SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 1999 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _______________ TO _______________
Commission file number 1-2199
ALLIS-CHALMERS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 39-0126090
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4180 Cherokee Drive
Brookfield, Wisconsin 53045
(Address of principal executive offices) (Zip code)
(414)781-7155
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
At July 15, 1999 there were 1,588,128 shares of Common Stock outstanding.
<PAGE>
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ---------------------
1999 1998 1999 1998
-------- ------- ------- -------
(thousands, except per share)
<S> <C> <C> <C> <C>
Sales $ 1,084 $ 1,249 $ 2,136 $ 2,752
Cost of sales 835 937 1,548 1,954
-------- ------- ------- -------
Gross Margin 249 312 588 798
Marketing and administrative expense 381 515 771 874
-------- ------- ------- -------
Income/(Loss) from Operations (132) (203) (183) (76)
Other income (expense)
Interest income 2 6 3 12
Interest expense (7) (9) (15) (18)
Other 0 9 1 22
-------- ------- ------- -------
Net Income/(Loss) $ (137) $ (197) $ (194) $ (60)
======== ======= ======= =======
Net Income/(Loss) per Common Share $ (.9) $ (.20) $ (.15) $ (.06)
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ACCUMULATED DEFICIT
Six Months Ended June 30 1999 1998
------------------------ -------- --------
(thousands)
<S> <C> <C>
Accumulated deficit - beginning of year $(75,673) $(76,291)
Net income/(loss) (194) (60)
-------- --------
Accumulated deficit - June 30 $(75,867) $ (76,351)
======== =========
This interim statement is unaudited.
The accompanying Notes are an integral part of the Financial Statements.
</TABLE>
<PAGE>
3
ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------- ------------
(thousands)
Assets
<S> <C> <C>
Cash and short-term investments $ 186 $ 223
Trade receivables, net 592 796
Inventories, net 67 127
Other current assets 56 112
--------- ---------
Total Current Assets 901 1,258
Net property, plant and equipment 1,270 1,308
--------- ---------
Total Assets $ 2,171 $ 2,566
========= =========
Liabilities and Shareholders' Deficit
Current maturities of long-term debt $ 75 $ 60
Trade accounts payable 179 291
Accrued employee benefits 135 155
Accrued pension liability 67,901 67,901
Other current liabilities 278 312
--------- ---------
Total Current Liabilities 68,568 68,719
Accrued postretirement benefit obligations 952 981
Long-term debt 211 232
Shareholders' deficit
Common stock, ($.15 par value, authorized
2,000,000 shares, outstanding 1,588,128
at June 30, 1999 and 1,000,028 at December 31, 1998) 152 152
Capital in excess of par value 8,155 8,155
Accumulated deficit (accumulated deficit of
$424,208 eliminated on December 2, 1988) (75,867) (75,673)
--------- ---------
Total Shareholders' Deficit (67,560) (67,366)
Commitments and contingent liabilities
--------- ---------
Total Liabilities and Shareholders'
Deficit $ 2,171 $ 2,566
======== =========
This interim statement is unaudited.
The accompanying Notes are an integral part of the Financial Statements.
</TABLE>
<PAGE>
4
ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30
-----------------------
1999 1998
------- -------
(thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (194) $ (60)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 83 88
Change in working capital:
Decrease in receivables, net 204 23
Decrease in inventories 60 23
Decrease in trade accounts payable (112) (76)
Increase in other current items 2 185
Other (29) (26)
------- -------
Net cash provided by operating activities 14 157
Cash flows from investing activities:
Capital expenditures (47) (221)
Proceeds from sale of equipment 2 2
------- -------
Net cash (used) by investing activities (45) (219)
Cash flows from financing activities:
Net proceeds from issuance of long-term debt 29 71
Payment of long-term debt (35) (30)
------- -------
Net cash provided (used) by financing activities (6) 41
------- -------
Net decrease in cash and short-term investments (37) (21)
Cash and short-term investments at
beginning of period 223 699
------- -------
Cash and short-term investments at
end of period $ 186 $ 678
======= =======
Supplemental information - interest paid $ 15 $ 18
======= =======
This interim statement is unaudited.
The accompanying Notes are an integral part of the Financial Statements.
</TABLE>
<PAGE>
5
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
This interim financial data should be read in conjunction with the consolidated
financial statements and related notes, management's discussion and analysis and
other information included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
All adjustments considered necessary for a fair presentation of the results of
operations have been included in the unaudited financial statements. The results
of operations for any interim period are not necessarily indicative of
Allis-Chalmers operating results for a full year.
NOTE 2 - POSTRETIREMENT OBLIGATIONS--PENSION PLAN
In 1994, the Company's independent pension actuaries changed the assumptions for
mortality and administrative expenses used to determine the liabilities of the
Allis-Chalmers Consolidated Pension Plan (Consolidated Plan). Primarily as a
result of the changes in mortality assumptions to reflect decreased mortality
rates of the Company's retirees, the Consolidated Plan was underfunded on a
present value basis. In the first quarter of 1996, the Company made a required
cash contribution to the Consolidated Plan in the amount of $205,000. The
Company did not, however, have the financial resources to make the other
required payments during 1996 and 1997. Given the inability of the Company to
fund such obligations with its current financial resources, in February 1997,
Allis-Chalmers applied to the Pension Benefit Guaranty Corporation (PBGC) for a
"distress" termination of the Consolidated Plan under section 4041(c) of the
Employee Retirement Income Security Act of 1974, as amended (ERISA). The PBGC
approved the distress termination application in September 1997 and agreed to a
plan termination date of April 14, 1997. The PBGC became trustee of the
terminated Consolidated Plan on September 30, 1997.
Upon termination of the Consolidated Plan, Allis-Chalmers and its subsidiaries
incurred a liability to the PBGC for an amount equal to the Consolidated Plan's
unfunded benefit liabilities. Allis- Chalmers and its subsidiaries also have
liability to the PBGC, as trustee of the terminated Consolidated Plan, for the
outstanding balance of the Consolidated Plan's accumulated funding deficiencies.
The PBGC has estimated that the unfunded benefit liabilities and the accumulated
funding deficiencies (together, the PBGC Liability) totaled approximately $67.9
million.
In September 1997, Allis-Chalmers and the PBGC entered into an agreement in
principle for the settlement of the PBGC Liability which required, among other
things, satisfactory resolution of the Company's tax obligations with respect to
the Consolidated Plan under Section 4971 of the Internal Revenue Code of 1986,
as amended (Code). Section 4971(a) of the Code imposes, for each taxable year, a
first-tier tax of 10% on the amount of the accumulated funding deficiency under
a plan like the Consolidated Plan. Section 4971(b) of the Code imposes an
additional, second-tier tax equal to 100% of such accumulated funding deficiency
if the deficiency is not "corrected" within a specified period. Liability for
the taxes imposed under section 4971 extends, jointly and severally, to the
Company and to its commonly-controlled subsidiary corporations.
<PAGE>
6
Prior to its termination, the Consolidated Plan had an accumulated funding
deficiency in the taxable years 1995, 1996, and 1997. Those deficiencies
resulted in estimated first-tier taxes under Code Section 4971(a) of
approximately $900,000.
On July 16, 1998, the Company and the Internal Revenue Service (IRS) reached an
agreement in principal to settle the Company's tax liability under Code Section
4971 for $75,000. Following final IRS approval, payment of this amount was made
on August 11, 1998.
In June 1999, but effective as of March 31, 1999, the Company and the PBGC
entered into an agreement for the settlement of the PBGC Liability (the PBGC
Agreement).
Pursuant to the terms of the PBGC Agreement, the Company issued 585,100 shares
of its common stock to the PBGC, or 35% of the total number of shares issued and
outstanding on a fully-diluted basis, and the Company has a right of first
refusal with respect to the sale of the shares of common stock owned by the
PBGC. In accordance with the terms of the PBGC Agreement, the Company is
required to (i) decrease the size of the Board of Directors of the Company (the
Board) to seven members; (ii) cause a sufficient number of current directors of
the Company to resign from the Board and all committess thereof; and (iii) cause
Thomas M. Barnhart, II, Alexander P. Sammarco and David A. Groshoff, designees
of the PBGC, to be elected to the Board. The PBGC has caused the Company to
amend its By-laws (By-laws) to conform to the terms of the PBGC Agreement.
Furthermore, the Company agreed to pay the PBGC's reasonable professional fees
on the 90th day after a Release Event (as hereinafter defined), which is
currently evidenced by a Company promissory note in favor of the PBGC in the
amount of $75,000. During the term of the PBGC Agreement, the Company has agreed
not to issue or agree to issue any common stock of the Company or any "common
stock equivalent" for less than fair value (as determined by a majority of the
Board). The Company also agreed not to merge or consolidate with any other
entity or sell, transfer or convey more than 50% of its property or assets
without majority Board approval and agreed not to amend its Amended and Restated
Certificate of Incorporation (Certificate) or By-laws.
In order to satisfy and discharge the PBGC Liability, the PBGC Agreement
provides that the Company must either: (i) receive, in a single transaction or
in a series of related transactions, debt financing which makes available to the
Company at least $10 million of borrowings or (ii) consummate an acquisition, in
a single transaction or in a series of related transactions, of assets and/or a
business where the purchase price (including funded debt assumed) is at least
$10 million (Release Event).
In connection with the PBGC Agreement, and as additional consideration for
settling the PBGC Liability, the following agreements, each dated as of March
31, 1999 were also entered into; (i) a Registration Rights Agreement between the
Company and PBGC (the Registration Rights Agreement); and (ii) a Lock-Up
Agreement by and among the Company, the PBGC, AL-CH Company, L.P., a Delaware
limited partnership (AL-CH), Wells Fargo Bank, as trustee under that certain
Amended and Restated Retiree Health Trust Agreement for UAW Retired Employees of
Allis-Chalmers Corporation (the UAW Trust), and Firstar Trust Company, as
trustee under that certain Amended and Restated Retiree Health Trust Agreement
for Non-UAW
<PAGE>
7
Retired Employees of Allis-Chalmers Corporation (the Non-UAW Trust) (the Lock-Up
Agreement).
The Registration Rights Agreement grants each holder of Registrable Shares
(defined in the Registration Rights Agreement to basically mean the shares of
common stock issued to the PBGC under the PBGC Agreement) the right to have
their shares registered pursuant to the Securities Act of 1933, as amended, on
demand or incidental to a registration statement being filed by the
Company. In order to demand registration of Registrable Shares, a request for
registration by holders of not less than 20% of the Registrable Shares is
necessary. The Company may deny a request for registration of such shares if the
Company contemplated filing a registration statement within 90 days of receipt
of notice from the holders. The Registration Rights Agreement also contains
provisions that allow the Company to postpone the filing of any registration
statement for up to 180 days. The Registration Rights Agreement contains
indemnification language similar to that usually contained in agreements of this
kind.
The Lock-Up Agreement governs the transfer and disposition of shares of the
Company's common stock and the voting of such shares, as well as grants the PBGC
a right of sale of its shares prior to AL-CH, the UAW Trust and the Non-UAW
Trust.
Pursuant to the Lock-Up Agreement, unless the Board has terminated the common
stock transfer restrictions set forth in Article XIII of the Company's
Certificate, AL-CH, the UAW Trust and the Non-UAW Trust each agreed that, during
the period commencing on March 31, 1999 and ending on the third anniversary of
the Release Event, it will not, directly or indirectly, sell, transfer, assign
or dispose of any shares of Company stock it beneficially owns. Commencing with
the third anniversary of the Release Event and continuing until the fifth
anniversary of the Release Event, each of AL-CH, the UAW Trust and the Non-UAW
Trust agreed not to sell, transfer or dispose of any shares of Company stock
without first giving the PBGC an opportunity to sell all or any portion of the
shares of Company stock the PBGC owns. The foregoing right of the PBGC applies
to the sale of Company stock in a public offering or otherwise.
The Lock-Up Agreement also contains a voting component. During the term of the
Lock-Up Agreement, each party to the agreement agreed to vote, at any meeting of
the Company stockholders and in any written consent, all shares of Company stock
owned by it in favor of the election as directors of the Company the persons
nominated by the Nominating Committee of the Board and to refrain from taking
any action contrary to or inconsistent with such obligation. During the term of
the Lock-Up Agreement, each party to the agreement further agreed not to vote
its shares of Company stock or take any other action to amend the Company's
Certificate or By-laws in a manner that is inconsistent with, or in breach of,
the PBGC Agreement. Each party further agreed that it will vote all of its
shares (i) in favor of certain specified amendments to the Company's
Certificate, (ii) for the election of the persons designated by the PBGC (each,
a PBGC Director) to serve on the Board and (iii) in favor of the election of
Company directors who are committed to cause, and who do cause, one PBGC
Director to be appointed to the Nominating Committee of the Board and one PBGC
Director to be appointed as the Chairman of the Compensation Committee of the
Board.
<PAGE>
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Operations of the Company consist of Houston Dynamic Service, Inc. (HDS), the
Company's machinery repair and service subsidiary.
Sales in the second quarter of 1999 totaled $1,084,000 a decrease of 13% from
$1,249,000 in the second quarter of 1998. The decrease was due to extremely soft
conditions as a backlash to the very low oil prices during the second half of
1998 which resulted in lower shipments in 1999 compared to the same period in
1998. HDS continues to be affected by volatile market conditions that prevail in
the oil related fields of refining, processing, chemicals and petrochemical
operations throughout the Gulf Coast.
Gross margin, as a percentage of sales, was 23% in the second quarter of 1999, a
decrease from 25% in 1998 due to competitive pricing.
Marketing and administrative expense was $381,000 in the second quarter of 1999
compared with $515,000 in the prior year. The decrease reflects the 1998
nonreoccurring costs that were associated with the Consolidated Plan and related
IRS issues. See Note 2 to the Financial Statements for further discussion. A
significant portion of the Company's administrative expenses relates to expenses
for Securities and Exchange Commission and other governmental reporting as well
as legal, accounting and audit, tax, insurance and other corporate requirements
of a publicly held company.
The Company incurred a net loss of $137,000, or $.09 per common share, in the
second quarter of 1999 compared with a net loss of $197,000, or $.20 per common
share, in the same period of 1998.
In the first half of 1999, the Company incurred a net loss of $194,000 or $.15
per common share compared with a loss of $60,000 or $.06 per common share in the
same period of 1998.
Financial Condition and Liquidity
Cash and short term investments totaled $186,000 at June 30, 1999, a decrease
from $223,000 at December 31, 1998.
Net trade receivables at June 30, 1999 were $592,000, reflecting a decrease from
the December 31, 1998 level of $796,000. This decrease was due to lower sales in
the first half of 1999.
Inventory at June 30, 1999 was $67,000, a decrease from $127,000 at year end
1998. This reduction was primarily due to one order for $110,000 that was in
work in process at year end 1998 and was subsequently shipped in the second
quarter of 1999.
<PAGE>
9
Net property, plant and equipment was $1,270,000 at June 30, 1999, a decrease
from $1,308,000 at year end 1998. For the six months ending June 30, 1999,
$47,000 of capital expenditures were made to insure cost competitiveness and the
ability to reach new markets.
Other current liabilities at June 30, 1999 were $278,000, a decrease from
$312,000 at December 31, 1998.
The A-C Reorganization Trust, pursuant to the Plan of Reorganization, funds all
costs incurred by Allis-Chalmers which relate to implementation of the Plan of
Reorganization, thus avoiding additional demands on the liquidity of the
Company. Such costs include an allocated share of certain expenses for Company
employees, professional fees and certain other administrative expenses.
In 1994, the Company's independent pension actuaries changed the assumptions for
mortality and administrative expenses used to determine the liabilities of the
Consolidated Plan. Primarily as a result of the changes in mortality assumptions
to reflect decreased mortality rates of the Company's retirees, the Consolidated
Plan was underfunded on a present value basis. In the first quarter of 1996, the
Company made a required cash contribution to the Consolidated Plan in the amount
of $205,000. The Company did not, however, have the financial resources to make
the other required payments during 1996 and 1997. Given the inability of the
Company to fund such obligations with its current financial resources, in
February 1997, Allis-Chalmers applied to the PBGC for a "distress" termination
of the Consolidated Plan under section 4041(c) of ERISA. The PBGC approved the
distress termination application in September 1997 and agreed to a plan
termination date of April 14, 1997. The PBGC became trustee of the terminated
Consolidated Plan on September 30, 1997.
Upon termination of the Consolidated Plan, Allis-Chalmers and its subsidiaries
incurred a liability to the PBGC for an amount equal to the Consolidated Plan's
unfunded benefit liabilities. Allis- Chalmers and its subsidiaries also have
liability to the PBGC, as trustee of the terminated Consolidated Plan, for the
outstanding balance of the Consolidated Plan's accumulated funding deficiencies.
The PBGC has estimated that the PBGC Liability totaled approximately $67.9
million.
In September 1997, Allis-Chalmers and the PBGC entered into an agreement in
principle for the settlement of the PBGC Liability which required, among other
things, satisfactory resolution of the Company's tax obligations with respect to
the Consolidated Plan under Section 4971 of the Code. Section 4971(a) of the
Code imposes, for each taxable year, a first-tier tax of 10% on the amount of
the accumulated funding deficiency under a plan like the Consolidated Plan.
Section 4971(b) of the Code imposes an additional, second-tier tax equal to 100%
of such accumulated funding deficiency if the deficiency is not "corrected"
within a specified period. Liability for the taxes imposed under section 4971
extends, jointly and severally, to the Company and to its commonly-controlled
subsidiary corporations.
Prior to its termination, the Consolidated Plan had an accumulated funding
deficiency in the taxable years 1995, 1996, and 1997. Those deficiencies
resulted in estimated first-tier taxes under Code Section 4971(a) of
approximately $900,000.
<PAGE>
10
On July 16, 1998, the Company and the IRS reached an agreement in principal to
settle the Company's tax liability under Code Section 4971 for $75,000.
Following final IRS approval, payment of this amount was made on August 11,
1998.
In June 1999, but effective as of March 31, 1999, the Company and the PBGC
entered into the PBGC Agreement.
Pursuant to the terms of the PBGC Agreement, the Company issued 585,100 shares
of its common stock to the PBGC, or 35% of the total number of shares issued and
outstanding on a fully-diluted basis, and the Company has a right of first
refusal with respect to the sale of the shares of common stock owned by the
PBGC. In accordance with the terms of the PBGC Agreement, the Company is
required to (i) decrease the size of the Board to seven members; (ii) cause a
sufficient number of current directors of the Company to resign from the Board
and all committees thereof; and (iii) cause Thomas M. Barnhart, II, Alexander P.
Sammarco and David A. Groshoff, designees of the PBGC, to be elected to the
Board. The PBGC has caused the Company to amend its By-laws to conform to the
terms of the PBGC Agreement. Furthermore, the Company agreed to pay the PBGC's
reasonable professional fees on the 90th day after a Release Event, which is
currently evidenced by a Company promissory note in favor of the PBGC in the
amount of $75,000. During the term of the PBGC Agreement, the Company has agreed
not to issue or agree to issue any common stock of the Company or any "common
stock equivalent" for less than fair value (as determined by a majority of the
Board). The Company also agreed not to merge or consolidate with any other
entity or sell, transfer or convey more than 50% of its property or assets
without majority Board approval and agreed not to amend its Certificate or
By-laws.
In order to satisfy and discharge the PBGC Liability, the PBGC Agreement
provides that the Company must either: (i) receive, in a single transaction or
in a series of related transactions, debt financing which makes available to the
Company at least $10 million of borrowings or (ii) consummate an acquisition, in
a single transaction or in a series of related transactions, of assets and/or a
business where the purchase price (including funded debt assumed) is at least
$10 million (Release Event).
In connection with the PBGC Agreement, and as additional consideration for
settling the PBGC Liability, the following agreements, each dated as of March
31, 1999, were also entered into: the Registration Rights Agreement and the
Lock-Up Agreement.
The Registration Rights Agreement grants each holder of Registrable Shares
(defined in the Registration Rights Agreement to basically mean the shares of
common stock issued to the PBGC under the PBGC Agreement) the right to have
their shares registered pursuant to the Securities Act of 1933, as amended, on
demand or incidental to a registration statement being filed by the Company. In
order to demand registration of Registrable Shares a request for registration by
holders of not less than 20% of the Registrable Shares is necessary. The Company
may deny a request for registration of such shares if the Company contemplated
filing a registration statement within 90 days of receipt of notice from the
holders. The Registration Rights Agreement also contains provisions that allow
the Company to postpone the filing of any
<PAGE>
11
registration statement for up to 180 days. The Registration Rights Agreement
contains indemnification language similar to that usually contained in
agreements of this kind.
The Lock-Up Agreement governs the transfer and disposition of shares of the
Company's common stock, the voting of such shares as well as grants the PBGC a
right of sale of its shares prior to AL-CH, the UAW Trust and the Non-UAW Trust.
Pursuant to the Lock-Up Agreement, unless the Board has terminated the common
stock transfer restrictions set forth in Article XIII of the Company's
Certificate, AL-CH, the UAW Trust and the Non-UAW Trust each agreed that, during
the period commencing on March 31, 1999 and ending on the third anniversary of
the Release Event, it will not, directly or indirectly, sell, transfer, assign
or dispose of any shares of Company stock it beneficially owns. Commencing with
the third anniversary of the Release Event and continuing until the fifth
anniversary of the Release Event, each of AL-CH, the UAW Trust and the Non-UAW
Trust agreed not to sell, transfer or dispose of any shares of Company stock
without first giving the PBGC an opportunity to sell all or any portion of the
shares of Company stock the PBGC owns. The foregoing right of the PBGC applies
to the sale of Company stock in a public offering or otherwise.
The Lock-Up Agreement also contains a voting component. During the term of the
Lock-Up Agreement, each party to the agreement agreed to vote, at any meeting of
the Company stockholders and in any written consent, all shares of Company stock
owned by it in favor of the election as directors of the Company the persons
nominated by the Nominating Committee of the Board and to refrain from taking
any action contrary to or inconsistent with such obligation. During the term of
the Lock-Up Agreement, each party to the agreement further agreed not to vote
its shares of Company stock or take any other action to amend the Company's
Certificate or By-laws in a manner that is inconsistent with, or in breach of,
the PBGC Agreement. Each party further agreed that it will vote all of its
shares (i) in favor of certain specified amendments to the Company's
Certificate, (ii) for the election of PBGC Directors and (iii) in favor of the
election of Company directors who are committed to cause, and who do cause, one
PBGC Director to be appointed to the Nominating Committee of the Board and one
PBGC Director to be appointed as the Chairman of the Compensation Committee of
the Board.
The foregoing are summaries of certain provisions of the PBGC Agreement, the
Registration Rights Agreement and the Lock-Up Agreement. The summaries are not
complete descriptions of the terms and conditions of those agreements and are
qualified in their entirety by reference to the full text of the PBGC Agreement,
the Registration Rights Agreement and the Lock-Up Agreement, which are
incorporated herein by reference and copies of which have been filed with the
Securities and Exchange Commission as exhibits to this Quarterly Report on Form
10-Q.
The Environmental Protection Agency (EPA) and certain state environmental
protection agencies have requested information in connection with eleven
potential hazardous waste disposal sites in which products manufactured by
Allis-Chalmers before consummation of the Plan of Reorganization were disposed.
The EPA has claimed that Allis-Chalmers is liable for cleanup costs associated
with several additional sites. The EPA's claims with respect to one other site
were withdrawn in 1994 based upon settlements reached with the EPA in the
bankruptcy proceeding. In addition, certain third parties have asserted that
Allis-Chalmers is
<PAGE>
12
liable for cleanup costs or associated EPA fines in connection with additional
sites. In one of these instances a former site operator has joined
Allis-Chalmers and 47 other potentially responsible parties as a third-party
defendant in a lawsuit involving cleanup of one of the sites. In each instance
the environmental claims asserted against the Company involve its prebankruptcy
operations. Accordingly, Allis-Chalmers has taken the position that all cleanup
costs or other liabilities related to these sites were discharged in the
bankruptcy. In one particular site, the EPA's Region III has concurred with the
Company's position that claims for environmental cleanup were discharged
pursuant to the bankruptcy. While each site is unique with different
circumstances, the Company has notified other Regional offices of the EPA of
this determination associated with the Region III site. The Company has not
received responses from the other Regional offices. No environmental claims have
been asserted against the Company involving its postbankruptcy operations.
The Company's principal sources of cash include earnings from the operations of
HDS and interest income on marketable securities. The cash requirements needed
for the administrative expenses associated with being a publicly held company
are significant, and the Company will continue to use cash generated by
operations to fund such expenses.
The necessity to assure liquidity emphasizes the need for the Company to
continue in a prudent manner its search for appropriate acquisition candidates
in order to increase the Company's operating base and generate positive cash
flow.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See PART I. Item 2, "Management's Discussion and Analysis."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The exhibits listed in the accompanying exhibit index are filed as
a part of this Form 10-Q.
(b) Reports on Form 8-K - No report on Form 8-K was filed during the second
quarter of 1999.
<PAGE>
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Allis-Chalmers Corporation
(Registrant)
/s/ John T. Grigsby, Jr.
John T. Grigsby, Jr.
Vice Chairman, Executive Vice
President and Chief Financial
Officer
August 3, 1999
<PAGE>
14
ALLIS-CHALMERS CORPORATION
Exhibit Index
Exhibit No. Description
- ----------- -----------
(10.1) Agreement dated as of March 31, 1999, by and between
Allis-Chalmers Corporation and the Pension Benefit Guaranty
Corporation
(10.2) Lock-Up Agreement dated as of March 31, 1999, by and among
Allis-Chalmers Corporation, the Pension Benefit Guaranty
Corporation, acting in its individual capacity and as trustee
of the Allis-Chalmers Consolidated Pension Plan, AL-CH
Company, L.P., Wells Fargo Bank, as trustee under that certain
Amended and Restated Retiree Health Trust Agreement for UAW
Retired Employees of Allis-Chalmers Corporation and Firstar
Trust Company, as trustee under that certain Amended and
Restated Retiree Health Trust Agreement for non-UAW Retired
Employees of Allis-Chalmers Corporation.
(10.3) Registration Rights Agreement dated as of March 31, 1999, by
and between Allis-Chalmers Corporation and the Pension Benefit
Guaranty Corporation
(27) Financial Data Schedule
Exhibit 10.1
AGREEMENT
AGREEMENT (this "Agreement") dated as of March 31, 1999 among
Allis-Chalmers Corporation, a Delaware corporation (the "Company"), and the
Pension Benefit Guaranty Corporation, a United States government corporation
acting in its individual capacity and as trustee of the Allis-Chalmers
Consolidated Pension Plan (the "Plan").
W I T N E S S E T H :
WHEREAS, the Company was the contributing sponsor of the Plan;
WHEREAS, pursuant to the Agreement for Appointment of Trustee and
Termination of the Plan dated as of September 30, 1997, the Plan was terminated
and the Pension Benefit Guaranty Corporation was appointed trustee of the Plan
pursuant to 29 U.S.C. ss.1342;
WHEREAS, prior to termination of the Plan, certain payments required
under Code ss.412 were not made to the Plan resulting in the creation of the
Funding Lien;
WHEREAS, as a result of the termination of the Plan, the Company became
indebted to the Pension Benefit Guaranty Corporation, in its individual
capacity, for an amount pursuant to 29 U.S.C. ss.1362(b), and as trustee of the
Plan, for an amount pursuant to 29 U.S.C. ss.1362(c), in an aggregate amount not
less than $70 million (the "PBGC Liability"); and
WHEREAS, the Company and Pension Benefit Guaranty Corporation desire to
settle the PBGC Liability and to agree to release the Funding Lien under certain
circumstances in accordance with the terms and subject to the conditions
contained herein.
NOW, THEREFORE, in consideration of the representations, warranties and
agreements contained herein, and intending to be legally bound hereby, the
Company and the Pension Benefit Guaranty Corporation each hereby agree as
follows:
ARTICLE 1
Definitions
1.1 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
"AL-CH" shall mean AL-CH, L.P., a Delaware limited
partnership.
"Board" shall mean the board of directors of the Company.
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"Business Day" means any day other than Saturday or Sunday and
any other day on which commercial banks in New York, New York are
required or permitted to be closed.
"By-laws" means the By-laws of the Company after giving effect
to the amendments contemplated by Section 2.6 hereof.
"Certificate" shall mean the Company's Amended and Restated
Certificate of Incorporation in effect on the date hereof.
"Closing" and "Closing Date" shall have the meanings set forth
in Section 2.1.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Common Stock" shall mean the Common Stock, par value $.15 per
share, of the Company.
"Common Stock Equivalents" shall mean any capital stock or
security of the Company (other than Common Stock) which is convertible,
exercisable or exchangeable for or into Common Stock.
"Continuing Director" shall mean any of the three (3) Company
directors continuing as directors and any person designated by AL-CH to
fill any vacancy created by the departure from the Board of any such
person. The initial Continuing Directors are Robert E. Nederlander,
Allan R. Tessler and Leonard Toboroff.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Funding Lien" shall mean the lien arising under Section
412(n) of the Code in favor of the Plan, in an amount exceeding $3
million, on all property and rights to property owned by the Company
and its subsidiary, Houston Dynamic Service, Inc.
"GAAP" shall mean the generally accepted accounting principles
in the United States of America in effect from time to time.
"Lock-Up Agreement" shall mean the lock-up agreement, in
substantially the form attached hereto as Exhibit A and dated as of the
Closing Date, between the PBGC, AL-CH the UAW Trust and the Non-UAW
Trust.
"Majority Board Approval" shall mean the affirmative vote of
not less than four (4) of the Company's 7-member Board.
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"Material Adverse Effect" shall mean a material adverse effect
on the assets, business, properties, liabilities, financial condition
or results of operation of the Company and its subsidiaries taken as a
whole.
"Non-UAW Trust" shall mean the trust created pursuant to that
certain Amended and Restated Retiree Health Trust Agreement for non-UAW
Retired Employees of Allis-Chalmers Corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation (in
its individual capacity and as trustee of the Plan) and its designee
for purposes of holding the Common Stock to be delivered hereunder and
exercising the rights granted herein.
"PBGC Director" shall have the meaning set forth in Section
4.5 hereof.
"PBGC Liability" shall have the meaning set forth in the
recitals to this Agreement.
"Person" or "person" shall mean an individual, corporation,
association, partnership, group (as defined in Section 13(d)(3) of the
Exchange Act), trust, joint venture, business trust or unincorporated
organization, or a government or any agency or political subdivision
thereof.
"Plan" shall have the meaning set forth in the recitals to
this Agreement.
"Release Event" shall mean an event approved by the Company's
Board which meets either of the following tests (1) the Company
receives, in a single transaction or in a series of related
transactions, debt financing which makes available to the Company at
least Ten Million Dollars ($10.0 million) of borrowings OR (2) the
Company consummates an acquisition, in a single transaction or in a
series of related transactions, of assets and/or a business where the
purchase price (including funded debt assumed) is at least Ten Million
Dollars ($10.0 million).
"Release Event Date" shall mean the earliest date on which a
Release Event occurs.
"Retiree Health Trust Director" shall mean the Company
director designated by the UAW Trust and the Non-UAW Trust.
"Registration Rights Agreement" shall mean the registration
rights agreement, in substantially the form attached hereto as Exhibit
B, to be executed by the Company and the PBGC at the Closing.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
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"SEC" shall mean the United States Securities and Exchange
Commission.
"Senior Officer's Certificate" shall have the meaning set
forth in Section 4.2(a).
"Stock Compensation Plan" shall mean the plan or plans to be
adopted by the Company providing for stock options or comparable Common
Stock-based incentive compensation to Company directors, officers
and/or employees; provided, however, that the number of shares of
Common Stock issued or issuable pursuant to such Stock Compensation
Plan shall not exceed 167,171 shares of Common Stock (subject to
adjustment as provided in Section 6.13 hereof).
"Subsidiary" or "subsidiary" shall mean, with respect to any
corporation (the "Parent") any other corporation, association or other
business entity of which more than 50% of the shares of the voting
stock are owned or controlled, directly or indirectly, by the Parent or
one or more Subsidiaries of the Parent, or by the Parent and one or
more of its Subsidiaries.
"Surviving Person" shall mean the continuing or surviving
Person of merger, consolidation or other corporate combination, the
Person receiving a transfer of all or a substantial part of the
properties and assets of the Company, or the Person consolidating with
or merging into the Company in a merger, consolidation or other
corporate combination in which the Company is the continuing or
surviving Person, but in connection with which the Common Stock is
exchanged or converted into the securities of any other person or the
right to receive cash or any other property.
"Tax Benefits" shall mean the net operating loss carryovers,
capital loss carryovers, and business credit carryovers to which the
Company is entitled pursuant to the Code.
"Tax Returns" means any return, amended return or other report
required to be filed with respect to any Tax, including declaration of
estimated tax and information returns.
"Taxes" means any federal, state, local or foreign taxes,
including but not limited to income, gross receipts, windfall profits,
value added, severance, property, production, sales, use, license,
excise, franchise, employment, withholding or similar taxes, together
with any interest, additions or penalties with respect thereto and any
interest in respect of such additions or penalties.
"Transaction Documents" shall mean collectively, this
Agreement, the Bylaws and the Registration Rights Agreement.
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"Transferee" shall have the meaning set forth in Section
4.6(a).
"UAW Trust" shall mean the trust created pursuant to that
certain Amended and Restated Retiree Health Trust Agreement for UAW
Retired Employees of Allis-Chalmers Corporation.
ARTICLE 2
Closing
2.1 Closing Date. Subject to the satisfaction or waiver of the
conditions set forth in this Agreement, the closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices of Anderson
Kill & Olick, P.C., counsel to the PBGC, at 1251 Avenue of the Americas, New
York, New York 10020, on the first Business Day following the date hereof, on
which the conditions in Section 5.1 and 5.2 are satisfied or waived by the PBGC,
or the Company, as the case may be (the "Closing Date"), or at such other time
and place as may be mutually agreed upon by the PBGC and the Company.
2.2 Issuance of Stock. On the Closing Date, the Company shall issue and
deliver 585,100 shares of Common Stock to the PBGC, which shares will constitute
35% of the issued and outstanding shares of Common Stock on a fully-diluted
basis, after giving effect to the shares to be issued pursuant to the Management
Agreement.
2.3 PBGC Liability and Funding Lien.
(a) On the Release Event Date, any and all liability of the Company and
of any person within the Company's controlled group as defined for purposes of
29 U.S.C. ss.ss.1301(a)(14) and 1362(a) for the PBGC Liability shall be deemed
satisfied and discharged in full.
(b) On the Release Event Date, the PBGC will execute and send for
recording notices of release with respect to the Funding Lien as perfected in
the jurisdictions where the PBGC filed notices of such lien. The PBGC shall
provide the Company with copies of the notices or release which have been file
stamped by the appropriate filing jurisdiction, within 10 Business Days of the
PBGC's receipt of such documents.
(c) On and after the Closing Date, the PBGC will not seek to enforce
any lien arising in favor of the Plan pursuant to 26 U.S.C. ss.412(n) except as
may be necessary by the PBGC to preserve or protect the rights of the Plan with
respect to the claims of a third party. On and after the Release Event Date, the
PBGC will not seek to enforce any lien arising in favor of the Plan pursuant to
26 U.S.C. ss.412(n).
2.4 Board of Directors. On the Closing Date, the Company shall (i)
cause the size of the Board to be decreased to seven (7) members; (ii) cause a
sufficient number of Company directors to execute and deliver to the Company
letters of resignation from the Board and all committees thereof; and (iii)
cause Thomas M. Barnhart, II, Alexander P. Sammarco
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and David A. Groshoff, designees of the PBGC, to be elected to the Board as PBGC
Directors. All resignations tendered pursuant to this Section 2.4 shall be
effective upon delivery.
2.5 Professional Fees. On the Closing Date, the Company shall deliver a
promissory note to the PBGC evidencing its obligation to reimburse the PBGC for
the reasonable professional fees and disbursements of Anderson Kill & Olick,
P.C., counsel to the PBGC, incurred in connection with the negotiation,
execution and delivery of the Transaction Documents and the transactions
contemplated thereby, in an amount not to exceed $75,000. Such promissory note
shall be in the appropriate amount and shall have a maturity date that is the
ninetieth (90th) day after the Release Event Date.
2.6 By-laws. The Company shall amend its By-laws on or prior to the
Closing Date as provided in the attached Exhibit C.
ARTICLE 3
Representations and Warranties
3.1 Representations and Warranties of the Company. In order to induce
the PBGC to execute and deliver, and to consummate the transactions contemplated
by, the Transaction Documents, the Company hereby represents and warrants to the
PBGC that:
(a) Organization and Good Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted. The Company is duly licensed or qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties,
or conducts any business, so as to require such qualification, except where the
failure to be so licensed or qualified in any such jurisdiction would not have a
Material Adverse Effect.
(b) Authorization; No Conflicts. The Company has full legal power and
authority to enter into this Agreement and the Transaction Documents and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and each Transaction Document to
which the Company is party and the consummation of transactions contemplated
hereby have been duly authorized by the Board. No other corporate proceeding on
the part of the Company are necessary to authorize the execution, delivery and
performance of this Agreement and each Transaction Document and the transactions
contemplated hereby and thereby. This Agreement has been, and on or prior to the
Closing Date each Transaction Document to which it is a party will be, duly and
validly executed and delivered by the Company. This Agreement constitutes, and
upon its execution on or prior to the Closing Date each Transaction Document
will constitute, a valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement and the Transaction Documents to which the Company is party, the
consummation of the transactions by it contemplated hereby and thereby and the
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<PAGE>
compliance by it with any of the provisions hereof and thereof will not conflict
with, violate or result in a breach of any provision of, require a consent
under, or constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the termination of or
accelerate the performance required by, or result in a right of termination or
acceleration under, (i) any provision of the Certificate or By-laws of the
Company or (ii) any material mortgage, note, indenture, deed of trust, lease,
loan agreement, warrant, registration rights agreement or other material
agreement or instrument, the violation or breach of would have a Material
Adverse Effect.
(c) Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required in
connection with the execution, delivery and performance of this Agreement and
the Transaction Documents by the Company and the consummation of the
transactions hereunder and thereunder.
(d) Common Stock. The Common Stock being issued to the PBGC has been
duly authorized by all necessary corporate action. When issued and delivered
against receipt of the consideration therefor, such Common Stock will be validly
issued, fully paid and nonassessable (except as provided in Section
180.0622(2)(b) of the Wisconsin Business Corporation Law as applicable to a
foreign corporation qualified to do business in Wisconsin), will not subject the
holders thereof to any personal liability and will not be subject to any
preemptive rights of any other stockholder of the Company. At the Closing the
PBGC will receive valid title to the Common Stock to be acquired on such date,
free and clear of any claim, lien, security interest or other encumbrance.
(e) Capitalization. The Company has a single class of authorized
capital stock, the Common Stock, of which 2,000,000 shares are currently
authorized, and 1,003,028 shares are currently issued and outstanding.
Immediately after the Closing contemplated herein, but disregarding the shares
which may be issued pursuant to the Management Agreement, the Company will have
1,588,128 shares of Common Stock issued and outstanding. Except as provided
above and as contemplated by the Stock Compensation Plan and the Management
Agreement, the Company has not issued options, warrants, rights to subscribe to,
scrip, calls or commitments of any kind or character whatsoever relating to the
purchase of any class of its capital stock, including, without limitation, the
Common Stock. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire any of its capital stock. Except
for the proposed Registration Rights Agreement, there are no contracts or
agreements between the Company and any Person granting such Person the right to
require the Company to file a registration statement under the Securities Act
with respect to the capital stock of the Company owned or to be owned by such
Person or to require the Company to include such capital stock in any other
registration statement filed by the Company under the Securities Act.
(f) Legal Proceedings. Except for the environmental litigation
identified in the Company's periodic filings with the SEC under the Exchange
Act, there are no legal, administrative, arbitration or other legal proceedings,
claims, actions or governmental investigations of any nature pending against the
Company which, if adversely decided, would
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have a Material Adverse Effect. To the best of the Company's knowledge, there
are no legal, administrative, arbitration or other legal proceedings, claims,
actions or governmental investigations of any nature threatened against the
Company, which, if adversely decided, would have a Material Adverse Effect.
Except for any order of the bankruptcy court in the Southern District of New
York having jurisdiction over the Company's prior Chapter 11 bankruptcy, the
Company is not subject to any order, judgment or decree of any Governmental
Entity which, individually or in the aggregate, could have a Material Adverse
Effect.
(g) Compliance with Law. To the best of the Company's knowledge, the
Company is in compliance with the laws, statutes, orders, rules and regulations
of Federal, state and local governmental authorities applicable to the Company,
the violation of which would have a Material Adverse Effect.
(h) Internal Revenue Service. The Company has entered into an Amended
Offer In Compromise with the Internal Revenue Service ("IRS") and has paid the
$75,000 required to be paid by the Company as provided therein, which actions
have effectively resolved any dispute or disagreement between the Company and
the IRS with respect to the Plan.
(i) Financial Statements. The Company has previously delivered to the
PBGC copies of (a) the consolidated balance sheet of the Company and its
Subsidiaries as of December 31 for the fiscal years 1996 and 1997, and the
related consolidated statements of operations, statements of stockholders'
equity and cash flows for the fiscal years 1995 through 1997, inclusive, as
reported in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed by the Company with the SEC under the Exchange Act, in
each case accompanied by the audit report of Price Waterhouse LLP, independent
public accountants with respect to the Company, and (b) the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of June 30,
1998 and the related unaudited consolidated statement of operations, statements
of stockholders' equity capital and cash flows for the three- and six-month
periods then ended as reported in the Company's Quarterly Report on Form l0-Q
for the quarter ended June 30, 1998 filed with the SEC under the Exchange Act.
All of such financial statements fairly present the consolidated financial
position of the Company and its Subsidiaries as of the dates shown and the
results of the consolidated operations, statements of stockholders' equity and
cash flows of the Company and its Subsidiaries for the respective fiscal periods
or as of the respective dates therein set forth, in each case subject, as to
interim statements, to changes resulting from year-end adjustments (none of
which will be material in amount and effect) and the absence of footnotes. All
of such financial statements have been prepared in accordance with GAAP
consistently applied during the periods involved, except as otherwise set forth
in the notes thereto, and, except for the environmental litigation identified in
the Company's periodic filings with the SEC under the Exchange Act and the PBGC
Liability, the Company and its Subsidiaries have no liabilities or obligations
of any nature (absolute, accrued, contingent or otherwise) which are not fully
reflected or reserved against in the balance sheet as of June 30, 1998 included
in such financial statements, except for liabilities that may have arisen in the
ordinary and usual course of business and consistent with
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past practice and that, individually or in the aggregate, do not have and are
not reasonably expected to have a Material Adverse Effect.
(j) Reports. To the best of its knowledge and except for the Company's
failure to hold annual meetings of its stockholders, the Company has filed all
reports, registration statements, proxy statements and other materials, together
with any amendments required to be made with respect thereto, that were required
to be filed with (i) the SEC under the Securities Act or the Exchange Act (all
such reports and statements are collectively referred to herein as the
"Reports") and (ii) any applicable state securities authorities. To the
knowledge of the Company, no such Report, as of the date it was filed, contained
any untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3.2 Representation and Warranties of PBGC. In order to induce the
Company to execute and deliver, and to consummate the transactions contemplated
by, the Transaction Documents, the PBGC represents and warrants to the Company
as follows:
(a) Organization. The PBGC is a corporation duly organized and validly
existing as a corporation under the laws of its jurisdiction of organization and
has the requisite power and authority to enter into this Agreement and the
Transaction Documents and to carry out its obligations hereunder and thereunder.
(b) Authorization; No Conflicts. The execution and delivery of this
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been authorized by all necessary corporate
action. This Agreement has been, and on or prior to the Closing Date the
Transaction Documents will be, executed and delivered by the PBGC and this
Agreement is, and upon their execution on or prior to the Closing Date each of
the Transaction Documents will be, valid and binding obligations of the PBGC
enforceable against it in accordance with its terms. The execution, delivery and
performance of this Agreement and the Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby and the
compliance by the PBGC with any of the provisions hereof and thereof will not
conflict with, violate or result in a breach of any provision of, require a
consent under, or constitute a default (or an event, which, with notice or lapse
of time or both, would constitute a default) under, any organizational document
of the PBGC.
ARTICLE 4
Additional Agreements of the Parties
4.1 Conduct of Business. During the term of this Agreement, without the
prior written consent of the PBGC, the Company covenants and agrees that it will
not:
(a) Except for the Stock Compensation Plan, issue or agree to issue any
shares of Common Stock or any Common Stock Equivalents for less than fair value
as determined by the Board. The Company covenants and agrees that, except for
the Stock
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Compensation Plan and the Management Agreement, it will not issue any Common
Stock or Common Stock Equivalents unless such fair value determination and a
decision to issue shares based upon said fair value determination have been made
by a Majority Board Approval. In exercising its fiduciary duties, the Board is
entitled, but is not required, to rely on a fairness opinion or comparable
financial and/or valuation advice from a recognized investment banker or
financial or business valuation expert. The parties understand and agree that
the Company may issue capital stock other than Common Stock and other than
Common Stock Equivalents without securing Majority Board Approval.
(b) Except with a Majority Board Approval, enter into: (i) a
consolidation or merger of the Company with or into another person (whether or
not the Company is the Surviving Person) or (ii) the sale, assignment, transfer,
lease, conveyance or other disposal of fifty percent (50%) or more of the
property or assets of the Company in one or more related transactions.
(c) Amend its Certificate or By-laws in a manner that is inconsistent
with or in breach of this Agreement. Without limiting the generality of the
foregoing, the Company agrees that it will not amend its Certificate or By-laws
to increase or decrease the 7-person Board contemplated by this Agreement.
4.2 Financial Statements and Other Reports. The Company covenants that
it will deliver to the PBGC:
(a) As soon as practicable and in any event within 45 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidated statements of operations, statements of stockholders'
equity and cash flows of the Company for the period from the beginning of the
then current fiscal year to the end of such quarterly period, and a consolidated
balance sheet of the Company as of the end of such quarterly period setting
forth in each case in comparative form figures for the corresponding period or
date in the preceding fiscal year, together with a certificate from a senior
officer of the Company to the effect that such financial statement have been
prepared in accordance with GAAP, consistently applied during the periods
involved (subject to year-end adjustments) and that such financial statements
fairly present the results of operations and changes in financial position,
stockholders' equity, cash flows and financial position of the Company and its
subsidiaries as of and for the period then ended ("Senior Officer's
Certificate'); provided, however, that delivery pursuant to clause (c) below of
a copy of the Company's periodic report on Form 10-Q for such period filed with
the SEC, shall be deemed to satisfy the requirements of this clause (a).
(b) As soon as practicable and in any event within 90 days after the
end of each fiscal year, a consolidated balance sheet of the Company as of the
end of such fiscal year and the related consolidated statements of operations,
statements of stockholders' equity and cash flows for such fiscal year, setting
forth in each case in comparative form the corresponding figures from the
preceding fiscal year, together with the audit report of Price Waterhouse
Coopers LLP or any other independent public accountants of recognized standing
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selected by the Company; provided, however, that delivery pursuant to clause (c)
below of a copy of the Annual Report on Form 10-K of the Company for such fiscal
year filed with the SEC shall be deemed to satisfy the requirements of this
clause (b).
(c) Promptly after transmission thereof, copies of all such financial
statements, proxy statements, notice and reports as it shall send to its
stockholders generally and copies of all such registration statement, other than
registration statements relating to employee benefit or dividend reinvestment
plans, and all such regular and periodic reports on Forms 10-K, 10-Q and 8-K (or
similar substitute forms) as it shall file with the SEC.
(d) Such other information relating to the Company as the PBGC may
reasonably request.
4.3 Lost, Stolen, Destroyed or Mutilated Securities. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate for any security of the Company and, in the case
of loss, theft or destruction, upon deliver of an undertaking by the holder
thereof to indemnify the Company (and, if requested by the Company, the delivery
of an indemnity bond sufficient in the judgment of the Company to protect the
Company from any loss it may suffer if a certificate is replaced), or, in the
case of mutilation, upon surrender and cancellation thereof, the Company will
issue a new certificate for an equivalent number of shares or another security
of like tenor, as the case may be.
4.4 Investment Representations; Transfer Restrictions.
(a) The PBGC represents, warrants and covenants to the Company, which
representations, warranties and covenants shall survive the purchase of the
Common Stock, that:
(1) The PBGC is an "accredited investor" as that term is
defined in Rule 501 of Regulation D as promulgated by the SEC.
(2) The PBGC is entering into this Agreement with a knowledge
and understanding of the risks associated with an investment in Common
Stock. The PBGC has made its own independent investigation of the risks
and potential benefits of owning Common Stock, and has not relied upon
any Company offering materials or oral representations, or any third
party.
(3) The PBGC understands that the Common Stock has not been
registered under the Securities Act, on the grounds that the offer and
sale of the Common Stock are exempt from registration by reason of
Section 4(2) of the Securities Act and/or Regulation D thereunder and
have not been registered under any state or the District of Columbia
securities law (the "Blue Sky Laws"), based in part upon the
representations herein.
(4) The PBGC is acquiring the Common Stock for investment for
PBGC's own account, not on behalf of others, and with a view to resell
or
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otherwise to distribute the Common Stock, and the PBGC will not sell or
otherwise distribute the Common Stock without registration under the
Securities Act and applicable Blue Sky Laws, or exemptions therefrom.
(5) The PBGC understands and agrees that in accordance with
the requirements of the Securities Act and the rules and regulations
thereunder and the Blue Sky Laws, (i) stop transfer notations with
respect to the Common Stock will be made on the Company's transfer
records, and (ii) a legend will be placed on any certificate
representing the Common Stock or other document evidencing ownership of
the Securities to the Blue Sky Law and that they may not be resold
unless they are registered under the Securities Act and any applicable
Blue Sky Law or are exempt therefrom.
(b) The PBGC acknowledges and agrees that each certificate for its
Common Stock shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD
OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION IS IN EFFECT UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT OR SUCH LAWS. THIS CERTIFICATE IS ISSUED PURSUANT TO
AND SUBJECT TO THE RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL AND OTHER
PROVISIONS OF AN AGREEMENT, DATED AS OF MARCH 31, 1999, BETWEEN THE COMPANY AND
THE PBGC REFERRED TO THEREIN, A COPY OF WHICH IS ON FILE WITH THE COMPANY.
Any holder of Common Stock may request the Company to remove the
Securities Act legend described herein from the certificates evidencing such
Common Stock by submitting to the Company such certificates, together with an
opinion of counsel reasonably satisfactory to the Company to the effect that
such legend is no longer required under the Securities Act.
(c) Subject to the provisions of this Section and Section 4.6, the PBGC
may, in its sole discretion and at any time upon prior written notice to the
Company, freely and without any limitations, transfer any shares of Common
Stock.
4.5 Board.
(a) Notwithstanding anything to the contrary contained in the Company's
Certificate or By-laws, during the term of this Agreement the PBGC shall be
entitled to designate three (3) persons to serve on the Board and to fill any
vacancies created by the departure of any such person (each a "PBGC Director"
and collectively, the "PBGC Directors"); provided, however, that (i) if at any
time the PBGC beneficially owns at least 117,020 shares of Common Stock but less
than 292,550 shares of Common Stock (subject to adjustment as provided in
Section 6.13 hereof) it shall have the right to designate one (1)
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PBGC Director and (ii) the PBGC shall have no right to designate any PBGC
Directors once the PBGC's beneficial ownership is reduced below 117,020 shares
of Common Stock (subject to adjustment as provided In Section 6.13 hereof). The
initial PBGC Directors are identified in Section 2.4 hereof. The Company shall
be advised by written notice of the persons nominated to be PBGC Directors and
such notice shall set forth as to each person proposed for nomination all
information relating to such persons that is required to be disclosed in
solicitations of proxies for election of directors pursuant to Regulation 14A
under the Exchange Act (including such person's written consent to being named
in the related proxy statement as a nominee and to serving as director if
elected).
(b) The Company shall cause the PBGC Directors, the Continuing
Directors and the Retiree Health Trust Director to be renominated for election
as directors at each annual meeting of Company stockholders held after the
Closing Date. The PBGC covenants and agrees to vote, at any annual or special
meeting of the Company stockholders and in any written consent, all shares of
Common Stock beneficially owned in favor of the election as director the persons
nominated for director by the Nominating Committee of the Board, and to refrain
from taking any action contrary to or inconsistent with such obligation.
(c) The parties covenant and agree that they will use their respective
best efforts to cause each of the Nominating Committee and the Compensation
Committee of the Board to consist of one (1) PBGC Director, one (1) Continuing
Director and the sole Retiree Health Trust Director. The PBGC Director on the
Compensation Committee shall be the Chairman of that Committee.
(d) No Company director shall be entitled to receive cash compensation,
whether structured as annual fees, meeting fees or otherwise, until the earlier
of (i) the date the PBGC (or its Transferee pursuant to Section 4.6(d)) is no
longer entitled to designate any PBGC Directors pursuant to Section 4.5(a) or
(ii) the fifth (5th) anniversary of the date hereof; provided, however, that the
Compensation Committee may determine compensation payable in cash for service as
a director as long as payment of any such compensation is deferred to a date
consistent with the foregoing. The Compensation Committee may from time to time
determine appropriate non-cash compensation for directors. Directors shall be
entitled to reimbursement for reasonable travel, lodging and comparable
out-of-pocket expenses incurred in attending Board meetings.
4.6 Right of First Refusal.
(a) The PBGC shall not sell any shares of Common Stock to any person or
persons that is not a party to this Agreement (the "Transferee") without first
offering all such shares of Common Stock to the Company for purchase at the same
price and on the same terms and subject to the same conditions as the proposed
transfer to the Transferee; provided, however, that any general distribution of
shares of Common Stock by the PBGC made pursuant to an effective registration
statement filed with the SEC pursuant to the Securities Act shall not be subject
to the provisions of this Section 4.6.
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(b) Prior to consummating any transfer that is subject to Section
4.6(a) above, the PBGC shall first notify the Company and shall offer to
transfer to the Company the number of shares of Common Stock proposed to be
transferred to the Transferee upon terms no less favorable than the PBGC has
received in a bona fide offer for such shares of Common Stock from the
Transferee. The Company shall have the right to purchase all, but not less than
all, of the shares of Common Stock offered pursuant to such notice.
(c) Upon receipt of the written notice provided for in Section 4.6(b),
the Company shall have the option, for a period of 20 Business Days following
the date said notice is received, to purchase all, but not less than all, of the
shares of Common Stock specified in such notice. In the event that the Company
shall fail to exercise such option and purchase all of the shares of Common
Stock being offered within such 20 Business Day period, then the PBGC shall have
the right, after the termination of such 20 Business Day period (or after waiver
by the Company in writing of its option to purchase), to transfer to the
Transferee, for a period of 30 Business Days after the expiration of the time
period during which the Company may exercise its right of first refusal, the
shares of Common Stock that were the subject of the option, but only in the
manner and on the terms and conditions as set forth in the written notice given
by the PBGC or on other terms no more favorable to the Transferee. In no event
shall the PBGC be required to transfer any shares of Common Stock to the Company
pursuant to this right of first refusal unless the Company purchases all of the
shares of Common Stock specified in the written notice on the terms and
conditions stated therein and within the time periods specified herein.
(d) If the PBGC, after complying with the provisions of this Section
4.6, sells all, but not less than all, of the shares of Common Stock then owned
by it to a single Transferee in a single transaction or a series of related
transactions, then in such an event the PBGC shall have the right to assign to
such Transferee its right to designate directors pursuant to Section 4.5 hereof
and its other rights under this Agreement as long as such Transferee executes
and delivers a written agreement in substantially the form of this Agreement
agreeing to be bound by the liabilities, obligations and restrictions undertaken
by the PBGC hereunder as though such Transferee was an initial signatory hereof;
provided, however, that (i) such Transferee shall have no right to assign any
right to designate directors or any right granted to the PBGC hereunder and (ii)
neither the Transferee (nor any transferee or assignee of such Transferee) shall
be subject to the right of first refusal provided in this Section 4.6.
4.7 Annual Meeting; Amendments to Certificate. The Company will
schedule an annual meeting of Company stockholders to be held no later than one
hundred fifty (150) days after the Release Event Date. At this annual meeting
the Company will, among other things, seek stockholder approval for (i) an
amendment to the Certificate to authorize a class of "blank check" preferred
stock, (ii) an amendment to Article XIII A.(2) of the Certificate to exempt
expressly any transfer by the PBGC of Common Stock subject to the terms and
conditions of this Agreement upon the Company's receipt of the legal opinion
required by the Certificate, (iii) an amendment to the Certificate to delete
Article XIV in its entirety in light of the fact that such Article has expired,
and (iv) an amendment or
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amendments to the Certificate to delete any corporate governance provisions with
respect to the Board to the extent such provisions have been included in the
By-laws.
ARTICLE 5
Conditions
5.1 Conditions to PBGC's Obligation to Close. The obligations of the
PBGC to consummate the transactions provided for herein are subject, in the sole
and absolute discretion of the PBGC, to the satisfaction or waiver of each of
the following conditions on or prior to the Closing Date:
(a) Representations and Warranties; Covenants. The representations and
warranties of the Company contained in this Agreement and the Transactions
Documents shall be true and correct in all material respects on and as of the
date of this Agreement or the date of such Transaction Document, as the case may
be, and on and as of the Closing Date with the same effect as though made on and
as of such date, and the Company shall have performed all obligations and
complied with all agreements, undertakings, covenants and conditions required
hereunder and thereunder to be performed by it at or prior to the Closing.
(b) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdictions which enjoins or
prohibits consummation of the transactions contemplated hereby.
(c) Registration Rights Agreement. The Registration Rights Agreement
shall have been executed and delivered by the parties thereto and shall be in
full force and effect.
(d) Board of Directors. The persons designated by the PBGC to be
directors pursuant to Section 2.4 hereof shall have been duly elected or
appointed to the Board, effective as of the Closing.
(e) Lock-up Agreement. The Lock-Up Agreement shall have been executed
and delivered by all parties thereto other than the PBGC.
(f) Company Certificate. The Company shall have delivered to the PBGC a
certificate, dated the Closing Date, signed by its chief executive officer and
in form and substance reasonably satisfactory to the PBGC, to the effect that
the conditions precedent set forth in this Section 5.1 have been satisfied.
(g) IRS. The Company shall have delivered to the PBGC evidence that the
Company has satisfied its obligations to the IRS under the Amended Offer In
Compromise.
(h) Legal Opinion. The Company shall have delivered the written
opinion, dated as of the Closing Date, of Foley & Lardner with respect to the
matters identified in Exhibit D.
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5.2 Conditions to the Company's Obligations to Close. The obligations
of the Company to consummate the transactions provided for hereby are subject,
in the sole and absolute discretion of the Company, to the satisfaction or
waiver of each of the following conditions on or prior to the Closing Date:
(a) Representations and Warranties; Covenants. The representations and
warranties of the PBGC contained in this Agreement shall be true and correct in
all material respects on and as of the date of this Agreement and on and as of
the Closing Date with the same effect as though made on and as of such dates,
and the PBGC shall have performed all obligations and compiled with all
agreements, undertakings, covenants and conditions required to be performed by
it at or prior to the Closing.
(b) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby.
ARTICLE 6
Miscellaneous
6.1 Survival of Representations and Warranties. All covenants and
agreements and all representations and warranties made herein or in any
certificates delivered in connection with the Closing shall survive the Closing.
6.2 Notices. All demands, notices, requests, consents, and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered by courier service, messenger, or confirmed
telecopy at, or if duly deposited in the mails, by certified or registered mail,
postage prepaid, return receipt requested, to the following addresses, or such
other addresses as may be furnished hereafter by notice in writing, to the
following parties:
To the Company: Allis-Chalmers Corporation
2255 Glades Road, Suite #307E
Boca Raton, FL 33431
Attn: John Grigsby
Telecopy No.: (561) 994-3298
With copies to: Robert B. Nederlander
Nederlander Organization, Inc.
810 7th Avenue
New York, NY 10019
Telecopy No.: (212) 586-5862
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Foley & Lardner
777 E. Wisconsin Avenue
Milwaukee, WI 53202-5367
Attn: Luke E. Sims
Telecopy No.: (414) 297-4900
To the PBGC: Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005
Attn: Frank McCulloch, Esq.
Telecopy No.: (202) 326-4112
With copies to: Anderson Kill & Olick, P.C.
1251 Avenue of the Americas
New York, NY 10020-1182
Attn: Mark D. Silverschotz, Esq.
Telecopy No.: (212) 278-1733
All demands, requests, consents, notices and communications shall be deemed to
have been given either: (x) at the time of actual delivery thereof; or (y) if
given by certified or registered mail, five (5) Business Days after
certification or registration thereof, to any officer (or an authorized
recipient of deliveries to the office) of the party to whom given.
6.3 Specific Performance. Each of the parties to this Agreement shall
be entitled to enforce its rights under this Agreement, specifically, to recover
damages and costs (including attorneys' fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement, and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
6.4 Integration and Severability. This Agreement embodies the entire
agreement and understanding among the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof. In case any
one or more of the provisions contained in this Agreement, or in any instrument
contemplated hereby, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein, and any other application
thereof shall not in any way be affected or impaired thereby.
6.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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6.6 Covenant of Further Assurances. Each party hereto agrees to execute
any and all documents, and to perform such other actions, to the extent
permitted by law, whether before or after the Closing Date, that may be
reasonably necessary or expedient to further the purposes of this Agreement or
to further assure the benefits intended to be conferred hereby.
6.7 Public Announcements. The Company and PBGC agree that no party
hereto shall make any public announcement or other dissemination of information
concerning the contents of this Agreement and the documents to be delivered and
transactions contemplated hereby, without the prior written consent of the other
parties hereto. Notwithstanding the foregoing, any party hereto may make any
disclosure which its counsel advises is required by applicable law or
governmental rule and regulation, in which case the other parties shall be
advised in advance, and the parties shall use reasonable efforts to cause a
mutually agreeable release or announcement to be issued. The parties agree to
issue a press release describing the transactions contemplated herein promptly
after Closing.
6.8 Captions. The captions used in this Agreement are for purposes of
convenience only and shall not be deemed to modify, or provide any basis for
interpretation of, any of the provisions of this Agreement.
6.9 Governing Law. This Agreement shall be construed in accordance with
and shall be governed by the internal laws of the State of Delaware.
6.10 Jurisdiction. The courts of the State of New York in New York
County and the United States District Court for the Southern District of New
York shall have jurisdiction over the parties with respect to any dispute or
controversy between them arising under or in connection with this agreement and,
by execution and delivery of this agreement, each of the parties to this
Agreement submits to the jurisdiction of those courts, including but not limited
to the in personam and subject matter jurisdiction of those courts, waived any
objections to such jurisdiction on the grounds of venue or forum non conveniens,
the absence of in personam or subject matter jurisdiction and any similar
grounds, consents to service of process by mail (in accordance with Section 6.2)
or any other manner permitted by law, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement.
6.11 Mutual Waiver of Jury Trial. Because disputes arising in
connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert person and the parties wish applicable
state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such applicable laws.
Therefore, to achieve the best combination of the benefits of the judicial
system and of arbitration, the parties hereto waive all right to trial by jury
in any action, suit or proceeding brought to enforce or defend any rights of
remedies under this Agreement.
6.12 Term. If at any time the PBGC, or its Transferee pursuant to
Section 4.6(d), is no longer entitled to designate any PBGC Directors, then the
covenants, agreements
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and obligation undertaken by the Company hereunder shall automatically terminate
and be of no further force and effect; provided, however, that the right of
refusal provided in Section 4.6 hereof in favor of the Company shall continue
until the PBGC beneficially owns less than 117,020 shares of Common Stock
(subject to adjustment as provided in Section 6.13 hereof), except if the
Company has ever exercised its right of first refusal, then such right of first
refusal shall continue until the PBGC no longer beneficially owns any shares of
Common Stock. Nothing contained in this Section 6.12 shall limit in any way any
covenant, agreement or obligation undertaken by the Company in the Registration
Rights Agreement or the Lock-Up Agreement.
6.13 Equitable Adjustment. In the event of a stock split, reverse stock
split, recapitalization, reorganization or comparable change in the Company's
capital structure (other than an issuance of Common Stock for fair value), any
reference to a specific number of shares of Common Stock herein shall be
equitably adjusted to reflect such change.
6.14 No Third Party Beneficiaries. No third party is a beneficiary of
this Agreement, and no third party shall be entitled to enforce any rights
hereunder.
6.15 Assignment. Except to the extent expressly provided in Section 4.6
hereof, the rights provided to the PBGC in this Agreement shall not be assigned
or transferred, and any assignment or transfer shall be null and void and
without legal effect.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
ALLIS-CHALMERS CORPORATION
By: /s/John T. Grigsby, Jr.
Name: John T. Grigsby, Jr.
Title: Executive V.P. and CFO
PENSION BENEFIT GUARANTY CORPORATION
By: /s/Robert M. Klein
Name: Robert M. Klein
Title: Acting Chief Negotiator
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EXHIBIT LIST
Exhibit Description
------- -----------
A Lock-Up Agreement
B Registration Rights Agreement
C Amendments to By-laws
D Legal Opinion
Exhibit 10.2
LOCK-UP AGREEMENT
THIS AGREEMENT, dated as of March 31, 1999, by and among Allis-Chalmers
Corporation, a Delaware corporation (the "Company"), the Pension Benefit
Guaranty Corporation, a United States government corporation acting in its
individual capacity and as trustee of the Allis-Chalmers Consolidated Pension
Plan (the Pension Benefit Guaranty Corporation, together with its designee for
the purpose of holding company capital stock, are collectively referred to
herein as the "PBGC"), AL-CH Company, L.P., a Delaware limited partnership
("AL-CH"), Wells Fargo Bank, as trustee under that certain Amended and Restated
Retiree Health Trust Agreement for UAW Retired Employees of Allis-Chalmers
Corporation (the "UAW Trust"), and Firstar Trust Company, as trustee under that
certain Amended and Restated Retiree Health Trust Agreement for non-UAW Retired
Employees of Allis-Chalmers Corporation (the "Non-UAW Trust").
W I T N E S S E T H:
WHEREAS, each party to this Agreement, other than the Company, is a
significant stockholder of the Company;
WHEREAS, the parties to this Agreement believe that it is in their
respective best interests to provide for the transfer and/or disposition of
shares of Company common stock, $.15 par value ("Common Stock") under certain
circumstances, and, except for the Company, with respect to the voting of their
shares of Common Stock under certain circumstances; and
WHEREAS, the Company and the PBGC are parties to that certain
Agreement, dated as of March 31, 1999 (the "Master Agreement"), pursuant to
which this Lock-Up Agreement is being executed and delivered.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, hereby covenant and agree as follows:
1. No Transfer or Disposition of Shares. Unless the Company's Board of
Directors ("Board") has terminated the Common Stock transfer restrictions set
forth in Article XIII of the Company's Amended and Restated Certificate of
Incorporation ("Certificate"), each of AL-CH, the UAW Trust and the Non-UAW
Trust covenant and agree that, during the period commencing on the date hereof
and continuing until the third (3rd) anniversary of the Release Event Date, it
will not, directly or indirectly, sell, transfer, assign or otherwise dispose
any shares of Common Stock now beneficially owned. Nothing provided in this
Agreement shall restrict AL-CH, the UAW Trust or the Non-UAW Trust from
distributing to any partner or beneficiary, respectively, shares of Common Stock
as long as such partner or beneficiary, as the case may be, executes and
delivers a lock-up agreement containing provisions substantially similar to the
provisions of this Section.
<PAGE>
2. Prior Opportunity to Sell.
(a) Each of AL-CH, the UAW Trust and the Non-UAW Trust covenant
and agree that, during the period (the "Window Period") commencing with the
third (3rd) anniversary of the Release Event Date and continuing until the fifth
(5th) anniversary of the Release Event Date, it will not, directly or
indirectly, sell, transfer, assign or otherwise dispose of any shares of Common
Stock without first giving the PBGC an opportunity to sell all or any portion of
the shares of Common Stock it now beneficially owns pursuant to (b) or (c)
below.
(b) If AL-CH, the UAW Trust or the Non-UAW Trust desire to sell
shares of Common Stock during the Window Period in a public offering pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, it shall first give written notice to the PBGC of such intention not
less than twenty (20) business days prior to effecting any sale. If the PBGC, by
written notice to all of the other parties to this Agreement given within twenty
(20) business days after the receipt of such notice of intention to sell, elects
to sell shares of Common Stock, then AL-CH, the UAW Trust and the Non-UAW Trust
shall refrain from effecting any sale until the earlier of (i) forty-five (45)
days after receipt of written notice from the PBGC indicating its desire to sell
its shares or (ii) the fifth (5th) anniversary of the Release Event Date. The
PBGC covenants and agrees that, if it elects to sell shares of Common Stock
during the Window Period prior to sales by AL-CH, the UAW Trust and the Non-UAW
Trust, that it will diligently pursue the sale of such shares, subject in all
cases to market conditions, and that it will notify all of the other parties to
this Agreement in writing at any time that the PBGC has completed or
discontinued its proposed sale of shares of Common Stock.
(c) If any time AL-CH, the UAW Trust or the Non-UAW Trust is
presented with an opportunity to sell shares of Common Stock during the Window
Period other than in a public offering, AL-CH, the UAW Trust or the Non-UAW
Trust, as the case may be, shall first give written notice to the PBGC and all
of the other parties to this Agreement of such opportunity (including the
proposed sale price and other material terms and conditions) not less than
twenty (20) business days prior to effecting any sale. If the PBGC, by written
notice to all of the parties to this Agreement given within twenty (20) business
days after the receipt of such notice of intention to sell, elects to sell
shares of Common Stock in such transaction, then the PBGC shall have the right,
until the earlier of (i) forty-five (45) days after delivery of the written
notice from the PBGC indicating its desire to sell shares or (ii) the fifth
(5th) anniversary of the Release Event Date, to sell shares of Common Stock
pursuant to such opportunity. If the PBGC has not consummated a sale of shares
of Common Stock during such time period, then AL-CH, the UAW Trust or the
Non-UAW Trust, as the case may be, shall be entitled to sell shares of Common
Stock upon terms no less favorable than those offered to the PBGC.
(d) Nothing provided in this Agreement shall limit or restrict in
any way the Company's right of refusal set forth in Section 4.6 of the Master
Agreement.
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3. Voting. During the term of this Agreement, each party covenants and
agrees to vote, at any annual or special meeting of the Company stockholders and
in a written consent, all shares of Common Stock beneficially owned in favor of
the election as director the persons nominated for director of the Company by
the Nominating Committee of the Company's Board of Directors, and to refrain
from taking any action contrary to or inconsistent with such obligation. During
the term of this Agreement, each party further covenants and agrees not to vote
its shares of Common Stock or to take any other action to amend the Company's
Certificate or By-laws in a manner that is inconsistent with, or in breach of,
the Master Agreement. Without limiting the generality of the foregoing, each
party hereto agrees that it will (i) vote all of its Common Stock in favor of
the amendments to the Company's Certificate identified on the attached Exhibit
A, (ii) vote all of its Common Stock for the election of the persons designated
by the PBGC (each, a "PBGC Director") to serve on the Board of Directors of the
Company and (iii) vote all of its Common Stock in favor of the election of
Company directors who are committed to cause, and who do cause, one (1) PBGC
Director to be appointed to the Nominating Committee of the Company's Board of
Directors ("Board"), and one (1) PBGC Director to be appointed as the Chairman
of the Compensation Committee of the Board.
4. Representations and Warranties. Each of AL-CH, the UAW Trust and the
Non-UAW Trust hereby severally represents and warrants to the PBGC as follows
(it being understood and agreed that no such party, including but not limited to
AL-CH, is making any representations or warranties on behalf of any other
party):
(a) Each is duly organized and validly existing, and has all
requisite power and authority to conduct its business as it is now being
conducted.
(b) Each has full legal power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement on behalf of such party, and the
consummation of the transactions contemplated hereby, have been duly authorized
by appropriate action on behalf of such party, and no other legal action is
necessary on its part to authorize the execution, delivery and performance of
this Agreement. This Agreement constitutes a valid and binding obligation of
such party, enforceable against such party in accordance with its terms. The
execution, delivery and performance of this Agreement by such party will not
conflict with, violate or result in a breach of any provision of, require a
consent under, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of or accelerate the performance required by, or result in a right of
termination or acceleration under (i) the charter, articles of organization,
limited partnership agreement or comparable organizational document of such
party, or (ii) any mortgage, note, indenture, deed of trust, lease, loan
agreement, warrant, registration rights agreement or other agreement or
instrument, the violation of which would have a material adverse effect on such
party.
(c) Each is the beneficial owner of the number of shares of Common
Stock set forth after its name on the attached Exhibit B.
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(d) No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state, local or other
governmental authority or body is required in connection with the execution,
delivery and performance of this Agreement on the part of such party and the
consummation of the transactions contemplated hereunder.
(e) To the knowledge of such party, there are no legal,
administrative, arbitration or other legal proceedings claims, actions or
governmental investigations of any nature pending against such party which, if
adversely decided, would have a material adverse effect on such party's
ownership of the Common Stock or legal power and authority to execute, deliver
and perform this Agreement.
5. Miscellaneous.
5.1 Survival of Representations and Warranties. All covenants and
agreements and all representations and warranties made herein shall survive any
closing hereunder.
5.2 Notices. All demands, notices, request, consents, and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered by courier service, messenger, or confirmed
telecopy at, or if duly deposited in the mails, by certified or registered mail,
postage prepaid, return receipt requested, to the following addresses, or such
other addresses as may be furnished hereafter by notice in writing, to the
following parties.
To the Company: Allis-Chalmers Corporation
2255 Glades Road, Suite #307E
Boca Raton, FL 33431
Attn: John Grigsby
Telecopy No.: (561) 994-3298
With copies to: Robert E. Nederlander
Nederlander organization, Inc.
810 7th Avenue
New York, NY 10019
Telecopy No.: (212) 586-5862
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
Attn: Luke E. Sims
Telecopy No.: (414) 297-4900
To the PBGC: Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005
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<PAGE>
Attn: Frank McCulloch, Esq.
Telecopy No.: (202) 326-4112
With copies to: Anderson Kill & Olick, P.C.
1251 Avenue of the Americas
New York, NY 10020-1182
Attn: Mark D. Silverschotz, Esq.
Telecopy No.: (212) 278-1733
To the UAW Richard D. Lichtenstein, Ph. D.
Retiree Trust: University of Michigan
Department of Healthy Management & Policy
1420 Washington Heights
Ann Arbor, MI 48109
Telecopy No.: (734) 764-4338
With copies to: Groom Law Group
1701 Pennsylvania Avenue, Suite 1200
Washington, DC 20006
Attn.: Ian Lanoff
Telecopy No.: (202) 659-4503
To the Non-UAW Art Streich
Retireee Trust: 1307 Milwaukee Street
Delafield, WI 53018
Telephone No.: (414) 646-8182
With copies to: Michael Best & Friedrich
100 East Wisconsin Avenue, Suite 3300
Milwaukee, WI 53202
Attn.: Scott H. Engroff, Esq.
Telecopy No.: (414) 277-0656
All demands, requests, consents, notices and communications shall be deemed to
have been given either: (x) at the time of actual delivery thereof; or (y) if
given by certified or registered mail, five (5) business days after
certification or registration thereof, to any officer (or an authorized
recipient of deliveries to the office) of the party to whom given.
5.3 Specific performance. Each of the parties to this Agreement
shall be entitled to enforce its rights under this Agreement, specifically, to
recover damages and costs (including attorneys' fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement, and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or
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other injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
5.4 Integration and Severability. Except for the Master Agreement
and that certain Registration Rights Agreement, dated as of the Release Event
Date, between the Company and the PBGC, this Agreement embodies the entire
agreement and understanding among the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof. In case any
one or more of the provisions contained in this Agreement, or in any instrument
contemplated hereby, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
remaining provisions contained herein and therein, and any other application
thereof shall not in any way be affected or impaired thereby.
5.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
5.6 Covenant of Further Assurances. Each party hereto agrees to
execute any and all documents, and to perform such other actions, to the extent
permitted by law, that may be reasonably necessary or expedient to further the
purposes of this Agreement or to further assure the benefits intended to be
conferred hereby.
5.7 Public Announcements. The parties hereto agree that no party
hereto shall make any public announcement or other dissemination of information
concerning the contents of this Agreement and the documents to be delivered and
transactions contemplated hereby, without the prior written consent of the other
parties hereto. Notwithstanding the foregoing, any party hereto may make any
disclosure which its counsel advises is required by applicable law or
governmental rule and regulation, in which case the other parties shall be
advised in advance, and the parties shall use reasonable efforts to cause a
mutually agreeable release or announcement to be issued.
5.8 Captions. The captions used in this Agreement are for purposes
of convenience only and shall not be deemed to modify, or provide any basis for
interpretation of, any of the provisions of this Agreement.
5.9 Governing Law. The Agreement shall be construed in accordance
with, and shall be governed by, the internal laws of the State of Delaware.
5.10 Jurisdiction. The courts of the State of New York in New York
County and the United States District Court for the Southern District of New
York shall have jurisdiction over the parties with respect to any dispute or
controversy between them arising under or in connection with this agreement and,
by execution and delivery of this agreement, each of the parties to this
Agreement submits to the jurisdiction of those courts, including but not limited
to the in personam and subject matter jurisdiction of those courts, waived any
objections to such jurisdiction on the grounds of venue or forum non conveniens,
the absence of in personam or subject matter jurisdiction and any similar
grounds, consents to service of process by mail (in accordance with Section 5.2)
or any other manner permitted by law, and
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irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement.
5.11 Mutual Waiver of Jury Trial. Because disputes arising in
connection with complex financial transactions are most quickly and economically
resolved by an experiences and expert person and the parties wish applicable
state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such applicable laws.
Therefore, to achieve the best combination of the benefits of the judicial
system and of arbitration, the parties hereto waive all right to trial by jury
in any action, suit or proceeding brought to enforce or defend any rights of
remedies under this Agreement.
5.12 Term. This Agreement shall continue in effect until the
earlier of (i) the fifth (5th) anniversary of the Release Event Date or (ii)
such time as the PBGC ceases to beneficially own not less than 117,020 shares of
Common Stock (subject to adjustment as provided in Section 5.13 hereof).
5.13 Equitable Adjustment. In the event of a stock split, reverse
stock split, recapitalization, reorganization or comparable change in the
Company's capital structure (other than an issuance of Common Stock for fair
value), any reference to a specific number of shares of Common Stock herein
shall be equitably adjusted to reflect such change.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ALLIS-CHALMERS CORPORATION
By: /s/John T. Grigsby, Jr.
Name: John T. Grigsby, Jr.
Title: Executive V.P. and CFO
PENSION BENEFIT GUARANTY CORPORATION
By: /s/Robert M. Klein
Name: Robert M. Klein
Title: Acting Chief Negotiator
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AL-CH COMPANY, L.P.
By: Q.E.N., Inc.
By: /s/Robert E. Nederlander
Name Robert E. Nederlander
Title: President
AMENDED AND RESTATED RETIREE HEALTH
TRUST AGREEMENT FOR UAW RETIRED
EMPLOYEES OF ALLIS-CHALMERS CORPORATION
By: WELLS FARGO BANK, N.A., in its
Representative capacity of the
above-named Trust:
By: /s/Jane McKeever
Name: Jane McKeever
Title: Trust Officer
AMENDED AND RESTATED HEALTH TRUST
AGREEMENT FOR NON-UAW RETIRED EMPLOYEES
OF ALLIS-CHALMERS CORPORATION
By: FIRSTAR TRUST COMPANY
By: /s/Richard A. Whittow
Name: Richard A. Whittow
Title: Vice President
-8-
Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of the 31st day of March, 1999, between ALLIS-CHALMERS CORPORATION, a
Delaware corporation (the "Company"), and the PENSION BENEFIT GUARANTY
CORPORATION (the "PBGC").
WHEREAS, pursuant to the Agreement, dated as of March 31, 1999 (the
"Master Agreement"), by and between the Company and the PBGC, the Company has
agreed to issue to the PBGC 585,100 shares of the Company's common stock, $0.15
par value ("Common Stock"); in consideration of the settlement of certain
obligations owed by the Company to the PBGC;
WHEREAS, to induce the PBGC to enter into the Master Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
the obligation of the PBGC as set forth in Section 5.1 of the Master Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. Definitions. As used herein, the following terms shall have the
following respective meanings:
"Designated Transferee" shall mean any Person that purchases
Registrable Shares from the PBGC subject to the provisions of the
Master Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Holders" shall mean the PBGC, affiliates of PBGC and any
Designated Transferees who are holders of record of shares of
Registrable Shares, and any combination of them, and the term "Holder"
shall mean any such person.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Person" shall mean any individual, corporation, association,
partnership, group (as defined in Section 13(d)(3) of the Exchange
Act), joint venture, business trust or unincorporated organization, or
a government or any agency or political subdivision thereof.
"Registrable Shares" shall mean any Common Stock (i) issued
pursuant to the Master Agreement, or (ii) issued or distributed in
respect of the Common Stock referred to in clause (i) above by way of
stock dividend or stock split or other distribution, recapitalization
or reclassification. As to any particular Registrable Share, such
Registrable Share shall cease to be a Registrable Share when (x) it
shall have been
<PAGE>
sold, transferred or otherwise disposed of or exchanged pursuant to a
registration statement under the Securities Act or (y) it shall have
been distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act.
"Registration Expenses" shall have the meaning set forth in
Section 8(b) hereof.
"Section 4(a) Notice" shall have the meaning set forth in
Section 6 hereof.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
2. Incidental Registrations.
(a) Right to Include Registrable Shares. Each time the Company
shall determine to file a registration statement under the Securities Act in
connection with the proposed offer and sale for cash of any Common Stock either
by it or by any holders of its outstanding Common Stock, the Company will give
prompt written notice of its determination to each Holder and of such Holder's
rights under this Section 2, at least 10 days prior to the anticipated filing
date of such registration statement; provided, however, that the Company is not
required to provide any such notice in connection with a registration statement
covering a Company stock option, incentive compensation, profit-sharing or
comparable employee benefit or compensation plan. Upon the written request of
each Holder made within 10 days after the receipt of any such notice from the
Company, (which request shall specify the Registrable Shares intended to be
disposed of by such Holder), the Company will use its commercially reasonable
efforts to effect the registration under the Securities Act of all Registrable
Shares which the Company has been so requested to register by the Holders
thereof, to the extent required to permit the disposition of the Registrable
Shares so to be registered; provided, that (i) if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to proceed with the
proposed registration of the securities to be sold by it, the Company may, at
its election, give written notice of such determination to each Holder of
Registrable Shares and thereupon shall be relieved of its obligation to register
any Registrable Shares in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith), and (ii)
if such registration involves an underwritten offering, all Holders of
Registrable Shares requesting to be included in the Company's registration must
sell their Registrable Shares to the underwriters on the same terms and
conditions as apply to the Company, with such differences, including any with
respect to indemnification, as may be customary or appropriate in combined
primary and secondary offerings. If a registration requested pursuant to this
Section 2(a) involves an underwritten public offering, any Holder of Registrable
Shares requesting to be included in such registration may elect, in writing
prior to the effective date of the registration statement filed in connection
with such registration, not to register such Common Stock in connection with
such registration. No registration effected under this Section 2 shall relieve
the Company of its obligations to effect registrations upon request under
Section 4 hereof.
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(b) Priority in Incidental Registrations. If a registration
pursuant to this Section 2 involves an underwritten offering and the managing
underwriter or underwriters in good faith advises the Company in writing that,
in its opinion, the number of shares of Common Stock which the Company, the
Holders and any other Persons intend to include in such registration exceeds the
largest number of shares of Common Stock which can be sold in such offering
without having an adverse effect on such offering (including the price at which
such Common Stock can be sold), then the Company will include in such
registration (i) first, 100% of the shares of Common Stock the Company proposes
to sell for its own account; (ii) second, to the extent that the number of
shares of Common Stock which the Company proposes to sell for its own account
is, in the aggregate, less than the number of shares of Common Stock which the
Company has been advised can be sold in such offering without having the adverse
effect referred to above, such number of other shares of Common Stock requested
to be included in the offering for the account of the Holders and any other
Persons which, in the opinion of such managing underwriter or underwriters, can
be sold without having the adverse effect referred to above, such number to be
allocated pro rata among all holders of Common Stock on the basis of the
relative number of such shares of Common Stock each other person has requested
to be included in such registration.
3. Holdback Agreements. (a) If any registration of Registrable Shares
shall be in connection with an underwritten public offering, the Holders agree
not to effect any public sale or distribution (except in connection with such
public offering), of any Common Stock or of any security convertible into or
exchangeable or exercisable for any Common Stock (in each case, other than as
part of such underwritten public offering), during the 90-day period (or such
lesser period as the managing underwriter or underwriters may permit) beginning
on the effective date of such registration, if, and to the extent, the managing
underwriter or underwriters of any such offering determines such action is
necessary or desirable to effect such offering, provided that each Holder has
received the written notice required by Section 2(a) hereof; provided, further,
that each Holder shall not be obligated to comply with such restrictions more
than once in any twelve-month period.
(b) If any registration of Registrable Shares shall be in
connection with any underwritten public offering, the Company agrees not to
effect any public sale or distribution (except in connection with such public
offering) of any of its Common Stock or of any security convertible into or
exchangeable or exercisable for Common Stock (in each case other than as part of
such underwritten public offering) during the 90-day period (or such lesser
period as the managing underwriter or underwriters may permit) beginning on the
effective date of such registration, and the Company also agrees to use its best
efforts to cause any Company officer, director or any holder of five percent
(5%) or more of the Common Stock to so agree.
4. Registration on Request.
(a) Request by Holders. Upon the Company's receipt of written
request of the Holders of at least 20% of the Registrable Shares that the
Company effect the registration under the Securities Act of all or part of such
Holders' Registrable Shares, and specifying the amount and intended method of
disposition thereof, the Company will promptly
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give notice of such requested registration to all other Holders of Registrable
Shares and, as expeditiously as possible, use its best efforts to effect the
registration under the Securities Act of: (i) the Registrable Shares which the
Company has been so requested to register by Holders of at least 20% of the
Registrable Shares; and (ii) all other Registrable Shares which the Company has
been requested to register by any other Holder thereof by written request
received by the Company within 21 days after the giving of such written notice
by the Company (which request shall specify the intended method of disposition
of such Registrable Shares); provided, however, that the Company shall not be
required to effect more than one registration during any twelve-month period
pursuant to this Section 4; provided, further, that the Company shall not be
obligated to file a registration statement relating to a registration request
under this Section 4 (other than on Form S-3 or any similar short-form
registration statement) within a period of three months after the effective date
of any other registration statement of the Company other than registration
statements on Form S-3 (or any similar short-form registration statement or any
successor or similar forms); provided, further, that in no event shall the
Company be required to effect more than two registrations in the aggregate
pursuant to this Section 4. Promptly after the expiration of the 21-day period
referred to in clause (ii) above, the Company will notify all the Holders to be
included in the registration of the other Holders and the number of shares of
Registrable Shares requested to be included therein. The Holders initially
requesting a registration pursuant to this Section 4 may, at any time prior to
the effective date of the registration statement relating to such registration,
cause such registration to be withdrawn by the Company by providing a written
notice to the Company requesting such withdrawal; provided, however, that upon
any such request for withdrawal, such Holders shall have forfeited their right
to such demand hereunder, and such Holders shall be responsible for the payment,
on a pro rata basis, of all Registration Expenses incurred in connection
therewith.
(b) Registration Statement Form. If any registration requested
pursuant to this Section 4 which is proposed by the Company to be effected by
the filing of a registration statement on Form S-3 (or any successor or similar
short-form registration statement) shall be in connection with an underwritten
public offering, and if the managing underwriter or underwriters shall advise
the Company in writing that, in its opinion, the use of another form of
registration statement is of material importance to the success of such proposed
offering, then such registration shall be effected on such other form.
(c) Effective Registration Statement. A registration requested
pursuant to this Section 4 will not be deemed to have been effected unless it
has become effective under the Securities Act and, subject to Section 4(d), such
registration has been maintained for a period of six (6) months or such earlier
period such that all the Registrable Shares included in such registration have
actually been sold thereunder. In addition, if within 180 days after it has
become effective, the offering of Registrable Shares pursuant to such
registration is materially interfered with by any stop order, injunction or
other order or requirement of the SEC or other governmental agency or court,
such registration will be deemed not to have been effected.
(d) Priority in Requested Registrations. If a requested
registration pursuant to this Section 4 involves an underwritten offering and
the managing underwriter or
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<PAGE>
underwriters in good faith advises the Company in writing that, in its opinion,
the number of shares of Common Stock requested to be included in such
registration (including shares of Common Stock of the Company which are not
Registrable Shares) exceeds the largest number of shares of Common Stock which
can be sold in such offering without having an adverse effect on such offering
(including the price at which such shares of Common Stock can be sold), then the
Company will include in such registration (i) first, 100% of the Registrable
Shares requested to be registered pursuant to Section 4(a) hereof (provided that
if the number of Registrable Shares requested to be registered pursuant to
Section 4(a) hereof exceeds the number which the Company has been advised can be
sold in such offering without having the adverse effect referred to above, the
number of such Registrable Shares to be included in such registration by the
Holders shall be allocated pro rata among such Holders on the basis of the
relative number of Registrable Shares each such Holder has requested to be
included in such registration); (ii) second, to the extent that the number of
Registrable Shares requested to be registered pursuant to Section 4(a) hereof is
less than the number of shares of Common Stock which the Company has been
advised can be sold in such offering without having the adverse effect referred
to above, such number of shares of Common Stock the Company requests to be
included in such registration; and (iii) third, to the extent that the number of
Registrable Shares requested to be included in such registration pursuant to
Section 4(a) hereof and the shares of Common Stock which the Company proposes to
sell for its own account are, in the aggregate, less than the number of shares
of Common Stock which the Company has been advised can be sold in such offering
without having the adverse effect referred to above, such number of other shares
of Common Stock proposed to be sold by any other Person which, in the opinion of
such managing underwriter or underwriters, can be sold without having the
adverse effect referred to above (provided that if the number of such shares of
Common Stock of such other Persons requested to be registered exceeds the number
which the Company has been advised can be sold in such offering without having
the adverse effect referred to above, the number of such shares of Common Stock
to be included in such registration pursuant to this Section 4(d) shall be
allocated pro rata among all such other Persons on the basis of the relative
number of shares of Common Stock each such Person has requested to be include in
such registration).
5. Registration Procedures.
(a) If and whenever the Company is required by the provisions of
Sections 2 or 4 hereof to use its best efforts to effect or cause the
registration of Registrable Shares, the Company shall as expeditiously as
possible:
(i) prepare and, in any event within 60 days after
the end of the period within which a request for registration may
be given to the Company, file with the SEC a registration
statement with respect to such Registrable Shares and use its
commercially reasonable efforts to cause such registration
statement to become effective;
(ii) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective for a
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period not in excess of 180 days or such shorter period until the
shares covered thereunder are sold and to comply with the
provisions of the Securities Act, the Exchange Act and the rules
and regulations promulgated thereunder with respect to the
disposition of all the shares of Common Stock covered by such
registration statement during such period in accordance with the
intended methods of disposition by the Holders hereof set forth in
such registration statement; provided, that (A) before filing a
registration statement (including an initial filing) or
prospectus, or any amendments or supplements thereto, the Company
will furnish to the Holders of the Registrable Shares covered by
such registration statement copies of all documents proposed to be
filed, which documents will be subject to the review and comment
of such Holders, and (B) the Company will notify each Holder of
Registrable Shares covered by such registration statement of any
stop order issued or threatened by the SEC, any other order
suspending the use of any preliminary prospectus or of the
suspension of the qualification of the registration statement for
offering or sale in any jurisdiction, and take all reasonable
actions required to prevent the entry of such stop order, other
order or suspension or to remove it if entered;
(iii) furnish to each Holder and each underwriter,
if applicable, of Registrable Shares covered by such registration
statement such number of copies of the registration statement and
of each amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus included in
such registration statement (including each preliminary prospectus
and summary prospectus), in conformity with the requirements of
the Securities Act, and such other documents as each Holder of
Registrable Shares covered by such registration statement may
reasonably request in order to facilitate the disposition of the
Registrable Shares owned by such Holder;
(iv) use its best efforts to register or qualify
such Registrable Shares covered by such registration statement
under the state securities or blue sky laws of such jurisdictions
as each Holder of Registrable Shares covered by such registration
statement and, if applicable, each underwriter, may reasonably
request, and do any and all other acts and things which may be
reasonably necessary to consummate the disposition in such
jurisdictions of the Registrable Shares owned by such Holder,
except that the Company shall not for any purpose (A) be required
to qualify generally to do business as a foreign corporation or a
broker-dealer in any jurisdiction where, but for the requirements
of this clause (iv), it would not be obligated to be so qualified,
(B) subject itself to taxation in any such jurisdiction or (C)
consent to service of process in any such jurisdiction;
(v) use its commercially reasonable efforts to cause
such Registrable Shares covered by such registration statement to
be registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the Holders thereof
to consummate the disposition of such Registrable Shares;
(vi) if at any time when a prospectus relating to
the Registrable Shares is required to be delivered under the
Securities Act any event shall
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have occurred as the result of which any such prospectus as then
in effect would include an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, promptly
give written notice thereof to each Holder and the managing
underwriter or underwriters, if any, of such Registrable Shares
and prepare and furnish to each such Holder a reasonable number of
copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of
such Registrable Shares, such prospectus shall not include an
untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statement
therein not misleading;
(vii) enter into such customary agreements
(including an underwriting agreement in customary form) and take
such other actions as each Holder of Registrable Shares being sold
or the underwriter or underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such
Registrable Shares, including customary indemnification and
opinions;
(viii) use its best efforts to obtain a "comfort"
letter or letters from the Company's independent public
accountants in customary form and covering matters of the type
customarily covered by "comfort" letters as the Holders of at
least 25% of the Registrable Shares being sold or the underwriters
retained by such Holders shall reasonably request;
(ix) make available for inspection by
representatives of any Holder of Registrable Shares covered by
such registration statement, by any underwriter participating in
any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained
by such Holders or any such underwriter, all financial and other
records, pertinent corporate documents and properties of the
Company and its subsidiaries, and cause all of the Company's and
its subsidiaries' officers, directors and employees to supply all
information and respond to all inquiries reasonably requested by
such Holders or any such representative, underwriter, attorney,
accountant or agent in connection with such registration
statement;
(x) promptly prior to the filing of any document
which is to be incorporated by reference into the registration
statement or the prospectus (after initial filing of the
registration statement), provide copies of such document to
counsel to the Holders of Registrable Shares covered by such
registration statement and to the managing underwriter or
underwriters, if any, and make the Company's representatives
available for discussion of such document;
(xi) otherwise use its commercially reasonable
efforts to comply with all applicable rules and regulations of the
SEC, and make available to its security holders, as soon as
reasonably practicable after the effective date of the
registration statement, an earnings statement which shall satisfy
the provisions of
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Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
(xii) use its best efforts to provide a CUSIP number
for all Registrable Shares not later than the effective date of
the applicable registration statement, and provide the applicable
transfer agents with printed certificates for the Registrable
Shares which are in a form eligible for deposit with the
Depository Trust Company;
(xiii) notify counsel for the Holders of Registrable
Shares included in such registration statement and the managing
underwriter or underwriters, if any, promptly, and confirm the
notice in writing, (A) when the registration statement, or any
post-effective amendment to the registration statement, shall have
become effective, or any supplement to the prospectus or any
amendment prospectus shall have been filed, (B) of the receipt of
any comments from the SEC and (C) of any request of the SEC to
amend the registration statement or amend or supplement the
prospectus or for additional information; and
(xiv) cooperate with each seller of Registrable
Shares and each underwriter, if any, participating in the
disposition of such Registrable Shares and their respective
counsel in connection with any filings required to be made with
the NASD.
(b) Each Holder of Registrable Shares hereby agrees that, upon
receipt of any notice from the Company of the happening of any event of the type
described in Section 5(a)(vi) hereof, such Holder shall forthwith discontinue
disposition of such Registrable Shares covered by such registration statement or
related prospectus until such Holder's receipt of the copies of the supplemental
or amended prospectus contemplated by Section 5(a)(vi) hereof, and, if so
directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all copies of the prospectus in its possession, covering such
Registrable Shares at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in Section 5(a)(ii)
hereof shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 5(a)(vi)
hereof and including the date when such Holder shall have received the copies of
the supplemental or amended prospectus contemplated by Section 5(a) (vi) hereof.
If for any other reason the effectiveness of any registration statement filed
pursuant to Section 4 hereof is suspended or interrupted prior to the expiration
of the time period regarding the maintenance of the effectiveness of such
Registration Statement required by Section 5(a)(ii) hereof so that Registrable
Shares may not be sold pursuant thereto, the applicable time period shall be
extended by the number of days equal to the number of days during the period
beginning with the date of such suspension or interruption to and ending with
the date when the sale of Registrable Shares pursuant to such registration
statement may be recommenced.
(c) Each Holder hereby agrees to provide the Company, upon receipt
of its request, with such information about such Holder to enable the Company to
comply with the requirements of the Securities Act and to execute such
certificates as the Company may
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reasonably request in connection with such information and otherwise to satisfy
any requirements of law.
6. Denial, Postponement or Suspension of Registration.
(a) If the Company receives a written request in compliance with
Section 4(a) hereof (a "Section 4(a) Notice") and is then contemplating filing
with the SEC a registration statement within 90 days of the date the Company
receives such request, which filing could otherwise trigger the application of
incidental registration rights of Holders under Section 2 hereof, then the
Company may deny the Holders the rights of registration granted pursuant to
Section 4 hereof; provided, however, that the Company shall be prohibited from
exercising its denial rights pursuant to this Section 6(a) more than one time in
any twelve-month period. The Company shall give prompt written notice (the
"Denial Notice") to the Holders of any such denial. The Company's failure to
file a registration statement with the SEC promptly (but in no event later than
90 days after the date it receives a Section 4(a) Notice) after denying a
Holder's request pursuant to Section 4(a) hereof, shall result in the loss of
the Company's denial rights with respect to any registration by the Holders
pursuant to a Section 4(a) Notice given within 180 days after receipt of the
Denial Notice.
(b) The Company, at its option, may postpone for up to 180 days
the filing of any registration statement authorized hereunder, and to suspend
sales under any registration statement authorized hereunder for up to 180 days;
provided, however, that in computing the 180-day period for which the Company is
required to maintain the effectiveness of any registration statement authorized
in accordance with Section 5 hereof, the period of any such suspension shall not
be included; provided, further, that the Company shall be prohibited from
exercising its suspension rights pursuant to this Section 6(b) more than one
time in any twelve-month period. The Company shall give prompt written notice to
the Holders of any such postponement or suspension, and shall likewise give
prompt written notice to the Holders of the termination of such postponement or
suspension. Each Holder hereby agrees to postpone the sale of any Registrable
Shares registered pursuant to any registration statement authorized under this
Agreement during any postponement or suspension.
7. Underwritten Registrations. Subject to the provisions of Sections 2,
3 and 4 hereof, any of the Registrable Shares covered by a registration
statement may be sold in an underwritten offering at the discretion of the
Holder thereof. In the case of an underwritten offering pursuant hereto, the
managing underwriter or underwriters shall be selected by the Company.
8. Expenses.
(a) The fees, costs and expenses of all registrations in
accordance with Section 2 and Section 4 hereof shall be borne by the Company,
subject to the provisions of Section 8(b) hereof.
(b) The fees, costs and expenses of registration to be borne as
provided in Section 8(a) hereof shall include, without limitation, all expenses
incident to the Company's performance of or compliance with this Agreement,
including without limitation
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<PAGE>
all SEC or NASD registration and filing fees and expenses, reasonable fees and
expenses of any "qualified independent underwriter" and its counsel as may be
required by the rules of the NASD, fees and expenses of compliance with
securities or blue sky laws (including without limitation reasonable fees and
disbursements of counsel for the underwriters, if any, or for the selling
Holders, in connection with blue sky qualifications of the Registrable Shares),
rating agency fees, printing expenses (including expenses of printing
certificates for Registrable Shares and prospectuses), messenger, telephone and
delivery expenses, the fees and expenses incurred in connection with the listing
of the shares of Common Stock to be registered on each securities exchange or
national market system on which similar shares of Common Stock issued by the
Company are then listed, fees and disbursements of counsel for the Company and
all independent certified public accountants (including the expenses of any
annual audit, special audit and "cold comfort" letters required by or incident
to such performance and compliance), securities laws liability insurance (if the
Company, in its sole and absolute discretion, decides to obtain such insurance),
the fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (including, without limitation, expenses relating to "road
shows" and other marketing activities), the reasonable fees of one counsel
retained in connection with each such registration by the Holders of a majority
of the Registrable Shares being registered, the reasonable fees and expenses of
any special experts retained by the Company in connection with such
registration, and fees and expenses of other persons retained by the Company
(but not including any underwriting discounts or commissions or transfer taxes,
if any, attributable to the sale of Registrable Shares by such Holders)
(collectively, "Registration Expenses").
9. Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any shares of Common Stock of the Company under the Securities
Act pursuant to Section 2 or 4 hereof, the Company will, and it hereby does,
indemnify and hold harmless, to the extent permitted by law, each of the Holders
of any Registrable Shares covered by such registration statement, each affiliate
of such Holder and their respective directors and officers or general and
limited partners (and the directors, officers, general and limited partners,
affiliates and controlling Persons thereof), each other Person who participates
as an underwriter in the offering or sale of such shares of Common Stock and
each other Person, if any, who controls such Holder or any such underwriter
within the meaning of the Securities Act (collectively, the "Indemnified
Parties"), against any and all losses, claims, damages or liabilities, joint or
several, and expenses (including any amounts paid in any settlement effected
with the Company's consent) to which any Indemnified Party may become subject
under the Securities Act, state securities or blue sky laws, common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof, whether or not such Indemnified Party is a party
thereto) or expenses arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such shares of Common Stock were registered under the
Securities Act, any preliminary, final or summary prospectus contained therein,
or any amendment or supplement thereto, (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or (iii) any violation by the Company of
any federal, state or common law rule or
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<PAGE>
regulation applicable to the Company and relating to action required of or
inaction by the Company in connection with any such registration, and the
Company will reimburse such Indemnified Party for any out-of-pocket legal or any
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided, that
the Company shall not be liable to any Indemnified Party in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement or amendment or supplement thereto or in any such
preliminary, final or summary prospectus in reliance upon and in conformity with
written information with respect to such Holder furnished to the Company by such
Holder specifically for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Holder or any Indemnified Party and shall survive the transfer of
such Common Stock by such Holder.
(b) Indemnification by the Holders and Underwriters. The Company
may require, as a condition to including any Registrable Shares in any
registration statement filed in accordance with Sections 2 or 4 hereof, that the
Company shall have received an undertaking reasonably satisfactory to it from
the Holders of such Registrable Shares or any underwriter to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section 9(a)
hereof) the Company with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information with respect to the
Holders of the Registrable Shares being registered or such underwriter furnished
to the Company by such Holders or such underwriter specifically for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement, or a document incorporated by reference
into any of the foregoing; provided, that no such Holder shall be liable for any
indemnity claims in excess of the amount of proceeds received by such Holder
from the sale of Registrable Shares. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any of the Holders, or any of their respective affiliates, directors,
officers or controlling Persons, and shall survive the transfer of such Common
Stock by such Holders.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 8, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, that the failure of the
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 9, except to the extent
that the indemnifying party is actually materially prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, with counsel satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election to
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<PAGE>
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation; provided that the indemnified party shall have the right to
employ counsel to represent the indemnified party and its respective controlling
persons, directors, officers, general or limited partners, employees or agents
who may be subject to liability arising out of any claim in respect of which
indemnification may be sought by the indemnified party against such indemnifying
party under this Section 9 if (i) the employment of such counsel shall have been
authorized in writing by such indemnifying party in connection with the defense
of such action, (ii) the indemnifying party shall not have promptly employed
counsel reasonably satisfactory to the indemnified party to assume the defense
of such action or counsel, or (iii) any indemnified party shall have reasonably
concluded that there may be defenses available to such indemnified party or its
respective controlling persons, directors, officers, employees or agents which
are in conflict with or in addition to those available to the indemnifying
party, and in that event the reasonable fees and expenses of one firm of
separate counsel for the indemnified party shall be paid by the indemnifying
party. No indemnifying party will consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation.
(d) If the indemnification provided for in this Section 9 shall
for any reason be unavailable to any indemnified party under Section 9(a) or
9(b) hereof or is insufficient to hold it harmless in respect of any loss,
claim, damage or liability, or any action in respect thereof referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the indemnified party
and indemnifying party or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) but also the relative
fault of the indemnified party and indemnifying party with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. Notwithstanding any other provision of this Section 9(d), no
Holder of Registrable Shares shall be required to contribute an amount greater
than the dollar amount of the proceeds received by such Holder with respect to
the sale of any such Registrable Shares. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
10. Rule 144. The Company covenants that it will file in a timely
manner the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder (or, if the
Company is not required to file such reports, it will, upon the request of any
Holder of Registrable Shares, make publicly available such information), and it
will take such further action as any Holder of Registrable Shares may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Shares without registration under the Securities Act within the
limitations of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended
-12-
<PAGE>
from time to time, or (b) any similar rule or regulation hereafter adopted by
the SEC. Upon the request of any Holder of Registrable Shares, the Company will
deliver to such Holder a written statement as to whether it has complied with
such requirements.
11. Assignability. The rights granted to the PBGC in this Agreement
shall not be assigned or transferred, and any attempted assignment or transfer
shall be null and void and without legal effect; provided, however, that the
PBGC or any Designated Transferee shall be entitled to assign and transfer any
or all of its rights hereunder to one or more Designated Transferees as long as
(i) the obligations of the Company hereunder are not increased or enlarged, (ii)
each Designated Transferee executes and delivers an agreement, in form and
substance reasonably satisfactory to the Company, acknowledging such Designated
Transferee's obligations under this Agreement, and (iii) each Designated
Transferee acquires not less than 117,020 shares of Common Stock, subject to
equitable adjustment after the date hereof in the event of a stock split,
reverse stock split, recapitalization, reorganization or comparable change in
the Company's capital structure (other than an issuance of Common Stock for fair
value).
12. Notices. Any and all notices, designations, consents, offers,
acceptances or any other communications shall be given in writing by either (a)
personal delivery to and receipted for by the addressee or by (b) telecopy or
registered or certified mail which shall be addressed, in the case of the
Company, to: Allis-Chalmers Corporation, 1626 South 70th Street, Milwaukee,
Wisconsin 53214, Attention: William Vaitl, with a copy to Luke E. Sims, Foley &
Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, in the case of
Holders, the address or addresses thereof appearing on the books of the Company
or of the transfer agent and registrar for its Common Stock.
All such notices and communications shall be deemed to have been duly
given and effective: when delivered by hand, if personally delivered; two
business days after being deposited in the mail, postage prepaid, if mailed; and
when receipt acknowledged, if telecopied.
13. No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its Common Stock which is inconsistent with
the rights granted to the Holders in this Agreement.
14. Specific Performance. The Company acknowledges that the rights
granted to the Holders in this Agreement are of a special, unique and
extraordinary character, and that any breach of this Agreement by the Company
could not be compensated for by damages. Accordingly, if the Company breaches
its obligations under this Agreement, the Holders shall be entitled, in addition
to any other remedies that they may have, to enforcement of this Agreement by a
decree of specific performance requiring the Company to fulfill its obligations
under this Agreement. The Company consents to personal jurisdiction in any such
action brought in the United States District Court for the Southern District of
New York or any such other court and to service of process upon it in the manner
set forth in Section 11 hereof.
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<PAGE>
15. Severability. If any provision of this Agreement or any portion
thereof is finally determined to be unlawful or unenforceable, such provision or
portion thereof shall be deemed to be severed from this Agreement. Every other
provision, and any portion of such an invalidated provision that is not
invalidated by such a determination, shall remain in full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which,
together, shall constitute one and the same instrument.
17. Defaults. A default by any party to this Agreement in such party's
compliance with any of the conditions or covenants hereof or performance of any
of the obligations of such party hereunder shall not constitute a default by any
other party.
18. Amendments, Waivers. This Agreement may not be amended, modified or
supplemented and no waivers of or consents to departures from the provisions
hereof may be given unless consented to in writing by the Company and the
Holders of a majority of the Registrable Shares; provided, however, that no such
amendment, supplement, modification or waiver shall deprive any Holder of any
rights under Sections 2 or 4 hereof without the consent of such Holder.
19. Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
20. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonably
attorneys' fees in addition to any other available remedy.
21. Entire Agreement. This Agreement, together with the Master
Agreement and the other agreements referenced therein, contains the entire
agreement among the parties hereto with respect to the transactions contemplated
herein and understandings among the parties relating to the subject matter
hereof.
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<PAGE>
22. Governing Law. This Agreement is make pursuant to and shall be
construed in accordance with the internal laws of the State of Delaware. The
parties hereto submit to the non-exclusive jurisdiction of the courts of the
State of New York in New York County and the United States District Court for
the Southern District of New York in any action or proceeding arising out of or
relating to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
ALLIS-CHALMERS CORPORATION
By: /s/John T. Grigsby, Jr.
Name: John T. Grigsby, Jr.
Title: Executive V.P. and CFO
PENSION BENEFIT GUARANTY CORPORATION
By: /s/Robert M. Klein
Name: Robert M. Klein
Title: Acting Chief Negotiator
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF ALLIS-CHALMERS AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 186
<SECURITIES> 0
<RECEIVABLES> 613
<ALLOWANCES> 21
<INVENTORY> 67
<CURRENT-ASSETS> 901
<PP&E> 2,836
<DEPRECIATION> 1,566
<TOTAL-ASSETS> 2,171
<CURRENT-LIABILITIES> 68,568
<BONDS> 211
0
0
<COMMON> 8,307
<OTHER-SE> (75,867)
<TOTAL-LIABILITY-AND-EQUITY> (2,171)
<SALES> 0
<TOTAL-REVENUES> 2,136
<CGS> 0
<TOTAL-COSTS> 1,548
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> (194)
<INCOME-TAX> 0
<INCOME-CONTINUING> (194)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (194)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
