SENIOR UNSECURED BRIDGE LOAN AGREEMENT

EXHIBIT 10.1

CONFIDENTIAL

$300,000,000

SENIOR UNSECURED
BRIDGE LOAN AGREEMENT

Dated as of December 18, 2006

among

ALLIS-CHALMERS ENERGY INC.

as the Borrower,

THE GUARANTORS NAMED HEREIN

as the Guarantors,

THE LENDERS NAMED HEREIN

as the Lenders,

ROYAL BANK OF CANADA

as Administrative Agent,

and

RBC CAPITAL MARKETS CORPORATION

as Sole Lead Arranger and Sole Bookrunner

Table of Contents

ALY Bridge Loan Agreement

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ALY Bridge Loan Agreement

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ALY Bridge Loan Agreement

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ALY Bridge Loan Agreement

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RECITALS

     A. Pursuant to the Asset Purchase Agreement, dated October 25, 2006 (the "Purchase Agreement", as amended in accordance with the terms of this Agreement), by and between the Borrower and Oil & Gas Rental Services, Inc., a Louisiana corporation (the "Target"), the Borrower intends to acquire from the Target substantially all of the assets of the Target and assume certain liabilities of the Target specified in the Purchase Agreement (the "Acquisition").

     B. The Borrower has requested that the Lenders make (a) a loan to the Borrower in an aggregate principal amount not in excess of $225,000,000 and (b) a loan to the Borrower in an aggregate principal amount not in excess of $75,000,000, in each case on the Closing Date (as hereinafter defined) to (a) finance a portion of the purchase price for the Acquisition and (b) pay fees, costs and expenses related to the Transactions (as hereinafter defined).

     C. The Lenders are willing to extend such credit to the Borrower on the terms and subject to the conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

Definitions

          SECTION 1.01. Defined Terms

     As used in this Agreement, the following terms shall have the meanings specified below:

     "Acquired Business" shall mean the assets of the Target and its Subsidiaries acquired by the Borrower from the Target pursuant to the Purchase Agreement.

     "Acquisition" shall have the meaning assigned to such term in the recitals.

     "Administrative Agent" shall have the meaning assigned to such term in the preamble.

     "Affiliate" shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified; provided, however, that, (a) for purposes of Section 6.07, the term "Affiliate" shall also include any Person that directly or indirectly owns 10% or more of any class of Capital Stock of the Person specified or that is an officer or director of the Person specified and (b) the term "Affiliate" with respect to the Borrower shall specifically exclude the Administrative Agent, each Lender, in its capacity as Lender, and any of its Affiliates.

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     "Applicable Rate" means (a) in the case of the Bridge A Loan, (i) with respect to a Eurodollar Rate Loan, 4.75% per annum, increasing to 5.75% per annum on the first anniversary of the Closing Date, and (ii) with respect to a Base Rate Loan, 3.75% per annum, increasing to 4.75% on the first anniversary of the Closing Date and (b) in the case of the Bridge B Loan, (i) with respect to a Eurodollar Rate Loan, 6.75% per annum, increasing to 7.75% per annum on the first anniversary of the Closing Date, and (ii) with respect to a Base Rate Loan, 5.75% per annum, increasing to 6.75% on the first anniversary of the Closing Date.

     "Asset Sale" shall mean the sale, transfer or other disposition (by way of merger, casualty, condemnation or otherwise) by the Borrower or any of its Subsidiaries to any Person other than the Borrower or any of its Subsidiaries of (a) any Capital Stock of any of the Subsidiaries of the Borrower or (b) any other assets of the Borrower or any of its Subsidiaries.

     "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit A or such other form as shall be reasonably approved by the Administrative Agent.

     "Base Rate Loan" shall mean a Loan that bears interest based on the Base Rate.

     "Board" shall mean the Board of Governors of the Federal Reserve System of the United States of America.

     "Borrower" shall have the meaning assigned to such term in the preamble.

     "Borrower Acquisition" shall mean any transaction or series of related transactions for the purpose of, or resulting in, directly or indirectly: (a) the acquisition by the Borrower or any Subsidiary of the Borrower of all or substantially all of the assets located in the United States of a Person or of any business or division of a Person; (b) the acquisition by the Borrower or any Subsidiary of the Borrower of more than fifty percent (50%) of any class of Voting Stock (or similar Capital Stock) of any Domestic Person; or (c) a merger, consolidation or other combination by the Borrower or any Subsidiary of the Borrower with another Person if the Borrower or any Subsidiary of the Borrower is the surviving entity; provided that (i) in any merger involving the Borrower, the Borrower must be the surviving entity; and

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     "Borrowing Request" shall mean a request by the Borrower in accordance with the terms of Section 2.04 and substantially in the form of Exhibit B, or such other form as shall be approved by the Administrative Agent.

     "Breakage Event" shall have the meaning assigned to such term in Section 2.17.

     "Bridge A Commitment" shall mean, with respect to each Bridge A Lender, the commitment of such Lender to make advances hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Commitment, as applicable.

     "Bridge A Lender" means a Lender that has a Bridge A Commitment or that holds any portion of the Bridge A Loan.

     "Bridge A Loan" means, collectively, the advances by the Bridge A Lenders pursuant to their Bridge A Commitments.

     "Bridge B Commitment" shall mean, with respect to each Bridge B Lender, the commitment of such Lender to make advances hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Commitment, as applicable.

     "Bridge B Lender" means a Lender that has a Bridge B Commitment or that holds any portion of the Bridge B Loan.

     "Bridge B Loan" means, collectively, the advances by the Bridge B Lenders pursuant to their Bridge B Commitments.

     "Business Day" shall mean any day other than a Saturday, Sunday or day on which banks in New York City are generally authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Rate Loan (including with respect to all notices and determinations in connection therewith and any payments of principal, interest or other amounts thereon), the term "Business Day" shall also exclude any day on which banks are generally not open for dealings in dollar deposits in the London interbank market.

     "Capital Expenditures" shall mean, for any period, (a) the aggregate amount of additions to property, plant and equipment and other capital expenditures of the Borrower and its Subsidiaries that are (or should be) set forth in a Consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP, and (b) Capital Lease Obligations or Synthetic Lease Obligations incurred by the Borrower and its Consolidated Subsidiaries during such period, but excluding in each case any such expenditure made to restore, replace or rebuild property to the condition of such property immediately prior to any damage, loss, destruction or condemnation of such property, to the extent such expenditure is made with insurance proceeds, condemnation awards or damage recovery proceeds relating to any such damage, loss, destruction or condemnation.

     "Capital Lease Obligations" of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

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     (a) in the case of a corporation, corporate stock;

     (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock:

     (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

     (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution or assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, regardless of whether such debt securities include any right of participation with Capital Stock.

     A "Change in Control" shall be deemed to have occurred if:

     (a) any "Person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 as in effect on the date hereof, but excluding any employee benefit plan of such Person and its Subsidiaries, and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) shall become the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under such Act), directly or indirectly, of more than fifty percent (50)% of outstanding Capital Stock of the Borrower having ordinary voting power;

     (b) a majority of the seats (other than vacant seats) on the board of directors of the Borrower shall at any time be occupied by Persons who were not (i) nominated by the board of directors of the Borrower or (ii) appointed by directors so nominated; or

     (c) any change in control (or similar event, however denominated) shall occur in respect of Material Indebtedness of the Borrower or any Subsidiary of the Borrower.

     "Change in Law" shall mean (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.15, by any lending office of such Lender or by such Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

     "Charges" shall have the meaning assigned to such term in Section 10.09.

     "Closing Date" shall mean the date on which the obligation to fund the Loans under this Agreement shall have become effective due to the satisfaction in full or waiver of the conditions set forth in Article IV.

     "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any legislation successor thereto.

     "Commitment" shall mean a Bridge A Commitment or a Bridge B Commitment.

     "Consolidated" refers to the consolidation of accounts in accordance with GAAP.

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     (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of

     (i) Consolidated interest expense for such period,

     (ii) Consolidated income tax expense for such period,

     (iii) all amounts attributable to depreciation and amortization for such period,

     (iv) non-recurring fees and expenses incurred in connection with the Transactions,

     (v) any non-cash charges (other than the write-down of current assets) for such period,

     (vi) executive compensation payments to the outgoing chairrman of the Target consisting of up to $7,800,000 in cash and $11,400,000 in common stock,

     minus (b) without duplication all cash payments made during such period on account of non-cash charges added to Consolidated Net Income pursuant to clause (a)(v) above in a previous period.

     "Consolidated Net Income" shall mean, for any period with respect to any Person, the net income or loss of such Person for such period determined on a Consolidated basis in accordance with GAAP; provided that there shall be excluded (without duplication):

     (a) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or governmental regulation applicable to such Subsidiary,

     (b) the income or loss of any Person accrued prior to the date (i) it becomes a Subsidiary or is merged into or consolidated with such Person or (ii) its assets are acquired by such Person or its Subsidiaries,

     (c) after-tax gains and losses realized upon the sale or other disposition of any property that is sold or otherwise disposed of other than in the ordinary course of business, and

     (d) extraordinary gains, losses or charges.

     "Constituent Documents" means, with respect to any Person, (a) the articles of incorporation, certificate of incorporation, constitution or certificate of formation (or the equivalent organizational documents) of such Person, (b) the by-laws or operating agreement (or the equivalent governing documents) of such Person and (c) any document setting forth the manner of election or duties of the directors or managing members of such Person (if any) and the designation, amount or relative rights, limitations and preferences of any class or series of such Person’s Capital Stock.

     "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms "Controlling" and "Controlled" shall have meanings correlative thereto.

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     "Disqualified Stock" shall mean any Capital Stock that, by its terms (or by the terms of any security or other Capital Stock into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, or requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in each case at any time on or prior to the date which is the first anniversary of the Maturity Date, or (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) Indebtedness or (ii) any Capital Stock referred to in clause (a) above, in each case at any time prior to the date which is the first anniversary of the Maturity Date.

     "Dollars" or "$" shall mean lawful money of the United States of America.

     "Domestic" shall mean, with respect to an entity, that such entity is incorporated, organized or formed under the laws of the United States, a state in the United States or any subdivision thereof or the District of Columbia.

     "Environmental Laws" shall mean all applicable Federal, state, local and foreign laws (including common law), treaties, regulations, rules, ordinances, codes, decrees, judgments, directives, orders (including consent orders), and agreements having the force and effect of law in each case, relating to protection of the environment or natural resources, or to protection of human health and safety as it relates to Hazardous Materials exposure, the presence or Release of Hazardous Materials in the environment, or the generation, manufacture, processing, distribution, use, treatment, storage, transport, recycling or handling of, or the arrangement for such activities with respect to, Hazardous Materials.

     "Environmental Liability" shall mean all liabilities, obligations, damages, losses, claims, actions, suits, judgments, orders, fines, penalties, fees, expenses and costs (including administrative oversight costs, natural resource damages and remediation costs), whether contingent or otherwise, arising out of or relating to (a) compliance or non-compliance with any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

     "Equity Issuance" shall mean the issuance of 3.2 million shares of Capital Stock by the Borrower to the Target, which Capital Stock shall be issued as payment for a portion of the purchase price of the Acquisition.

     "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time, or any legislation successor thereto.

     "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with such Person, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 (b), (c), (m) or (o) of the Code.

     "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice

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     "Eurodollar Rate" shall mean for any Interest Period with respect to any Eurodollar Rate Loan:

     (a) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the LIBOR I screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars for delivery on the first day of such Interest Period with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, or

     (b) if the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two (2) Business days prior to the first day of such Interest Period, or

     "Eurodollar Rate Loan" shall mean a Loan that bears interest at a rate based on the Eurodollar Rate.

     "Event of Default" shall have the meaning assigned to such term in Article VII.

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     "Existing Notes" shall mean the Borrower’s existing 9.0% senior notes due 2014.

     "Existing Senior Credit Agreement" shall mean the Borrower’s Amended and Restated Credit Agreement dated as of January 18, 2006 by and among the Borrower, as borrower, Royal Bank, as administrative agent and collateral agent, RBC Capital Markets, as lead arranger and sole bookrunner, and the lenders party thereto.

     "Existing Senior Credit Documents" shall mean the Existing Senior Credit Agreement and the credit documents contemplated under and executed by the Borrower pursuant thereto.

     "Extraordinary Receipt" shall mean any cash received by or paid to or for the account of any Person not in the ordinary course of business, including, without limitation, tax refunds (provided that, for greater clarity and without limiting the foregoing, ordinary tax refunds on account of cash taxes actually paid would be considered ordinary course), pension plan reversions, proceeds of insurance (including, without limitation, any key man life insurance but excluding proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustment received in connection with any purchase agreement (including any purchase price adjustment received in connection with the Purchase Agreement); provided, however, that an Extraordinary Receipt shall not include cash receipts received from proceeds of insurance, condemnation awards (or payments in lieu thereof) or indemnity payments to the extent that such proceeds, awards or payments are received by any Person in respect of any third party claim against such Person and applied to pay (or to reimburse such Person for its prior payment of) such claim and the costs and expenses of such Person with respect thereto.

     "Federal Funds Rate" shall mean, for any day, the rate per annum equal to the weighted average of rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent on such day on such transactions as determined by the Administrative Agent.

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     "Fees" shall have the meaning assigned to such term in Section 2.06.

     "Financial Officer" of any Person shall mean the chief financial officer, principal accounting officer, treasurer, assistant treasurer or controller of such Person.

     "Fiscal Year" shall mean the fiscal year of the Borrower and its Subsidiaries ending on December 31 of each calendar year.

     "Foreign Lender" shall mean any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

     "Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic Subsidiary.

     "Funded Debt" of any Person means Indebtedness in respect of the Loans, in the case of the Borrower, and all other Indebtedness of such Person that by its terms matures more than one year after the date of determination or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one