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.
"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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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
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A Lock-Up Agreement
B Registration Rights Agreement
C Amendments to By-laws
D Legal Opinion