Exhibit 99.1
Allis-Chalmers Corporation
4180 Cherokee Drive
Brookfield, WI 53045
May 9, 2001
Pension Benefit Guaranty Corporation
c/o Pacholder Associates, Inc.
8044 Montgomery Road, Suite 382
Cincinnati, OH 45236
Re: Allis-Chalmers Corporation
Ladies and Gentlemen:
Reference is made to (i) the Agreement (the "Agreement") dated February
28, 1999, by and between Allis-Chalmers Corporation ("A-C") and the Pension
Benefit Guaranty Corporation (the "PBGC"), individually and as trustee of the
Allis-Chalmers Consolidated Pension Plan (the "Plan"), (ii) the Lock-Up
Agreement (the "Lock-Up Agreement") dated March 31, 1999, entered into in
connection therewith, and (iii) the Registration Rights Agreement (the
"Registration Agreement") dated March 31, 1999, entered into in connection
therewith. We have provided you with a copy of the Agreement and Plan of Merger
to be dated on or about the date hereof, pursuant to which A-C proposes to issue
to the shareholders (the "Shareholders") of OilQuip Rentals, Inc., an aggregate
of 10,000,000 shares of its Common Stock ("A-C Common Stock") in consideration
of 100% of the outstanding stock of OilQuip Rentals, Inc. (the "Merger"). In
connection therewith, the PBGC, individually and as trustee of the Plan, hereby
agrees with A-C as follows:
1. The Merger constitutes an "acquisition" and the A-C Common Stock
delivered to the OilQuip Shareholders in connection with the Merger constitutes
a "purchase price" in excess of "Ten Million Dollars" (based on the public
trading information available with respect to the A-C Common Stock), as each of
the foregoing terms is used in the definition of "Release Event" set forth in
the Agreement.
2. The Merger, when consummated, constitutes a Release Event within the
meaning of the Agreement. On the date of consummation of the Merger, which event
shall constitute the Release Event Date, the PBGC shall comply with Section
2.3(b) of the Agreement.
3. Upon consummation of the Merger, the PBGC shall be entitled to
designate one person to serve on the Board of Directors of A-C and to fill any
vacancies created by the departure of any such person (the "PBGC Director") so
long as the PBGC beneficially owns at least 117,020 shares of the A-C Common
Stock. The initial PBGC Director shall be David Groshoff. A-C shall cause the
PBGC Director to be renominated at each annual meeting of A-C
stockholders held after the date hereof, so long as the PBGC certifies that it
owns the requisite number of shares.
4. The PBGC Director shall be entitled to receive any compensation,
whether structured as annual fees, meeting fees, stock options or otherwise,
provided to other outside directors, as such compensation may be determined by
the Board of Directors of A-C. The PBGC hereby consents to the payment of $7,500
to Richard Lichtenstein for his service as a director of A-C, payable upon his
resignation as a director.
5. Notwithstanding anything to the contrary set forth in the Agreement,
the covenants, agreements and obligations undertaken by A-C in the Agreement
shall automatically terminate upon consummation of the Merger, except that the
proviso to the first sentence of Section 6.12 and the second sentence of Section
6.12 of the Agreement shall continue after the consummation of the Merger in
accordance with their respective terms (except as set forth in paragraph 6
below).
6. The Registration Agreement is hereby amended to provide that, during
the twelve (12) month period immediately following the Merger, A-C shall be
required to file a registration statement at the request of the Holders under
the Registration Agreement only on Form S-3 or any successor form and only to
the extent it is then eligible to use such form. After such twelve (12) month
period, A-C shall be required to file registration statements at the request of
the Holders under the Registration Agreement on Form S-1 or S-2 as provided
therein. A-C is not currently eligible to utilize Form S-3 in connection with
the sale of shares of A-C Common Stock by the PBGC.
7. Upon consummation of the Merger, the Lock-Up Agreement shall
automatically terminate pursuant to the termination agreement attached hereto.
8. As the Merger will create restrictions on the use of A-C's net
operating loss carryforwards, the Board of Directors of A-C has terminated the
transfer restrictions set forth in Article XIII of A-C's Amended and Restated
Certificate of Incorporation, effective upon the approval by the stockholders of
A-C of the amendments to its certificate of incorporation and the filing thereof
with the Secretary of State of the State of Delaware.
9. Attached hereto is a copy of the Agreement and Proxy which the PBGC has
agreed to execute and deliver to OilQuip, and the execution and delivery of
which is a condition to OilQuip's obligation to consummate the Merger.
10. The PBGC acknowledges that OilQuip and the Shareholders are relying on
this letter in consummating the Merger.
Please execute and return to the undersigned the attached Agreement and
Proxy and the attached copy of this letter to indicate your agreement with the
foregoing.
Sincerely,
/s/ John T. Grigsby, Jr.
----------------------------
John T. Grigsby, Jr.,
Chief Financial Officer
Agreed and Acknowledged:
Pension Benefit Guarantee Corporation
By: /s/ Hazel Broadney
-----------------------
Hazel Broadney
Acting Chief Financial Officer