if applicable) execute and deliver to or upon the order of the holder
        thereof a new Warrant or Warrants of like tenor, in the name of such
        holder or as such holder (upon payment by such holder of any applicable
        transfer taxes) may direct, calling in the aggregate on the face or
        faces thereof for the number of shares of Common Stock called for on the
        face or faces of the Warrant or Warrants so surrendered.

        Section 6.3. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained

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pursuant to subdivision (a) of Section 6.2, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

                            ARTICLE VII. DEFINITIONS

        As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:

        Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or pursuant to Section 2.4, 2.5 or 2.9,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than

                (a) shares issued, (i) upon exercise of this Warrant, (ii) upon
        exercise of options and warrants described in Schedule 3.1(d) to the
        Warrant Purchase Agreement, on the terms and conditions currently in
        effect, (iii) to Munawar H. Hidayatallah, or his assignees, pursuant to
        the terms of the compensation agreement described in Schedule 3.1(d) to
        the Warrant Purchase Agreement, on the terms and conditions currently in
        effect, (iv) pursuant to any employee benefit plan or plans subsequently
        adopted by the Company, to the extent that such plans do not provide for
        the issuance of shares constituting in excess of 10% of the outstanding
        common stock of the Company on a fully-diluted basis.

                (b) such additional number of shares as may become issuable upon
        the exercise of any of the securities referred to in the foregoing
        clause (a) by reason of adjustments required pursuant to anti-dilution
        provisions applicable to such securities as in effect on the date
        hereof, but only if and to the extent that such adjustments are required
        as the result of the original issuance of the Warrant, and

                (c) such additional number of shares as may become issuable upon
        the exercise of any of the securities referred to in the foregoing
        clause (a) by reason of adjustments required pursuant to anti-dilution
        provisions applicable to such securities as in effect on the date
        hereof, in order to reflect any subdivision or combination of Common
        Stock, by reclassification or otherwise, or any dividend on Common Stock
        payable in Common Stock.

        Appreciation Rights: All stock appreciation rights, net profits
interests or other rights entitling the holder or owner thereof to receive
payments based upon or determined with reference to the distributions to holders
of Common Stock or the profits of the Company.

        Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the States of Texas or New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.

        Commission: The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.

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        Common Stock: As defined in the introduction to this Warrant, such term
to include (i) any stock into which such Common Stock shall have been changed or
any stock resulting from any reclassification of such Common Stock, (ii) all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference and (iii) all stock appreciation rights, phantom stock and similar
contract rights the holders of which are entitled to payments based on or
determined by reference to the value of the Common Stock, dividends payable with
respect to Common Stock, or liquidating distributions payable with respect to
Common Stock.

        Company: As defined in the introduction to this Warrant, such term to
include any Person which shall succeed to or assume the obligations of the
Company hereunder in compliance with Article III.

        Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.

        Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.

        Dilution Factor: As defined in Section 2.1.

        Dilutive Basis: With respect to any issuance or sale or any deemed
issuance or sale of Additional Shares of Common Stock from and after the date
hereof, the greater of (i) the Current Market Price on the day immediately
before issuance or deemed issuance and (ii) the Warrant Price on the day before
issuance or deemed issuance.

        Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.

        Expiration Date: The tenth anniversary of the date of issuance of this
Warrant.

        GAAP: Generally accepted accounting principles set forth in the Opinions
of the Accounting Principles Board of the American Institute of Certified Public
Accountants and in statements by the Financial Accounting Standards Board or in
such other statement by such other entity as may be approved by a significant
segment of the accounting profession; and the requirement that such principles
be applied on a consistent basis shall mean that the accounting principles
observed in a current period are comparable in all material respects to those
applied in a preceding period.

        Initial Price: $1.00.

                                      -12-

<PAGE>

        Market Price: On any date specified herein, the amount per share of the
Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof determined in good faith by the
Board of Directors of the Company as of a date which is within 20 days of the
date as of which the determination is to be made.

        NASD: The National Association of Securities Dealers, Inc.

        Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.

        Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received upon the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Article III or otherwise.

        Person: Any corporation, association, partnership, joint venture, trust,
estate, limited liability company, organization, business, individual,
government or political subdivision thereof or governmental agency.

        Restricted Securities: All of the following: (a) any Warrant bearing the
applicable legend or legends referred to in Section 5.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
the Warrant and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of the Warrant and which, when
so issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.

        Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.

        Subsidiary: With respect to any Person, any corporation with respect to
which more than 50% of the outstanding shares of stock of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned, directly or indirectly, by
such Person or by one or more Subsidiaries of such Person.

                                      237

<PAGE>

        Transfer: Any sale, assignment, pledge or other disposition of any
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.

        Purchaser: Wells Fargo Energy Capital, Inc..

        Warrant Price: As defined in Section 2.1 of this Warrant.

        Warrant Purchase Agreement: That certain Warrant Purchase Agreement by
and between the Company and Purchaser, dated of even date herewith.

                           ARTICLE VIII. MISCELLANEOUS

        Section 8.1. Remedies. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.

        Section 8.2. No Rights or Liabilities as Stockholder. The holder of this
Warrant and all subsequent holders thereof hereby agree that except to the
extent set forth herein, no provision of this Warrant shall be construed as
conferring upon the holder hereof any rights as a stockholder of the Company or
as imposing any obligation on such holder to purchase any securities or as
imposing any liabilities on such holder as a stockholder of the Company, whether
such obligation or liabilities are asserted by the Company or by creditors of
the Company.

        Section 8.3. Notices. All notices and other communications under this
Warrant shall be in writing and shall be mailed by registered or certified mail,
return receipt requested, addressed (a) if to any holder of any Warrant, to the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if the Company, to the attention of its
President at its office maintained pursuant to subdivision (a) of Section 6.2,
provided that the exercise of any Warrant shall be effective in the manner
provided in Article I.

        Section 8.4. Miscellaneous.

                (a) This Warrant may be amended, waived, discharged or
        terminated and the Company may take any action herein required to be
        performed by it, only if the Company shall have obtained the written
        consent to such amendment, action or omission to act, of the holder of
        the Warrant.

                (b) THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
        WITH THE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

                (c) The section headings in this Warrant are for purposes of
        convenience only and shall not constitute a part hereof.

                                      238

<PAGE>

        Section 8.5. Option, Warrants and Other Securities. The Company has
outstanding the following options and warrants:

                (a) Options issued to Leonard Toboroff to purchase 500,000
        shares of Common Stock at $.50 per share.

                (b) Warrants to Energy Spectrum Partners, LP, a Delaware limited
        partnership ("ENERGY SPECTRUM"), for 437,500 shares of Common Stock at
        $.15 per share and an agreement to issue an additional 875,000 warrants
        at the same price pursuant to this Agreement in the event that the
        Series A Preferred Stock of the Company held by Energy Spectrum is not
        redeemed on or before the first anniversary of the date of issue.
        Pursuant to its Certificate of Designation, the Series A Preferred Stock
        has conversion rights, adjustments of the conversion price, certain
        voting rights including the right to elect directors and both mandatory
        and optional redemption. Energy Spectrum has certain demand and
        piggyback registration rights pursuant to that certain Registration
        Right Agreement with the Company.

                (c) In connection with that certain Stock Purchase Agreement
        ("SPA") between the Company and Jens H. Mortensen, Jr. ("MORTENSEN"),
        (i) the Company is issuing to Mortensen $1,625,000 in shares of Common
        Stock valued at the average of the closing bid and offer price for
        Common Stock 30 days prior to the closing date of the SPA, (ii)
        Mortensen has an option to convert his 19% in stock of Jens' Oil Field
        Service, Inc., Texas corporation, into shares of Common Stock in
        accordance with terms of the option, and (iii) Mortensen has one demand
        registration right at his cost and piggyback registration rights.

                (d) Employment Agreement of Munawar H. Hidayatallah provides
        that his incentive compensation may be paid in common stock of OilQuip
        Rentals, Inc., a Delaware corporation ("OILQUIP") and wholly-owned
        subsidiary of the Company. This may provide for such incentive
        compensation to be paid in Common Stock.

                (e) Mountain Compressed Air, Inc., a Texas corporation ("MCAI")
        and wholly-owned subsidiary of OilQuip, issued warrants to Houlihan,
        Lokey, Howard & Zukin for 620,000 shares of its common stock, par value
        $0.01 per share.

                (f) The Company has entered into that certain letter agreement
        dated November 14, 2001 with Jefferies & Company, Inc. ("JEFFERIES"),
        whereby Jefferies will act as exclusive financial adviser to the Company
        and placement agent for up to $25,000,000 in securities of the Company.
        There are fees and reimbursements of expenses for services thereunder
        along with rights to manage or co-manage offerings, act as adviser in
        mergers and receive fees described therein.

                (g) The Company has entered into an agreement dated October 4,
        2001 with Virginia A. Muller ("MULLER") whereby Muller will act as a
        financial advisor to the Company regarding a private placement offering.
        Muller will be entitled to (i) a success fee of 2.5% of funds raised in
        the offering if the investors are originated by the Company or Muller,
        or (ii) a success fee of 1% of funds raised in the offering if the
        investors are originated by a third party.

                                      239

<PAGE>

                (h) The Company has issued options to purchase 24,000 shares of
        Common Stock at $2.75 per share to eight current or former directors
        and/or officers of the Company, which expire March, 2010 and are not
        subject to any plan. The Company has a Long Term Incentive Plan (1989)
        (the "PLAN") which provides for grants to officers and key employees of
        stock options, stock appreciation rights, performance shares, restricted
        stock, restricted stock units and other stock-based awards. The maximum
        number of shares of Common Stock which may be granted pursuant to the
        plan is 50,000. No stock options or stock appreciation rights have been
        granted to date under the Plan and the Plan should have terminated by
        its terms.

                (i) The Company has issued options to John T. Grigsby, Jr. to
        purchase 10,000 shares of Common Stock at $2.75 per share.

                                      240

<PAGE>

        This Warrant is hereby executed as of the date first above written.

                                        Allis-Chalmers Corporation

                                        By:
                                           -------------------------------------
                                            Munawar H. Hidayatallah
                                            Chairman and Chief Executive Officer

                                      241

<PAGE>

                                     FORM OF SUBSCRIPTION

To ___________________________:

        The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases _________* shares of
Common Stock of _________________, and herewith makes payment of $___________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to ___________________________, whose address is
______________________________ ___________.

Dated: ____________________________           __________________________________
                                               (Signature must conform in all
                                               respects to name of holder as
                                               specified on the face or Warrant)

                                              __________________________________
                                              (Street Address)

                                              __________________________________
                                              (City)   (State) (Zip Code)

                                              __________________________________

                *Insert the number of shares called for on the face of this
        Warrant (or, in the case of a partial exercise, the portion thereof as
        to which this Warrant is being exercised), in either case without making
        any adjustment for Additional Shares of Common Stock or any other stock
        or other securities or property or cash which, pursuant to the
        adjustment provisions of this Warrant, may be delivered upon exercise.
        In the case of a partial exercise, a new Warrant or Warrants will be
        issued and delivered, representing the unexercised portion of the
        Warrant, to the holder surrendering the Warrant.

                                      242

<PAGE>

                               FORM OF ASSIGNMENT

                 [To be executed only upon transfer of Warrant]

        For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _________________ the right
represented by such Warrant to purchase shares of Common Stock of to which such
Warrant relates, and appoints Attorney to make such transfer on the books of
maintained for such purpose, with full power of substitution in the premises.

Dated:____________________________            __________________________________
                                              (Signature must conform in all
                                              respects to name of holder as
                                              specified on the face or Warrant)

                                              __________________________________
                                              (Street Address)

                                              __________________________________
                                               (City)   (State) (Zip Code)

Signed in the presence of:

__________________________________

                                       243

<PAGE>

                  SCHEDULE 3.1(d) TO WARRANT PURCHASE AGREEMENT

                     OPTIONS, WARRANTS AND OTHER SECURITIES

        (a) Options issued to Leonard Toboroff to purchase 500,000 shares of
Common Stock at $.50 per share.

        (b) Warrants to Energy Spectrum Partners, LP, a Delaware limited
partnership ("ENERGY SPECTRUM"), for 437,500 shares of Common Stock at $.15 per
share and an agreement to issue an additional 875,000 warrants at the same price
pursuant to this Agreement in the event that the Series A Preferred Stock of the
Company held by Energy Spectrum is not redeemed on or before the first
anniversary of the date of issue. Pursuant to its Certificate of Designation,
the Series A Preferred Stock has conversion rights, adjustments of the
conversion price, certain voting rights including the right to elect directors
and both mandatory and optional redemption. Energy Spectrum has certain demand
and piggyback registration rights pursuant to that certain Registration Right
Agreement with the Company.

        (c) In connection with that certain Stock Purchase Agreement ("SPA")
between the Company and Jens H. Mortensen, Jr. ("MORTENSEN"), (i) the Company is
issuing to Mortensen $1,625,000 in shares of Common Stock valued at the average
of the closing bid and offer price for Common Stock 30 days prior to the closing
date of the SPA, (ii) Mortensen has an option to convert his 19% in stock of
Jens' Oil Field Service, Inc., Texas corporation, into shares of Common Stock in
accordance with terms of the option, and (iii) Mortensen has one demand
registration right at his cost and piggyback registration rights.

        (d) Employment Agreement of Munawar H. Hidayatallah provides that his
incentive compensation may be paid in common stock of OilQuip Rentals, Inc., a
Delaware corporation ("OILQUIP") and wholly-owned subsidiary of the Company.
This may provide for such incentive compensation to be paid in Common Stock.

        (e) Mountain Compressed Air, Inc., a Texas corporation ("MCAI") and
wholly-owned subsidiary of OilQuip, issued warrants to Houlihan, Lokey, Howard &
Zukin for 620,000 shares of its common stock, par value $0.01 per share.

        (f) The Company has entered into that certain letter agreement dated
November 14, 2001 with Jefferies & Company, Inc. ("JEFFERIES"), whereby
Jefferies will act as exclusive financial adviser to the Company and placement
agent for up to $25,000,000 in securities of the Company. There are fees and
reimbursements of expenses for services thereunder along with rights to manage
or co-manage offerings, act as adviser in mergers and receive fees described
therein.

        (g) The Company has entered into an agreement dated October 4, 2001 with

                                       244

<PAGE>

Virginia A. Muller ("MULLER") whereby Muller will act as a financial advisor to
the Company regarding a private placement offering. Muller will be entitled to
(i) a success fee of 2.5% of funds raised in the offering if the investors are
originated by the Company or Muller, or (ii) a success fee of 1% of funds raised
in the offering if the investors are originated by a third party.

        (h) The Company has issued options to purchase 24,000 shares of Common
Stock at $2.75 per share to eight current or former directors and/or officers of
the Company, which expire March, 2010 and are not subject to any plan. The
Company has a Long Term Incentive Plan (1989) (the "PLAN") which provides for
grants to officers and key employees of stock options, stock appreciation
rights, performance shares, restricted stock, restricted stock units and other
stock-based awards. The maximum number of shares of Common Stock which may be
granted pursuant to the plan is 50,000. No stock options or stock appreciation
rights have been granted to date under the Plan and the Plan should have
terminated by its terms.

        (i) The Company has issued options to John T. Grigsby, Jr. to purchase
10,000 shares of Common Stock at $2.75 per share.

                                       245

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