-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U+4JRajb4P47TAEKbE+k3pfTkM129rfGufW0khRZoK5Hlvljz3U12EYro/HGnyPd KFurOf0vU+6ck8GzfR66iA== 0001019687-04-000781.txt : 20040413 0001019687-04-000781.hdr.sgml : 20040413 20040413110506 ACCESSION NUMBER: 0001019687-04-000781 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20040413 GROUP MEMBERS: CHRISTOPHER ENGEL GROUP MEMBERS: DONALD ENGEL GROUP MEMBERS: ENGEL INVESTORS DEFINED BENEFIT PLAN GROUP MEMBERS: LEONARD TOBOROFF GROUP MEMBERS: RER CORP. GROUP MEMBERS: ROBERT E. NEDERLANDER FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: NEDERLANDER ROBERT E ET AL CENTRAL INDEX KEY: 0001141105 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 510 PARK AVENUE STREET 2: 10B CITY: NEW YORK STATE: NY ZIP: 10022 MAIL ADDRESS: STREET 1: 510 PARK AVENUE STREET 2: 10B CITY: NEW YORK STATE: NY ZIP: 10022 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ALLIS CHALMERS CORP CENTRAL INDEX KEY: 0000003982 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 390126090 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-30534 FILM NUMBER: 04729823 BUSINESS ADDRESS: STREET 1: 7660 WOODWAY #200 CITY: HOUSTON STATE: TX ZIP: 77063 BUSINESS PHONE: 713-369-0550 MAIL ADDRESS: STREET 1: 7660 WEELWAY STREET 2: #200 CITY: HOUSTON STATE: TX ZIP: 77063 FORMER COMPANY: FORMER CONFORMED NAME: ALLIS CHALMERS MANUFACTURING CO DATE OF NAME CHANGE: 19710614 SC 13D 1 rer_13d-040204.txt ------------------------------ OMB APPROVAL ------------------------------ OMB Number 3235-0145 Expires: December 31, 2005 Estimated average burden hours per response ..... 11 ------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 Allis-Chalmers Corporation - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $.15 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 019645 407 - -------------------------------------------------------------------------------- (CUSIP Number) Charles I. Weissman, Esq. Swidler Berlin Shereff Friedman, LLP 405 Lexington Avenue New York, New York 10174 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 2, 2004 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [_]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 019645407 Page 3 of 16 pages - -------------------------------------------------------------------------------- 1. Name of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). RER Corp. - -------------------------------------------------------------------------------- 2. Check the Appropriate Box If a Member of a Group (See Instructions) (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) PF - -------------------------------------------------------------------------------- 5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Michigan - -------------------------------------------------------------------------------- 7. Sole Voting Power NUMBER OF 2,616,666 SHARES ----------------------------------------------------------------- BENEFICIALLY 8. Shared Voting Power OWNED BY None EACH ----------------------------------------------------------------- REPORTING 9. Sole Dispositive Power PERSON 2,616,666 WITH ----------------------------------------------------------------- 10. Shared Dispositive Power None - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 2,616,666 - -------------------------------------------------------------------------------- 12. Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 12.5% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) CO - -------------------------------------------------------------------------------- CUSIP No. 019645407 Page 4 of 16 pages - -------------------------------------------------------------------------------- 1. Name of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Robert E. Nederlander - -------------------------------------------------------------------------------- 2. Check the Appropriate Box If a Member of a Group (See Instructions) (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) PF - -------------------------------------------------------------------------------- 5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization United States - -------------------------------------------------------------------------------- 7. Sole Voting Power NUMBER OF 2,725,976 SHARES ----------------------------------------------------------------- BENEFICIALLY 8. Shared Voting Power OWNED BY None EACH ----------------------------------------------------------------- REPORTING 9. Sole Dispositive Power PERSON 2,725,976 WITH ----------------------------------------------------------------- 10. Shared Dispositive Power None - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 2,725,976 - -------------------------------------------------------------------------------- 12. Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 13.0% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- CUSIP No. 019645407 Page 5 of 16 pages - -------------------------------------------------------------------------------- 1. Name of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Leonard Toboroff - -------------------------------------------------------------------------------- 2. Check the Appropriate Box If a Member of a Group (See Instructions) (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) PF - -------------------------------------------------------------------------------- 5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization United States - -------------------------------------------------------------------------------- 7. Sole Voting Power NUMBER OF 2,975,975 SHARES ----------------------------------------------------------------- BENEFICIALLY 8. Shared Voting Power OWNED BY None EACH ----------------------------------------------------------------- REPORTING 9. Sole Dispositive Power PERSON 2,975,975 WITH ----------------------------------------------------------------- 10. Shared Dispositive Power None - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 2,975,975 - -------------------------------------------------------------------------------- 12. Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 13.9% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- CUSIP No. 019645407 Page 6 of 16 pages - -------------------------------------------------------------------------------- 1. Name of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Donald Engel - -------------------------------------------------------------------------------- 2. Check the Appropriate Box If a Member of a Group (See Instructions) (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) PF - -------------------------------------------------------------------------------- 5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization United States - -------------------------------------------------------------------------------- 7. Sole Voting Power NUMBER OF 1,067,469 SHARES ----------------------------------------------------------------- BENEFICIALLY 8. Shared Voting Power OWNED BY 415,142 EACH ----------------------------------------------------------------- REPORTING 9. Sole Dispositive Power PERSON 1,067,469 WITH ----------------------------------------------------------------- 10. Shared Dispositive Power 415,142 - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,482,611 - -------------------------------------------------------------------------------- 12. Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 7.2% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- CUSIP No. 019645407 Page 7 of 16 pages - -------------------------------------------------------------------------------- 1. Name of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Christopher Engel - -------------------------------------------------------------------------------- 2. Check the Appropriate Box If a Member of a Group (See Instructions) (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) PF - -------------------------------------------------------------------------------- 5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization United States - -------------------------------------------------------------------------------- 7. Sole Voting Power NUMBER OF 887,057 SHARES ----------------------------------------------------------------- BENEFICIALLY 8. Shared Voting Power OWNED BY 415,142 EACH ----------------------------------------------------------------- REPORTING 9. Sole Dispositive Power PERSON 887,057 WITH ----------------------------------------------------------------- 10. Shared Dispositive Power 415,142 - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,302,199 - -------------------------------------------------------------------------------- 12. Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 6.4% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- CUSIP No. 019645407 Page 8 of 16 pages - -------------------------------------------------------------------------------- 1. Name of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Engel Investors Defined Benefit Plan - -------------------------------------------------------------------------------- 2. Check the Appropriate Box If a Member of a Group (See Instructions) (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) PF - -------------------------------------------------------------------------------- 5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization New York - -------------------------------------------------------------------------------- 7. Sole Voting Power NUMBER OF 415,142 SHARES ----------------------------------------------------------------- BENEFICIALLY 8. Shared Voting Power OWNED BY None EACH ----------------------------------------------------------------- REPORTING 9. Sole Dispositive Power PERSON 415,142 WITH ----------------------------------------------------------------- 10. Shared Dispositive Power None - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 415,142 - -------------------------------------------------------------------------------- 12. Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 2.1% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) EP - -------------------------------------------------------------------------------- SCHEDULE 13D ALLIS-CHALMERS CORPORATION Certain of the shares covered by this Schedule 13D Statement (this "Schedule 13D") were previously reported in a "group" Schedule 13D Statement originally filed on September 16, 1992 by Robert E. Nederlander and Leonard Toboroff, among others, as amended and supplemented by Amendment No. 1 to the Statement on Schedule 13D relating to the event date of May 9, 2001 and Amendment No. 2 to the Statement of Schedule 13D relating to the event date of December 19, 2001 (which Amendment No. 2 had terminated the "group") (collectively, the "Original Schedule 13D"). ITEM 1. SECURITY AND ISSUER Security: Common Stock of Allis-Chalmers Corporation ("Common Stock") Issuer: Allis-Chalmers Corporation (the "Issuer") 7660 Woodway, Suite 200 Houston, TX 77063 ITEM 2. IDENTITY AND BACKGROUND (a) Pursuant to Rule 13d-1(a) of Regulation 13D-G of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Act"), this Schedule 13D is hereby filed by RER Corp., Robert E. Nederlander, Leonard Toboroff, Donald Engel, Christopher Engel and Engel Investors Defined Benefit Plan (collectively, the "Reporting Persons"). (b) The principal address and/or office of Leonard Toboroff is 39 North Moore Street, Apt. 6B, New York, NY 10013. The principal address of RER Corp. and Robert E. Nederlander is c/o Nederlander Company L.L.C., 1450 Broadway, 20th Floor, New York, NY 10018. The principal address of Donald Engel and Engel Investors Defined Benefit Plan is 570 Park Avenue, New York, NY 10021. The principal address of Christopher Engel is 1075 Park Avenue, New York, NY 10128. (c) Mr. Nederlander has been President and/or a Director since November 1981 of the Nederlander Organization, Inc., owner and operator of one of the world's largest chains of live theaters, and is also Co-Managing Partner of Nederlander Company L.L.C., owner and/or operator of theaters outside New York City. Mr. Nederlander became Chairman of the Board of the Issuer in May 1989; from 1993 through October 1996 he was Vice Chairman, and thereafter he remained solely a director. Mr. Toboroff has been a director and Vice-Chairman of the Board since May 1989 and served as an Executive Vice President of the Issuer from May 1989 until February 2002. Mr. Toboroff has been a practicing attorney continuously since 1961. RER Corp. is a Michigan corporation controlled by Mr. Nederlander. Donald Engel and Christopher Engel are private investors. Engel Investors Defined Benefit Plan is a pension benefit trust, whose trustees are Donald Engel and Christopher Engel. (d) and (e) During the past five years, none of the Reporting Persons has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Each of Mr. Nederlander, Mr. Toboroff, Donald Engel and Christopher Engel is a United States citizen. RER Corp. is a Michigan corporation. Engel Investors Defined Benefit Plan is a pension benefit trust, organized under the laws of the state of New York. ITEM 3. SOURCE AND AMOUNT OF FUNDS The shares of Common Stock owned by RER Corp., Robert E. Nederlander and Leonard Toboroff on or prior to December 19, 2001 are described in the Original Schedule 13D. On April 2, 2004, the following transactions occurred. Each of RER Corp. and Leonard Toboroff acquired 1,033,333 shares of Common Stock and warrants to purchase 1,333,333 shares of Common Stock in exchange for an investment of $666,666.50. Donald Engel acquired 464,768 shares of Common Stock and warrants to purchase 599,701 shares of Common Stock in exchange for an investment of $299,850.25. Christopher Engel acquired 387,307 shares of Common Stock and warrants to purchase 499,750 shares of Common Stock in exchange for an investment of $249,875.50. Engel Investors Defined Benefit Plan acquired 181,259 shares of Common Stock and warrants to purchase 233,883 shares of Common Stock in exchange for an investment of $116,941.25. See also Item 4 below. The source of consideration is personal funds. ITEM 4. PURPOSE OF TRANSACTION On April 2, 2004, in exchange for an investment of $2 million, the Issuer issued 3,100,000 shares of Common Stock and warrants to purchase 4,000,000 shares of Common Stock at the exercise price of $0.50 per share, expiring on April 1, 2006 to an investor group consisting of the Reporting Persons (collectively, the "Investors Group") pursuant to the terms of the Stock and Warrant Purchase Agreement (the "Purchase Agreement"). The shares and warrants issued under the Purchase Agreement included: (a) 1,033,333 shares of Common Stock and a warrant to purchase 1,333,333 shares of Common Stock (the "RER Warrant") acquired by RER Corp., (b) 1,033,333 shares of Common Stock and a warrant to purchase 1,333,333 shares of Common Stock (the "Toboroff Warrant") acquired by Leonard Toboroff, (c) 464,768 shares of Common Stock and a warrant to purchase 599,701 shares of Common Stock (the "Donald Engel Warrant") acquired by Donald Engel, (d) 387,307 shares of Common Stock and a warrant to purchase 499,750 shares of Common Stock (the "Christopher Engel Warrant") acquired by Christopher Engel and (e) 181,259 shares of Common Stock and a warrant to purchase 233,883 shares of Common Stock (the "EIDBP Warrant") acquired by Engel Investors Defined Benefit Plan. In addition, the holder of all outstanding shares of the Company's Series A 10% Cumulative Convertible Preferred Stock converted all shares of Series A 10% Cumulative Convertible Preferred Stock, including accrued dividend rights, into 8,590,449 shares of Common Stock. In connection with the foregoing transactions the Investors Group, Energy Spectrum Partners LP ("Energy Spectrum"), Munawar H. Hidayatallah, Saeed M. Sheikh and Jens H. Mortensen (Messrs. Hidayatallah, Sheikh, and Mortensen are collectively referred to as the "Directors Group") entered into a stockholders agreement dated April 2, 2004 (the "Stockholders Agreement") pursuant to which the parties have agreed to vote for the election to the board of directors of the Issuer three persons nominated by Energy Spectrum, two persons nominated by the Investors Group and one person nominated by the Directors Group. In addition, the parties and the Issuer agreed that in the event the Issuer has not completed a public offering of its shares prior to September 30, 2005, then, at the request of Energy Spectrum, the Issuer will retain an investment banking firm to identify candidates for a transaction involving the sale of the Issuer or its assets. Moreover, Energy Spectrum, the Investors Group and the Directors Group entered into a registration rights agreement with Issuer and other parties named therein dated April 2, 2004 (the "Registration Rights Agreement"), pursuant to which the parties were granted certain registration rights with respect to the Common Stock owned or to be owned by such parties. On April 2, 2004 the Issuer issued to each of Messrs. Toboroff and Nederlander A) 10,000 shares of Common Stock and B) an option to purchase additional 10,000 shares of Common Stock (the "Toboroff Option" and the "Nederlander Option," respectively), exercisable for $0.55 per share with a term of five years, pursuant to the Issuer's 2003 Stock Incentive Plan. The shares and options were issued to Messrs. Toboroff and Nederlander in lieu of fees for their services as directors in 2002 and 2003. Each of the Reporting Persons acquired shares of Common Stock as an investment. Each of the Reporting Persons may seek to acquire or dispose of shares of Common Stock through open market or privately negotiated transactions from time to time in its or his discretion. Any such purchases will depend upon the market prices for the shares of Common Stock, the number of shares which may become available for purchase at prices which each of the Reporting Persons regard as attractive and various other factors which each of the Reporting Persons may determine to be relevant. Except for the foregoing, no Reporting Person has any present plans or proposals which relate to or would result in any of the actions or events described in paragraphs (a) through (j) of Item 4 of Schedule 13D. However, the Reporting Persons retain their respective rights to modify their plans with respect to the transactions described in this Item 4, to acquire or dispose of securities of the Issuer and to formulate plans and proposals which could result in the occurrence of any such events, subject to applicable laws and regulations. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) and (b) The number of shares of Common Stock beneficially owned by Mr. Nederlander includes: (i) 250,000 shares of Common Stock held by RER Corp. pursuant to the Merger Agreement dated May 9, 2001, which is incorporated by reference to Exhibit 7.1 to the Schedule 13D filed by Mr. Nederlander on December 19, 2001, (ii) 89,310 shares of Common Stock held by Q.E.N. Inc., a corporation controlled by Mr. Nederlander, (iii) 1,033,333 shares of Common Stock acquired by RER Corp. as the result of the transactions set forth in Item 4, (iv) 1,333,333 shares of Common Stock issuable upon exercise of the RER Warrant, (v) 10,000 shares of Common Stock issued pursuant to the Issuer's 2003 Stock Incentive Plan, as set forth in Item 4, (vi) 10,000 shares of Common Stock issuable upon exercise of the Nederlander Option, and (vii) 35,073,657 shares of Common Stock which Mr. Nederlander may be deemed to beneficially own pursuant to Rule 13d-3 of the Securities and Exchange Commission as a result of RER Corp. being a party to the Stockholders Agreement. Mr. Nederlander disclaims beneficial ownership of the Common Stock deemed to be beneficially owned by Mr. Nederlander as a result of R.E.R. Corp. being a party to the Stockholders Agreement. Accordingly, based upon the foregoing, Mr. Nederlander may be deemed to be the beneficial owner of only 2,725,976 shares of Common Stock, or 13.0% of the outstanding shares of Common Stock as of the date hereof. The number of shares of Common Stock beneficially owned by Mr. Toboroff includes: (i) 500,000 shares of Common Stock issuable upon exercise the option that was granted on May 31, 2001 and is currently exercisable, (ii) 64,303 shares held by Leonard Toboroff P.C. Profit Sharing Trust 002, (iii) 25,006 shares held by Lenny Corp., a corporation controlled by Mr. Toboroff, (iv) 1,333,333 shares of Common Stock issuable upon exercise of the Toboroff Warrant, (v) 1,033,333 shares of Common Stock acquired as the result of the transactions set forth in Item 4, (vi) 10,000 shares of Common Stock issued pursuant to the Issuer's 2003 Stock Incentive Plan, as set forth in Item 4, (vii) 10,000 shares of Common Stock issuable upon exercise of the Toboroff Option, and (viii) 34,823,658 shares of Common Stock which Mr. Toboroff may be deemed to beneficially own pursuant to Rule 13d-3 of the Securities and Exchange Commission as a result of being a party to the Stockholders Agreement. Mr. Toboroff disclaims beneficial ownership of the Common Stock deemed to be beneficially owned by Mr. Toboroff as a result of being a party to the Stockholders Agreement. Accordingly, based upon the foregoing, Mr. Toboroff may be deemed to be the beneficial owner of only 2,975,975 shares of Common Stock, or 13.9% of the outstanding shares of Common Stock as of the date hereof. The number of shares of Common Stock beneficially owned by Donald Engel includes: (i) 3,000 shares of Common Stock previously acquired by Donald Engel, (ii) 599,701 shares of Common Stock issuable upon exercise of the Donald Engel Warrant, (iii) 464,768 shares of Common Stock acquired as the result of the transactions set forth in Item 4, (iv) 233,883 shares of Common Stock issuable upon exercise of the EIDBP Warrant, (v) 181,259 shares of Common Stock acquired by Engel Investors Defined Benefit Plan as the result of the transactions set forth in Item 4, and (vi) 36,317,022 shares of Common Stock which Donald Engel may be deemed to beneficially own pursuant to Rule 13d-3 of the Securities and Exchange Commission as a result of being a party to the Stockholders Agreement. Donald Engel disclaims beneficial ownership of the Common Stock deemed to be beneficially owned by Donald Engel as a result of being a party to the Stockholders Agreement. Accordingly, based upon the foregoing, Donald Engel may be deemed to be the beneficial owner of only 1,482,611 shares of Common Stock, or 7.2% of the outstanding shares of Common Stock as of the date hereof. The number of shares of Common Stock beneficially owned by Christopher Engel includes: (i) 499,750 shares of Common Stock issuable upon exercise of the Christopher Engel Warrant, (ii) 387,307 shares of Common Stock acquired as the result of the transactions set forth in Item 4, (iii) 233,883 shares of Common Stock issuable upon exercise of the EIDBP Warrant, (iv) 181,259 shares of Common Stock acquired by Engel Investors Defined Benefit Plan as the result of the transactions set forth in Item 4 and (v) 36,497,434 shares of Common Stock which Christopher Engel may be deemed to beneficially own pursuant to Rule 13d-3 of the Securities and Exchange Commission as a result of being a party to the Stockholders Agreement. Christopher Engel disclaims beneficial ownership of the Common Stock deemed to be beneficially owned by Christopher Engel as a result of being a party to the Stockholders Agreement. Accordingly, based upon the foregoing, Christopher Engel may be deemed to be the beneficial owner of only 1,302,199 shares of Common Stock, or 6.4% of the outstanding shares of Common Stock as of the date hereof. The number of shares of Common Stock beneficially owned by Engel Investors Defined Benefit Plan includes: (i) 233,883 shares of Common Stock issuable upon exercise of the EIDBP Warrant, (ii) the 181,259 shares of Common Stock acquired as the result of the transactions set forth in Item 4, and (iii) 37,384,491 shares of Common Stock which Engel Investors Defined Benefit Plan may be deemed to beneficially own pursuant to Rule 13d-3 of the Securities and Exchange Commission as a result of being a party to the Stockholders Agreement. Engel Investors Defined Benefit Plan disclaims beneficial ownership of the Common Stock deemed to be beneficially owned by Engel Investors Defined Benefit Plan as a result of being a party to the Stockholders Agreement. Accordingly, based upon the foregoing, Engel Investors Defined Benefit Plan may be deemed to be the beneficial owner of only 415,142 shares of Common Stock, or 2.1% of the outstanding shares of Common Stock as of the date hereof. The number of shares beneficially owned by each of the Reporting Persons and the percentage of outstanding shares represented thereby, have been computed in accordance with Rule 13d-3 under the Act. The ownership of the Reporting Persons is based on 19,633,340 outstanding shares of Common Stock of the Issuer as of the April 2, 2004, according to information provided by the Issuer. (c) None, except as set forth in Item 4. (d) Not applicable. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER To the best knowledge of each Reporting Person, there are no other contracts, arrangements, understandings or relationships (legal or otherwise) between any of the Reporting Persons and any other person with respect to any securities of the Issuer, including but not limited to, transfer or voting of any of the securities of the Issuer, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, or a pledge or contingency the occurrence of which would give another person voting power over the securities of the Issuer, except for the following: RER Corp., Mr. Toboroff, Donald Engel, Christopher Engel and Engel Investors Defined Benefit Plan are parties to the Stockholders Agreement, the Registration Rights Agreement and the Purchase Agreement described in Item 4. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 7.1: Stockholders Agreement dated April 2, 2004, by and among the Issuer, Mr. Toboroff, RER Corp., Donald Engel, Christopher Engel, Engel Investors Defined Benefit Plan and the other persons signatory thereto. Exhibit 7.2: Registration Rights Agreement dated April 2, 2004, by and among the Issuer, Mr. Toboroff, RER Corp., Donald Engel, Christopher Engel, Engel Investors Defined Benefit Plan and the other persons signatory thereto. Exhibit 7.3: Stock and Warrant Purchase Agreement dated April 2, 2004, by and among the Issuer, Mr. Toboroff, RER Corp., Donald Engel, Christopher Engel and Engel Investors Defined Benefit Plan. SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. RER CORP. By: /s/ Robert E. Nederlander ---------------------------------- Robert E. Nederlander President /s/ Robert E. Nederlander ---------------------------------- Robert E. Nederlander /s/ Leonard Toboroff ---------------------------------- Leonard Toboroff /s/ Donald Engel ---------------------------------- Donald Engel /s/ Christopher Engel ---------------------------------- Christopher Engel ENGEL INVESTORS DEFINED BENEFIT PLAN By: /s/ Donald Engel ---------------------------------- Donald Engel Trustee Dated: April 12, 2004 AGREEMENT OF JOINT FILING In accordance with Rule 13d-1(k) under the Act, the undersigned hereby agree to the joint filing with the other persons signatory below of a statement on Schedule 13D or any amendments thereto, with respect to the Common Stock, and that this Agreement be included as an attachment to such filing. This Agreement may be executed in any number of counterparts each of which shall be deemed to be an original and all of which together shall be deemed to constitute one and the same Agreement. IN WITNESS WHEREOF, the undersigned hereby execute this Agreement on the 12th day of April, 2004. RER CORP. By: /s/ Robert E. Nederlander ---------------------------------- Robert E. Nederlander President /s/ Robert E. Nederlander ---------------------------------- Robert E. Nederlander /s/ Leonard Toboroff ---------------------------------- Leonard Toboroff /s/ Donald Engel ---------------------------------- Donald Engel /s/ Christopher Engel ---------------------------------- Christopher Engel ENGEL INVESTORS DEFINED BENEFIT PLAN By: /s/ Donald Engel ---------------------------------- Donald Engel Trustee EX-7.1 3 allis_13dex7-1.txt EXHIBIT 7.1 STOCKHOLDERS AGREEMENT This Stockholders Agreement (this "AGREEMENT") dated as of April 2, 2004 is made by and among Energy Spectrum Partners, LP ("ENERGY SPECTRUM"), the Investors Group (as defined in Section 1.1 below), the Directors Group (as defined in Section 1.1 below), and Allis-Chalmers Corporation, a Delaware corporation (the "COMPANY"). Energy Spectrum, the Investors Group, and the Directors Group shall, as long as each such Person or group of Persons owns Stock, be collectively referred to herein as the "STOCKHOLDERS". RECITALS WHEREAS, the Company is currently required, pursuant to the terms of the Certificate of Designation, Preferences and Rights, as amended (the "CERTIFICATE OF DESIGNATION"), of the Series A 10% Cumulative Convertible Preferred Stock ($0.01 par value) of the Company (the "PREFERRED STOCK, SERIES A"), to redeem all except one share of the shares of Preferred Stock, Series A held by Energy Spectrum; WHEREAS, the Company and its directors recognize and acknowledge that it is in the best interest of the Company for Energy Spectrum to waive its right to mandatory redemption, and to instead convert its shares of Preferred Stock, Series A into shares of Common Stock pursuant to the conversion terms of the Certificate of Designation; WHEREAS, in light of the foregoing Recital, Energy Spectrum has agreed to waive its right to mandatory redemption, and to convert all of its shares of Preferred Stock, Series A into shares of Common Stock (as defined in Section 1.1 below), on the conversion terms set forth in the Certificate of Designation and in the Preferred Stock Conversion Agreement (the "Conversion Agreement"), by and between Energy Spectrum and the Company, dated the date hereof; WHEREAS, Energy Spectrum is willing to enter into the Conversion Agreement in reliance upon the Company, the Directors Group and the Investors Group fulfilling their respective obligations under this Agreement; WHEREAS, it is a condition of the consummation of the transactions contemplated hereby that A-C will, prior to or concurrently with the execution of this Agreement: (1) obtain a one year extension on the maturity date of certain loan obligations, and (2) enter into a Stock and Warrant Purchase Agreement (the "SWP Agreement") pursuant to which it will issue and sell to the Investor Group 3,100,000 shares of its Common Stock and warrants (the "Warrants") to purchase as additional 4,000,000 shares of Common Stock; WHEREAS, the Company and its directors recognize and acknowledge that, in waiving its right to mandatory redemption, Energy Spectrum is waiving a valuable right, both in economic terms and in non-economic terms, and that Energy Spectrum would not agree to waive its mandatory redemption right without assurances that the Company would honor its obligations under this Agreement; 1 WHEREAS, the Company and its directors recognize and acknowledge that the directors of the Company have certain fiduciary duties to the common stockholders of the Company; including the duties of loyalty, care and good faith; WHEREAS, the Company and its directors recognize and acknowledge that under certain circumstances, the fiduciary duties of the directors of the Company to its stockholders may require the directors to sell or consider the sale of the Company; WHEREAS, the parties to this Agreement recognize that Energy Spectrum would not agree to convert its shares of Preferred Stock, Series A pursuant to Article 3 of this Agreement without assurances that, if no Qualified Public Offering occurs on or before September 30, 2005, Energy Spectrum will have the rights, and the Company will perform its obligations under, Article 4 of this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. DEFINITIONS; USAGE 1.1. DEFINITIONS. For the purposes of this Agreement, unless the context otherwise requires, capitalized terms used and not otherwise defined in this Agreement shall have the following meanings: "AFFILIATE"--as defined in the rules promulgated under the Securities Act. "AGREEMENT"--as defined in the first paragraph of this Agreement. "ALTERNATIVE INVESTMENT BANK NOTICE"--as defined in Section 4.3(a). "AS CONVERTED BASIS" -means after giving effect to the exercise and or conversion of all securities exercisable for or convertible into Common Stock. "BOARD"--the board of directors of the Company. "CERTIFICATE OF DESIGNATION"--as defined in the Recitals above. "COMMON STOCK"--the common stock of the Company, par value $0.15 per share, any stock into which such stock shall have been converted or changed, or any stock resulting from any reclassification of such stock and all other stock of any class or classes (however designated) of the Company, the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference. "COMPANY"--as defined in the first paragraph of this Agreement. 2 "COMPANY RESPONSE"--as defined in Section 4.2(a). "CONSENT"--any approval, consent ratification, waiver, or other authorization. "CORPORATE TRANSACTION"--either of the following transactions to which the Company is a party: (a) a merger, reorganization, consolidation or share exchange in which securities possessing more than 50% of the total combined voting power of the Company's securities outstanding immediately prior thereto are transferred to, or in the event of a share exchange more than 50% of the total combined voting power of the Company's outstanding securities immediately thereafter come to be held by, a Person or Persons different from the Person or Persons holding such voting power immediately prior to such transaction; or (b) the sale, transfer or other disposition of all or substantially all of the Company's assets. "DIRECTORS GROUP"--each of Munawar H. Hidayatallah, Jens Mortensen and Saeed Sheikh. "DIRECTORS GROUP DESIGNEE"--the director the Directors Group has the right to designate for election to the Board pursuant to Section 2.2(c). "ENERGY SPECTRUM"--as defined in the first paragraph of this Agreement. "ENERGY SPECTRUM DESIGNEES"--the directors Energy Spectrum has the right to designate for election to the Board pursuant to Section 2.2(a). "ENERGY SPECTRUM RESPONSE"--as defined in Section 4.2(b). "INVESTMENT BANK"--the investment banking firm retained pursuant to Section 3 hereof. "INVESTMENT BANK NOTICE"--as defined in Section 4.1. "INVESTORS GROUP"--each of the persons so designated on Exhibit "A." "INVESTORS GROUP DESIGNEES"--the directors the Investors Group has the right to designate for election to the Board pursuant to Section 2.2(b). "PERSON"--any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body. "PREFERRED STOCK, SERIES A"--as defined in the Recitals above. "QUALIFIED PUBLIC OFFERING"--the closing of an underwritten public offering of Common Stock by means of a registration statement filed by the Company under the Securities Act, which offering: (i) does not exclusively relate to securities under an employee stock option, bonus or other compensation 3 plan; (ii) is at a price of not less than $0.50 per share of Common Stock (such amount to be ratably adjusted to reflect any stock splits, subdivisions, combinations or any other action that would cause an adjustment pursuant to any antidilution provisions); and (iii) yields net proceeds to the Company of not less than $10,000,000 (net of underwriting discounts and other expenses and including proceeds received by the Company upon exercise of any over-allotment option by underwriters). "SECURITIES ACT"--the Securities Act of 1933, as amended. "STOCK"--means all capital stock of the Company held by a Stockholder. "STOCKHOLDER"--Energy Specturm, each Person in the Investors Group, each Person in the Directors Group, and each additional stockholder of the Company who becomes a party to this Agreement by executing a counterpart to this Agreement and delivering it to the Company. 1.2. USAGE. In this Agreement, unless a clear contrary intention appears: (a) the singular number includes the plural number and vice versa; (b) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (c) reference to any gender includes each other gender or, in the case of an entity, the neuter; (d) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (e) reference to any law means such law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any law means that provision of such law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (f) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision thereof; (g) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; (h) "or" is used in the inclusive sense of "and/or"; 4 (i) with respect to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding"; and (j) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto. 2. BOARD OF DIRECTORS; VOTING 2.1. BOARD SIZE. At all meetings (and written consents in lieu of meetings) of stockholders of the Company, each Stockholder shall vote all of such Stockholder's Stock and other securities entitled to vote in respect of the election of the directors of the Company and take all other actions as may be necessary to cause the number of directors on the Board to be not less than nine (9) directors. 2.2. ELECTION OF DIRECTORS. At all meetings (and written actions in lieu of meetings) of stockholders of the Company at which directors are to be elected, each Stockholder shall vote all of such Stockholder's Stock and other securities entitled to vote in respect of the election of the directors of the Company to elect as directors of the Company the Energy Spectrum Designees, Investors Group Designees and Directors Group Designees: (a) ENERGY SPECTRUM DESIGNEES. At each of the Company's annual or special meetings of stockholders at which directors are to be elected, Energy Spectrum shall have the right to designate in writing: (i) three (3) nominees for election to the Board, so long as Energy Spectrum and/or its Affiliates collectively hold a number of shares of Stock (on an As Converted Basis) greater than 66% of the number of shares of Stock held by them (on an As Converted Basis) at the date hereof, after making ratable adjustments in the event of any stock splits, stock dividends or stock combinations; (ii) two (2) nominees for election to the Board, so long as Energy Spectrum and/or its Affiliates collectively hold a number of shares of Stock (on an As Converted Basis) greater than 33%, but less than or equal to 66%, of the number of shares of Stock held by them (on an As Converted Basis) at the date hereof, after making ratable adjustments in the event of any stock splits, stock dividends or stock combinations; and (iii) one (1) nominee for election to the Board, so long as Energy Spectrum and/or its Affiliates collectively hold a number of shares of Stock (on an As Converted Basis) greater than five percent (5%) of the outstanding Common Stock on an As Converted Basis, but less than or equal to 33%, of the number of shares of Stock held by them (on an As Converted Basis) at the date hereof, after making ratable adjustments in the event of any stock splits, stock dividends or stock combinations. This Agreement does not grant Energy Spectrum the right to have more than: three (3) directors on the Board at any time if designating directors pursuant to Section 2.2(a)(i), two (2) directors 5 on the Board at any time if designating directors pursuant to Section 2.2(a)(ii), or one (1) director on the Board at any time if designating directors pursuant to Section 2.2(a)(iii). (b) INVESTORS GROUP DESIGNEES. At each of the Company's annual or special meetings of stockholders at which directors are to be elected, the Investors Group shall have the right to designate in writing the following: (i) two (2) nominees for election to the Board, so long as the Investors Group and/or Affiliates of any member of the Investors Group collectively hold a number of shares of Stock (on an As Converted Basis) greater than 50%, of the number of shares of Stock held by them (on an As Converted Basis) at the date hereof, after making ratable adjustments in the event of any stock splits, stock dividends or stock combinations; and (ii) one (1) nominee for election to the Board, so long as the Investors Group and/or Affiliates of any member of the Investors Group collectively hold a number of shares of Stock (on an As Converted Basis) greater than five percent (5%) of the outstanding Common Stock on an As Converted Basis, but less than or equal to 50%, of the number of shares of Stock held by them (on an As Converted Basis) at the date hereof, after making ratable adjustments in the event of any stock splits, stock dividends or stock combinations. This Agreement does not grant the Investors Group the right to have more than: two (2) directors on the Board at any time if designating directors pursuant to Section 2.2(b)(i) or one (1) director on the Board at any time if designating directors pursuant to Section 2.2(b)(ii). (c) DIRECTORS GROUP DESIGNEE. At each of the Company's annual or special meetings of stockholders at which directors are to be elected, the Directors Group shall have the right to designate in writing one (1) nominee for election to the Board, so long as the Directors Group and/or Affiliates of any member of the Directors Group collectively hold a number of shares of Stock (on an As Converted Basis) greater than five percent (5%) of the outstanding Common Stock on an As Converted Basis. 2.3. REMOVAL. Each Stockholder agrees to vote such Stockholder's Stock (calculated on an As Converted Basis), at all meetings (and written actions in lieu of meetings) of stockholders of the company, for removal of a certain director as directed by the Person or Persons having the right to designate such director pursuant to Section 2.2(a), (b) or (c) above. 2.4. VACANCIES. Each Stockholder agrees to vote such Stockholder's Stock (calculated on an As Converted Basis), at all meetings (and written actions in lieu of meetings) of stockholders of the Company, to fill any vacancy on the Board caused by the resignation, death or removal of any director designated under 2.2(a), (b) or (c) with a nominee selected as provided therein. 6 3. CORPORATE TRANSACTION 3.1. NO QUALIFIED PUBLIC OFFERING. If a Qualified Public Offering does not occur on or before September 30, 2005, then at any time on or after October 1, 2005, Energy Spectrum may send notice to the Company that the Energy Spectrum recommends that the Company retain an Investment Bank (the "INVESTMENT BANK NOTICE") to seek and report on candidates interested in entering into a Corporate Transaction, with a view toward maximizing stockholder value. 3.2. INVESTMENT BANK PROCESS. Within 45 days of receipt of the Investment Bank Notice, the Board of Directors shall appoint an investment banking firm to seek and report on candidates interested in entering into a Corporate Transaction, with a view toward maximizing stockholder value. If the Company does not give Energy Spectrum the Company's response of its selection (the "Company Response") within the 45-day period described in this Section 3.2, Energy Spectrum may elect, in its sole discretion, to give the Company the Alternative Investment Bank Notice as set forth in Section 3.3(a). If Energy Spectrum elects to give the Company the Alternative Investment Bank Notice, the Company shall relinquish its rights under this Section 3.2, and the parties' rights under this Article 3 shall be governed by Section 3.3. 3.3. ALTERNATIVE PROCESS. (a) If the Company does not give Energy Spectrum the Company Response within the 45-day period set forth in Section 3.2 above, Energy Spectrum may elect, in its sole discretion and at any time after the expiration of such 45-day period, to give a list of three (3) investment banking firms to the Company (the "ALTERNATIVE INVESTMENT BANK NOTICE"), each of which investment banking firms shall, by virtue of being recommended by Energy Spectrum, be considered an Investment Bank for purposes of this Agreement if eventually retained by the Company pursuant to and for the purposes set forth in this Article 3. (b) Within thirty 30 days of its receipt of the Alternative Investment Bank Notice, the Company shall retain one (1) Investment Bank listed in the Alternative Investment Bank Notice. 3.4 RETENTION. The Investment Bank selected pursuant to this Section 3 shall be engaged to seek and report on candidates interested in entering into a Corporate Transaction, with a view toward maximizing stockholder value. 4. GENERAL PROVISIONS 4.1. NOTICES. All notices, Consents, waivers, and other communications required or permitted by this Agreement must be in writing and will be deemed to have been given to a party when: (a) Delivered to the appropriate address by hand or by nationally recognized overnight courier service, costs prepaid (with written confirmation of receipt); 7 (b) Sent by facsimile or email with confirmation of transmission by the transmitting equipment; or (c) Received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or email addresses and marked to the attention of the designated Person (by name or title), or to such other address, facsimile number, email address or Person as a party may designate by notice to the other parties: The Company: Allis Chalmers Corporation 7660 Woodway, Suite 200 Houston, Texas 77063 with a copy to: Joseph P. Bartlett Spolin Silverman Cohen & Bartlett LLP 1620 26th Street, Suite 2000 North Santa Monica, California 90404 Stockholders: The contact information of each Stockholder is provided on Exhibit A hereto, which shall be updated by the Company whenever a transferee delivers a counterpart to this Agreement to the Company. 4.2. RESTRICTIVE LEGEND ON STOCK CERTIFICATES. The Company and each Stockholder agree that all certificates representing all shares of Common Stock of the Company which at any time are subject to the provisions of this Agreement shall have endorsed upon them in boldface type the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER OBLIGATIONS CONTAINED IN A STOCKHOLDERS AGREEMENT BETWEEN THE CORPORATION AND CERTAIN OF ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE WITH THE CORPORATION AND WILL BE FURNISHED WITHOUT COST TO THE HOLDER HEREOF UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION. 4.3. TRANSFEREES. Under no circumstances shall any sale or other transfer of any Stock subject hereto be valid until the proposed transferee thereof shall have executed a counterpart and become a party to this Agreement, and thereby shall have become subject to all of the provisions hereof, unless the requirement is waived by written consent of the parties hereto; provided that this Agreement shall terminate with respect to any shares sold in an offering registered under the Securities Act or in a broker's transaction pursuant to Rule 144 under the Securities Act. 8 4.4. FURTHER ASSURANCES. Each party hereto agrees to perform any further acts and to execute and deliver any further documents which may be reasonably necessary to carry out the provisions of this Agreement. 4.5. REMEDIES. If a breach of any party to this Agreement occurs, any party may pursue any available remedy by proceeding at law or in equity to enforce the performance of any provision of this Agreement. Except as otherwise provided by law or as otherwise provided in this agreement, a delay or omission by any such party in exercising any right or remedy accruing upon any such breach shall not impair the right or remedy or constitute a waiver of or acquiescence in any such breach. No remedy is exclusive of any other remedy. All available remedies are cumulative. 4.6. SEVERABILITY. In the event that any of the provisions, or portions thereof, of this Agreement are held to be unenforceable or invalid by any court of competent jurisdiction, the validity and enforceability of the remaining provisions, or portions thereof, shall not be affected thereby. 4.7. GOVERNING LAW. This Agreement has been executed in and shall be governed by the laws of the State of Delaware. 4.8. INUREMENT; ASSIGNMENTS. Subject to the restrictions against transfer or assignment as herein contained, the provisions of this Agreement shall inure to the benefit of and shall be binding on the heirs, assigns, successors in interest, personal representatives, estates, heirs, and legatees of each of the parties hereto. 4.9. AMENDMENT. This Agreement may only be amended by the written consent of all then current parties to this Agreement. 4.10. ENTIRE AGREEMENT. This Agreement contains the entire understanding between the parties hereto concerning the subject matter contained herein. 4.11. COUNTERPARTS. This Agreement may be executed simultaneously in multiple counterparts, each of which when so executed shall be deemed to be an original and such counterparts shall together constitute one and the same instrument. 4.12. REPRESENTATION BY COUNSEL. All of the Stockholders represent that they have consulted, or have had an opportunity to consult, separate counsel in negotiating and executing this Agreement. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.] 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective on and after April 2, 2004. THE COMPANY: ------------ /S/ MUNAWAR HIDAYATALLAH ----------------------------------------------- MUNAWAR HIDYATALLAH, CHIEF EXECUTIVE OFFICER DIRECTORS GROUP: ---------------- /S/ MUNAWAR HIDAYATALLAH ----------------------------------------------- Munawar H. Hidayatallah /S/ JENS H. MORTENSEN ----------------------------------------------- Jens H. Mortensen /S/ SAEED M. SHEIKH ----------------------------------- SAEED M. SHEIKH INVESTORS GROUP: ---------------- /S/ LEONARD TOBOROFF ----------------------------------------------- Leonard Toboroff Engel Investors Defined Benefit Plan /S/ DONALD ENGEL ----------------------------------------------- By: Title: 10 RER Corp. /S/ ROBERT NEDERLANDER ----------------------------------------------- By: Title: /S/ DONALD ENGEL ----------------------------------------------- Donald Engel /S/ CHRISTOPHER ENGEL ----------------------------------------------- Christopher Engel ENERGY SPECTRUM PARTNERS LP --------------------------- By: Energy Spectrum Capital LP, General Partner By: Energy Spectrum LLC, General Partner By: /S/ James W. Spann ----------------------------------------- Name: James W. Spann ----------------------------------------- Title: Chief Investment Officer ----------------------------------------- 11 EXHIBIT A LIST OF STOCKHOLDERS AND ADDRESS FOR NOTICE - ------------------------------------------ ------------------------------------- STOCKHOLDER ADDRESS FOR NOTICE - ------------------------------------------ ------------------------------------- Energy Spectrum 5956 Sherry Lane, Suite 900 Dallas, TX 75225 Attention: Thomas Whitener - ------------------------------------------ ------------------------------------- Directors Group Munawar H. Hidayatallah 7660 Woodway, Suite 200 Houston, Texas 77063 Jens H. Mortensen 7660 Woodway, Suite 200 Houston, Texas 77063 Saeed M. Sheikh 1050 17th Street, N.W. Suite 450 Washington DC 20036 - ------------------------------------------ ------------------------------------- Investors Group RER Corp 1450 Broadway 20th Floor New York, NY 10022 Engel Investors Defined Benefit Plan 570 Park Avenue New York, NY 10021 Donald Engel 570 Park Avenue New York, NY 10021 Christopher Engel 1075 Park Avenue New York, NY 10128 Leonard Toboroff 39 N. Moore Street New York, NY 10013 - -------------------- ---------------------------------------------------------- 12 EX-7.2 4 allis_13dex7-2.txt EXHIBIT 7.2 REGISTRATION RIGHTS AGREEMENT AMONG ALLIS-CHALMERS CORPORATION AND THE INVESTORS NAMED ON EXHIBIT "A" HERETO ---------------------------------- --------------------------------------------- DATED APRIL 2, 2004 --------------------------------------------- ================================================================================ TABLE OF CONTENTS
Page ---- 1. Registration Under Securities Act, etc..................................................................1 1.1 Registration on Request........................................................................1 1.2 Incidental Registration........................................................................3 1.3 Registration Procedures........................................................................4 1.4 Underwritten Offerings.........................................................................7 1.5 Preparation; Reasonable Investigation..........................................................8 1.6 Limitations Conditions and Qualifications to Obligations under Registration Covenants..........8 1.7 Indemnification................................................................................9 2. Definitions............................................................................................11 3. Rule 144 and Rule 144A.................................................................................12 4. Amendments and Waivers.................................................................................13 5. Nominees for Beneficial Owners.........................................................................13 6. Notices................................................................................................13 7. Assignment.............................................................................................14 8. Calculation of Percentage Interests in Registrable Securities..........................................14 9. No Inconsistent Agreements.............................................................................14 10. Remedies...............................................................................................14 11. Certain Distributions..................................................................................14 12. Severability...........................................................................................14 13. Entire Agreement and Termination of Prior Registration Rights Agreements...............................15 14. Headings...............................................................................................15 15. Governing Law..........................................................................................15 16. Counterparts...........................................................................................15 (i)
REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated April 2, 2004, among ALLIS-CHALMERS CORPORATION, a corporation organized under the laws of Delaware (the "Company"), on the one hand, and the following parties that are signatory hereto (to the extent any of the following parties does not execute and deliver to the Company a counterpart to this Agreement, such party shall not be a party hereto and shall instead retain such party's rights under the Prior Registration Rights Agreements as defined in the Recitals below); Donald Engel ("D. Engel"), Engel Investors Defined Benefit Plan ("Engel DBP"), Christopher Engel ("C. Engel"), RER. Corp., a Michigan corporation ("RER"), Leonard Toboroff ("Toboroff," and, with D. Engel, Engel DBP, C. Engel and RER, the "Purchasers"), ENERGY SPECTRUM PARTNERS LP, a limited partnership organized under the laws of Delaware ("Energy Spectrum"), JENS MORTENSEN ("Mortensen"), WELLS FARGO ENERGY CAPITAL, INC. a corporation organized under the laws of Texas ("Wells Fargo Energy"), Wells Fargo Credit, Inc., a Minnesota corporation ("Wells Fargo Credit"), SAEED SHEIKH ("Sheikh"), MUNAWAR H. HIDAYATALLAH ("Hidayatallah"), COLEBROOKE INVESTMENTS, LIMITED, a Guernsey trust ("Colebrooke"), JEFFREY R. FREEDMAN ("Freedman"), HOWARD S. LORCH and JAMIE C. LORCH ("Lorch") and JOHN L. PALAZZOLA ("Palazolla" and collectively, with Sheikh, Hidayatallah, Colebrooke, Freedman, RER and Lorch, the "Oil Quip Investors"), and THE PENSION BENEFIT GUARANTY CORPORATION, a federally chartered corporation ("PBGC," and, collectively, with Purchasers, Energy Spectrum, Mortensen, Wells Fargo and the Oil Quip Investors, the "Investors"). R E C I T A L S --------------- WHEREAS, the OilQuip Investors, Energy Spectrum, Mortensen, Wells Fargo Energy and PBGC are parties to certain agreements with the Company, as set forth on Exhibit "B" hereto (the "Prior Registration Rights Agreements"), pursuant to which the Company has made certain agreements in respect of the registration of securities of the Company under applicable U.S. and state securities laws; WHEREAS, the OilQuip Investors, Energy Spectrum, Mortensen, Wells Fargo and PBGC have agreed it is in the best interest of the Company to terminate the Prior Registration Rights Agreements and simultaneously execute this Agreement; WHEREAS, pursuant to a Stock and Warrant Purchase Agreement dated April 2, 2004 (the "Purchase Agreement"), between the Company and Purchasers, Purchasers have agreed to purchase from the Company, and the Company has agreed to issue to Purchaser, (1) an aggregate amount of 3,100,000 shares of the Company's Common Stock, par value $.15 per share (the "Common Stock"), and (2) warrants to purchase 4,000,000 shares of Common Stock in the aggregate; WHEREAS, in connection with the transaction contemplated by the Purchase Agreement, the Company is issuing a Warrant to Wells Fargo Credit and has agreed to grant Wells Fargo Credit the registration rights set forth herein; and 1 WHEREAS, in connection with the consummation of the transactions contemplated by the Purchase Agreement, the Company wishes to grant to the Investors certain registration rights with respect to the capital stock of the Company owned or to be owned by the Investors, in consideration of the termination of all rights relating to the registration of Securities granted pursuant to the Prior Registration Rights Agreements; A G R E E M E N T ----------------- NOW, THEREFORE, in consideration of the foregoing and mutual covenants and agreements set forth herein, the mutual benefits to be gained by the performance thereof and good and valuable consideration, the receipt of which are hereby acknowledged and accepted, the parties hereto hereby agree as follows: 1. Registration Under Securities Act, etc. 1.1 Registration on Request. (a) REQUEST. At any time, or from time to time, upon the written request of one or more holders (the "Initiating Holders") of Registrable Securities representing not less than 10% of the Registrable Securities that the Company effect the registration under the Securities Act of all or part (in an amount representing not less than 10% of the Registrable Securities) of such Initiating Holders' Registrable Securities, the Company promptly will give written notice of such requested registration to all registered holders of Registrable Securities, and thereupon the Company will use its reasonable best efforts to effect, at the earliest possible date, the registration under the Securities Act, including by means of a shelf registration on Form S-3 (or any successor form) pursuant to Rule 415 under the Securities Act if so requested in such request (but only if the Company is then eligible to use such a shelf registration and if Form S-3 (or such successor form) is then available to the Company), of (i) the Registrable Securities which the Company has been so requested to register by such Initiating Holders, and (ii) all other Registrable Securities which the Company has been requested to register by the holders thereof (such holders together with the Initiating Holders hereinafter are referred to as the "Selling Holders") by written request given to the Company within 30 days after the giving of such written notice by the Company, all to the extent required to permit the disposition of the Registrable Securities to be registered. (b) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall effect a registration pursuant to this Section 1.1, no securities other than Registrable Securities shall be included among the securities covered by such registration unless (i) the managing underwriter of such offering shall have advised each Selling Holder of Registrable Securities to be covered by such registration in writing that the inclusion of such other securities would not adversely affect such offering, or (ii) the Selling Holders of not less than 50% of all Registrable Securities to be covered by such registration shall have consented in writing to the inclusion of such other securities, either at the time of registration or in connection with the grant by the Company of registration rights after the date hereof. 2 (c) REGISTRATION STATEMENT FORM. Registrations under this Section 1.1 shall be on such appropriate registration form of the Securities and Exchange Commission (the "Commission") as shall be reasonably selected by the Company. (d) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to this Section 1.1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective and remained effective in compliance with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement (unless the failure to so dispose of such Registrable Securities shall be caused solely by reason of a failure on the part of the Selling Holders); PROVIDED, that except with respect to any registration statement filed pursuant to Rule 415 under the Securities Act, such period need not exceed the number of days set forth in Rule 3-12(g) of Regulation S-X that applies to the Company, (ii) if after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and has thereafter ceased to be effective for more than 30 days, or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Selling Holders. (e) SELECTION OF UNDERWRITERS. The underwriter or underwriters of each underwritten offering of the Registrable Securities so to be registered shall be selected by the Selling Holders of more than 50% of each class of Registrable Securities to be included in such registration and shall be reasonably acceptable to the Company. (f) PRIORITY IN REQUESTED REGISTRATION. If the managing underwriter of any underwritten offering initiated pursuant to this Section 1.1 shall advise the Company in writing (and the Company shall so advise each Selling Holder of Registrable Securities requesting registration of such advice) that, in its opinion, the number of securities requested to be included in such registration exceeds the number which can be sold in such offering within a price range acceptable to the Selling Holders of 50% of the Registrable Securities requested to be included in such registration, the Company, except as provided in the following sentence, will include in such registration, to the extent of the number and type which the Company is so advised can be sold in such offering, Registrable Securities requested to be included in such registration, FIRST, all securities proposed by the Selling Holders to be sold for their own accounts, pro rata among such Selling Holders and such other Persons on the basis of the percentage of Registrable Securities held by each Selling Holder seeking registration, SECOND, if after all shares proposed by the Selling Holders are included pursuant to FIRST above, any securities initially requested to be registered by the Company for the accounts of other Persons pursuant to the exercise of registration rights if such securities must be included to prevent a breach of any applicable registration rights agreement between the Company and such other Person, but only in such amount and to the extent required by such agreement, and THIRD, such securities initially requested to be included in such registration pursuant by the Company for its own account. If the total number of Registrable Securities requested to be included in such registration cannot be included as provided in FIRST above, holders of Registrable Securities requesting registration thereof pursuant to Section 1.1, representing not less than 10% of the Registrable Securities with 3 respect to which registration has been requested and constituting not less than 50% of the Initiating Holders, shall have the right to withdraw the request for registration by giving written notice to the Company within 20 days after receipt of such notice by the Company. (g) Notwithstanding the foregoing, the Company shall not be required to effect a registration pursuant to this Section 1.1, during the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of and ending on a date one hundred eighty (180) days after the effective date of a registration subject to SECTION 1.2 hereof, if such action would violate any obligation of the Company relating to such registration rights; PROVIDED that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective (provided the Company has given notice to any Initiating Holders within 30 days of its receipt of a request for registration). (h) LIMITATIONS ON REGISTRATION ON REQUEST. Notwithstanding anything in this Section 1.1 to the contrary, except as provided in the following sentence, in no event will the Company be required to (i) effect, in the aggregate, more than three (3) registrations pursuant to this Section 1.1 or (ii) effect a registration pursuant to this Section 1.1 within the six (6)-month period occurring immediately subsequent to the effectiveness (within the meaning of Section 1.1(d)) of a registration statement filed pursuant to this Section 1.1. Each holder, as of the date hereof, of more than 10% of the Registrable Securities shall be entitled to demand at least one registration pursuant to this Section 1.1 and provided further that any registration in which the number of securities to be sold by any selling shareholder are limited pursuant to Section 1.1(f) shall not count as a registration for purposes of this Section 1.1(h). For purposes of this Section, the Purchasers shall be treated as a single holder. (i) REGISTRATION EXPENSES. The Company will pay all Registration Expenses in connection with any registration requested pursuant to this Section 1.1. 1.2 INCIDENTAL REGISTRATION (a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any time proposes to register any of its Common Stock under the Securities Act by registration on any form other than Forms S-4 or S-8 or in connection with the issuance of stock in consideration of the acquisition of assets or a business, whether or not for sale for its own account, it will each such time give prompt written notice to all registered holders of Registrable Securities of its intention to do so and of such holders' rights under this Section 1.2. Upon the written request of any such holder (a "Requesting Holder") made as promptly as practicable and in any event within 30 days after the receipt of any such notice (10 days if the Company states in such written notice or gives telephonic or telecopied notice to all registered holders of Registrable Securities, with written confirmation to follow promptly thereafter, stating that (i) such registration will be on Form S-3 and (ii) such shorter period of time is required because of a planned filing date) (which request shall specify the Registrable Securities intended to be disposed of by such Requesting Holder), the Company will use its reasonable best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Requesting Holders thereof; PROVIDED, that prior to the effective date of the registration statement filed in connection with such registration, immediately upon notification to the Company from the managing underwriter of the price at which such securities are to be sold, if such price is below the price which any Requesting Holder shall 4 have indicated to be acceptable to such Requesting Holder, the Company shall so advise such Requesting Holder of such price, and such Requesting Holder shall then have the right to withdraw its request to have its Registrable Securities included in such registration statement; PROVIDED, FURTHER, HOWEVER, that 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 register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each Requesting Holder of Registrable Securities and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from any obligation of the Company to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any holder or holders of Registrable Securities entitled to do so to cause such registration to be effected as a registration under Section 1.1, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities. No registration effected under this Section 1.2 shall relieve the Company of its obligation to effect any registration upon request under Section 1.1. (b) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing underwriter of any underwritten offering shall inform the Company by letter of its opinion that the number or type of Registrable Securities requested to be included in such registration would materially adversely affect such offering, and the Company has so advised the Requesting Holders in writing, then the Company will include in such registration, to the extent of the number and type which the Company is so advised can be sold in (or during the time of) such offering, FIRST, all securities proposed by the Company to be sold for its own account, SECOND, any securities initially proposed to be registered by the Company for the accounts of other Persons pursuant to the exercise of registration rights if such securities must be included to prevent a breach of any applicable registration rights agreement between the Company and such other Person, but only in such amount and to the extent required by such agreement, and THIRD, such Registrable Securities requested to be included in such registration pursuant to this Agreement and such other securities proposed to be registered by the Company for the accounts of each other Person (not included in those securities to be registered pursuant to clause SECOND) and which by the terms of any applicable registration rights agreement between the Company and such other Person must be included in the same proportion as the Registrable Securities of any Requesting Holder under this Agreement, pro rata among such Requesting Holders and such other Persons on the basis of the percentage of Registrable Securities held by each Requesting Holder. (c) EXPENSES. The Company will pay all Registration Expenses in connection with any registration effected pursuant to this Section 1.2. 1.3 REGISTRATION PROCEDURES. If and whenever the Company is required to use its reasonable best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 1.1 and 1.2, the Company will, as expeditiously as possible: (a) prepare and (within 90 days after the end of the period within which requests for registration may be given to the Company or in any event as soon thereafter as practicable) file with the Commission the requisite registration statement to effect such registration and thereafter use its reasonable best efforts to cause such registration statement to become effective; PROVIDED, HOWEVER, that the Company may discontinue any registration of its securities which are not Registrable Securities (and, under the circumstances specified in Section 1.2(a), its securities which are Registrable Securities) at any time prior to the effective date of the registration statement relating thereto; 5 (b) prepare and file with the Commission 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 and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; PROVIDED, that except with respect to any such registration statement filed pursuant to Rule 415 under the Securities Act, such period need not exceed the number of days set forth in Rule 3-12(g) of Regulation S-X that applies to the Company; (c) furnish to each seller of Registrable Securities covered by such registration statement, such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request; (d) use its reasonable best efforts (i) to register or qualify all Registrable Securities and other securities covered by such registration statement under such other securities or blue sky laws of such States of the United States of America where an exemption is not available and as the sellers of Registrable Securities covered by such registration statement shall reasonably request, (ii) to keep such registration or qualification in effect for so long as such registration statement remains in effect, and (iii) to take any other action which may be reasonably necessary or advisable to enable such sellers to consummate the disposition in such jurisdictions of the securities to be sold by such sellers, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (d) be obligated to be so qualified or to consent to general service of process in any such jurisdiction; (e) use its reasonable best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the seller or sellers of Registrable Securities to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (f) furnish at the effective date of such registration statement to each seller of Registrable Securities, and each such seller's underwriters, if any, a signed counterpart of: (i) an opinion of counsel for the Company, dated the effective date of such registration statement and, if applicable, the date of the closing under the underwriting agreement, and 6 (ii) a "comfort" letter signed by the independent public accountants who have certified the Company's financial statements included or incorporated by reference in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' comfort letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' comfort letters delivered to the underwriters in underwritten public offerings of securities and, in the case of the accountants' comfort letter, such other financial matters, and, in the case of the legal opinion, such other legal matters, as the underwriters may reasonably request; (g) notify each seller of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and at the request of any such seller promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (h) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and, if required, make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder, and promptly furnish to each such seller of Registrable Securities a copy of any amendment or supplement to such registration statement or prospectus; (i) provide and cause to be maintained a transfer agent and registrar (which, in each case, may be the Company) for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration; and (j) use its reasonable best efforts to list all Registrable Securities covered by such registration statement on any national securities exchange on which Registrable Securities of the same class covered by such registration statement are then listed and, if no such Registrable Securities are so listed, on any national securities exchange on which the Common Stock is then listed. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. 7 Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in subdivision (g) of this Section 1.3, such holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (g) of this Section 1.3 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. 1.4 UNDERWRITTEN OFFERINGS. (a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the underwriters for any underwritten offering by holders of Registrable Securities pursuant to a registration requested under Section 1.1, the Company will use all reasonable efforts to enter into an underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to each such holder and the underwriters and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of that type, including, without limitation, indemnities to the effect and to the extent provided in Section 1.7. The holders of the Registrable Securities proposed to be sold by such underwriters will reasonably cooperate with the Company in the negotiation of the underwriting agreement. Such holders of Registrable Securities to be sold by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registrable Securities. No holder of Registrable Securities shall be required to make any representations or warranties to or agreements with the Company other than representations, warranties or agreements regarding such holder, such holder's Registrable Securities and such holder's intended method of distribution or any other representations required by applicable law. (b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company proposes to register any of its securities under the Securities Act as contemplated by Section 1.2 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any Requesting Holder of Registrable Securities, use its reasonable best efforts to arrange for such underwriters to include all the Registrable Securities to be offered and sold by such Requesting Holder among the securities of the Company to be distributed by such underwriters, subject to the provisions of Section 1.2. The holders of Registrable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registrable Securities. Any such Requesting Holder of Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Requesting Holder, such Requesting Holder's Registrable Securities and such Requesting Holder's intended method of distribution or any other representations except as expressly set forth herein or required by applicable law. 8 1.5 PREPARATION; REASONABLE INVESTIGATION. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company will give the holders of Registrable Securities registered under such registration statement, their underwriters, if any, and their respective counsel the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such reasonable access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. 1.6 LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER REGISTRATION COVENANTS. The Company shall be entitled to postpone for a reasonable period of time (but not exceeding 90 days) the filing of any registration statement otherwise required to be prepared and filed by it pursuant to Section 1.1 if the Company determines, in its reasonable judgment, that such registration and offering would interfere with any financing, acquisition, corporate reorganization or other material transaction involving the Company or any of its affiliates and promptly gives the holders of Registrable Securities requesting registration thereof pursuant to Section 1.1 written notice of such determination, containing a general statement of the reasons for such postponement and an approximation of the anticipated delay. If the Company shall so postpone the filing of a registration statement, holders of Registrable Securities requesting registration thereof pursuant to Section 1.1, representing not less than 10% of the Registrable Securities with respect to which registration has been requested and constituting not less than 50% of the Initiating Holders, shall have the right to withdraw the request for registration by giving written notice to the Company within 30 days after receipt of the notice of postponement and, in the event of such withdrawal, such request shall not be counted for purposes of the requests for registration to which holders of Registrable Securities are entitled pursuant to Section 1.1 hereof. 1.7 INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. The Company will, and hereby does, indemnify and hold harmless, in the case of any registration statement filed pursuant to Section 1.1 or 1.2, each seller of any Registrable Securities covered by such registration statement and each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act, and their respective directors, officers, partners, agents and affiliates, against any losses, claims, damages or liabilities, joint or several, to which such seller or underwriter or any such director, officer, partner, agent, affiliate or controlling person may become subject under the Securities Act or otherwise, including, without limitation, the fees and expenses of legal counsel, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary 9 prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, and the Company will reimburse such seller or underwriter and each such director, officer, partner, agent, affiliate and controlling Person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; PROVIDED, HOWEVER, that the Company shall not be liable 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 an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by or on behalf of such seller or underwriter, as the case may be, specifically stating that it is for use in the preparation thereof; and PROVIDED, FURTHER, that the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the Securities Act, 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 such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, partner, agent, affiliate or controlling person and shall survive the transfer of such securities by such seller. (b) INDEMNIFICATION BY THE SELLERS. As a condition to including any Registrable Securities in any registration statement, the Company shall have received an undertaking satisfactory to it from the prospective seller of such Registrable Securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 1.7(a)) each other Seller, the Company, and each director of the Company, each officer of the Company and each other Person, if any, who participates as an underwriter in the offering or sale of such securities and each other Person who controls the Company or any such underwriter within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; PROVIDED, HOWEVER, that the liability of such indemnifying party under this Section 1.7(b) shall be limited to the amount of proceeds received by such indemnifying party in the offering giving rise to such liability. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. (c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Section 1.7(a) or (b), such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, 10 give written notice to the latter of the commencement of such action; PROVIDED, HOWEVER, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 1.7, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER, that any indemnified party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action or proceeding in which both the Company and an indemnified party is, or is reasonably likely to become, a party, such indemnified party shall have the right to employ separate counsel at the Company's expense and to control its own defense of such action or proceeding if (a) there are or may be legal defenses available to such indemnified party or to other indemnified parties that are different from or additional to those available to the Company or (b) any actual conflict exists between the Company and such indemnified party that would make such separate representation advisable; PROVIDED, HOWEVER, that the Company may limit the fees and expenses that it pays in any one legal action or group of related legal actions to those fees and expenses of one firm of attorneys (together with appropriate local counsel), which firm of attorneys (together with appropriate legal counsel) shall be designated in writing by a majority of the indemnified parties who are a party to, or are reasonably likely to become parties to, such legal action or group of related legal actions. No indemnifying party shall be liable for any settlement of any action or proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No indemnifying party shall, without the consent of the indemnified party, which consent shall not be unreasonably withheld or delayed, 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 to such claim or litigation or which requires action other than the payment of money by the indemnifying party. (d) CONTRIBUTION. If the indemnification provided for in this Section 1.7 shall for any reason be held by a court to be unavailable to an indemnified party under Section 1.7(a) or (b) hereof in respect of any loss, claim, damage or liability, or any action in respect thereof, then, in lieu of the amount paid or payable under Section 1.7(a) or (b), the indemnified party and the indemnifying party under Section 1.7(a) or (b) shall contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating the same), (i) in such proportion as is appropriate to reflect the relative fault of the Company and the prospective sellers of Registrable Securities covered by the registration statement which resulted in such loss, claim, damage or liability, or action or proceeding in respect thereof, with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action or proceeding in respect thereof, as well as any other relevant equitable considerations or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the Company and such prospective sellers from the offering of the securities covered by such registration statement, PROVIDED, that for purposes of this clause (ii), the relative benefits received by the prospective sellers shall be deemed not to exceed the amount of proceeds received by such prospective sellers. 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. Such prospective sellers' 11 obligations to contribute as provided in this Section 1.7(d) are several in proportion to the relative value of their respective Registrable Securities covered by such registration statement and not joint. In addition, no Person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or claim effected without such Person's consent, which consent shall not be unreasonably withheld. (e) OTHER INDEMNIFICATION. Indemnification and contribution similar to that specified in the preceding subdivisions of this Section 1.7 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Securities Act. (f) INDEMNIFICATION PAYMENTS. The indemnification and contribution required by this Section 1.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. 2. DEFINITIONS. In addition to terms defined in the Purchase Agreement, as used herein, unless the context otherwise requires, the following terms have the following respective meanings: "REGISTRABLE SECURITIES" means all shares of Common Stock of the Company owned by the parties hereto from time to time. All references to percentages of Registrable Securities shall be calculated pursuant to Section 8. "REGISTRATION EXPENSES" means all expenses incident to the Company's performance of or compliance with Section 2, including, without limitation, all registration and filing fees, all fees of the New York Stock Exchange, Inc., other national securities exchanges or the National Association of Securities Dealers, Inc., all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, any fees and disbursements of underwriters customarily paid by issuers or sellers of securities (excluding any underwriting discounts or commissions with respect to the Registrable Securities) and the fees and expenses of one counsel to the Selling Holders (selected by Selling Holders representing at least 50% of the Registrable Securities covered by such registration); PROVIDED, HOWEVER, that in the event the Company shall determine, in accordance with Section 1.2(a) or Section 1.6, not to register any securities with respect to which it had given written notice of its intention to so register to holders of Registrable Securities, all of the costs of the type (and subject to any limitation to the extent) set forth in this definition and incurred by Requesting Holders in connection with such registration on or prior to the date the Company notifies the Requesting Holders of such determination shall be deemed Registration Expenses. Notwithstanding the foregoing, Registration Expenses shall not include underwriting discounts and commissions. "SECURITIES ACT" means the Securities Act of 1933, as amended. 12 3. AMENDMENTS AND WAIVERS. This Agreement may be amended with the consent of the Company and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of (i) the holder or holders of at least 50% of the Registrable Securities affected by such amendment, action or omission to act, and (ii) each holder, as of the date hereof, of more than 10% of the Registrable Securities. Any holder of Registrable Securities giving its written consent for purposes of this Section 3, and any successor or assign of any such holder, shall be bound by any consent authorized by such holder, whether or not such Registrable Securities shall have been marked to indicate such consent. 4. RULE 144 AND RULE 144A. The Company shall take all actions reasonably necessary to enable holders of Registrable Securities to sell such securities without registration under the Securities Act within the limitation of the provisions of (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (b) Rule 144A under the Securities Act, as such Rule may be amended from time to time, or (c) any similar rules or regulations hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. Notwithstanding any other provision hereof, no Holder shall be entitled to exercise any right provided for in Section 1.1 at any time at which such Holder has been eligible to sell all Registrable Securities held by such Holder (and all Registrable Securities held by any affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144(k) of the Securities Act) without registration in compliance with Rule 144(k) of the Securities Act, or any successor rule, for a period of at least three (3) consecutive months. 5. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election in writing delivered to the Company, be treated as the holder of such Registrable Securities for purposes of any request or other action by any holder or holders of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any holder or holders of Registrable Securities contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. 6. NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first--class mail, return receipt requested, telecopier, courier service or personal delivery: (a) if to Purchaser or the Investors, addressed to it in the manner set forth in the Purchase Agreement, or at such other address as it shall have furnished to the Company in writing in the manner set forth herein; (b) if to any other holder of Registrable Securities, addressed to it in the manner set forth in the Prior Registration Rights Agreements to which such holder is a party, or at such other address as it shall have furnished to the Company in writing in the manner set forth therein; or 13 (c) if to the Company, addressed to it in the manner set forth in the Purchase Agreement, or prior Registration Agreement to which the party delivering notice is a party, or at such other address as it shall have furnished to the parties in writing. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered to a courier, if delivered by overnight courier service; two business days after being deposited in the mail, postage prepaid, if mailed; and when receipt is acknowledged, if telecopied. 7. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and, with respect to the Company, its respective successors and permitted assigns and, with respect to the Purchaser and the Investors, any holder of any Registrable Securities, subject to the provisions respecting the minimum numbers of percentages of shares of Registrable Securities required in order to be entitled to certain rights, or take certain actions, contained herein. Except by operation of law, this Agreement may not be assigned by the Company without the prior written consent of the holders of a majority in interest of the Registrable Securities outstanding at the time such consent is requested. 8. CALCULATION OF PERCENTAGE INTERESTS IN REGISTRABLE SECURITIES. For purposes of this Agreement, all references to a percentage of the Registrable Securities shall be calculated based upon the number of shares of Registrable Securities outstanding at the time such calculation is made, assuming the conversion or exercise of all securities exercisable for or convertibles into shares of Common Stock. 9. NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement. Without limiting the generality of the foregoing, the Company will not hereafter enter into any agreement with respect to its securities which grants, or modify any existing agreement with respect to its securities to grant, to the holder of its securities in connection with an incidental registration of such securities equal or higher priority to the rights granted to Investors hereunder. 10. REMEDIES. Each holder of Registrable Securities, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. 11. CERTAIN DISTRIBUTIONS. The Company shall not at any time make a distribution on or with respect to the Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the resulting or surviving corporation and such Registrable Securities are not changed or exchanged) of securities of another issuer if holders of Registrable Securities are entitled to receive such securities in such distribution as holders of Registrable Securities and any of the securities so distributed are registered under the Securities Act, unless the securities to be distributed to the holders of Registrable Securities are also registered under the Securities Act. 14 12. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of Purchaser shall be enforceable to the fullest extent permitted by law. 13. ENTIRE AGREEMENT AND WAIVER OF RIGHTS UNDER PRIOR REGISTRATION RIGHTS AGREEMENTS. This Agreement, together with the Purchase Agreement (including the exhibits and schedules thereto), is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the Purchase Agreement (including the exhibits and schedules thereto) supersede and terminate the Prior Registration Rights Agreements and all other prior agreements and understandings between the parties with respect to such subject matter. Each party hereto waives all rights relating to the registration of securities of the Company pursuant to the Prior Registration Rights Agreements. 14. HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 15. GOVERNING LAW. This Agreement has been negotiated, executed and delivered in the State of Delaware and shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of law. 16. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed an original and all of which taken together shall constitute one and the same instrument. [Signature Page Follows] 15 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective representatives hereunto duly authorized as of the date first above written. Allis-Chalmers Corporation By: /S/ MUNAWAR HIDAYATALLAH -------------------------------------- Name: MUNAWAR HIDAYATALLAH -------------------------------------- Title: CHIEF EXECUTIVE OFFICER -------------------------------------- Donald Engel /S/ DONALD ENGEL ----------------------------------------------- Engel Investors Defined Benefit Plan By: /S/ DONALD ENGEL ---------------------- Name: DONALD ENGEL -------------------------------------- Title: -------------------------------------- Christopher Engel /S/ CHRISTOPHER ENGEL ----------------------------------------------- 16 RER Corp. By /S/ ROBERT NEDERLANDER -------------------------------------- Name: ROBERT NEDERLANDER -------------------------------------- Title: -------------------------------------- Leonard Toboroff By: /S/ LEONARD TOBOROFF -------------------------------------- Name: -------------------------------------- Title: -------------------------------------- 17 ENERGY SPECTRUM PARTNERS LP By: Energy Spectrum Capital LP, General Partner By: Energy Spectrum LLC, General Partner By: /S/ James W. Spann -------------------------------------- Name: James W. Spann -------------------------------------- Title: Chief Investment Officer -------------------------------------- Wells Fargo Energy Capital, Inc. By: /S/ CLAYTON TAYLOR -------------------------------------- Name: CLAYTON TAYLOR -------------------------------------- Title: ASSISTANT VICE PRESIDENT -------------------------------------- Saeed Sheikh /S/ SAEED SHEIKH ----------------------------------------------- Munawar H. Hidayatallah /S/ MUNAWAR H. HIDAYATALLAH ----------------------------------------------- COLEBROOKE INVESTMENTS LIMITED By: Plaiderie Corporate Directors -------------------------------------- One Limited -------------------------------------- Its: Director -------------------------------------- By: -------------------------------------- Name: -------------------------------------- Title: -------------------------------------- Jeffrey R. Freedman ----------------------------------------- 18 Howard S. Lorch and Jamie C. Lorch ------------------------------------------ ------------------------------------------ John L. Palazzola ------------------------------------------ Pension Benefit Guaranty Corporation By -------------------------------------- Name: -------------------------------------- Title: -------------------------------------- Jens Mortensen /S/ JENS MORTENSEN ----------------------------------------------- 19 WELLS FARGO CREDIT, INC. By -------------------------------------- Name: -------------------------------------- Title: -------------------------------------- 20 EXHIBIT "A" ----------- LIST OF INVESTORS ----------------- o Donald Engel o Engel Investors Defined Benefit Plan o Christopher Engel o RER Corp. o Leonard Toboroff o Energy Spectrum Partners L.P., a Delaware limited partnership o Jens Mortensen, o Wells Fargo Energy Capital, Inc., a Texas corporation o Wells Fargo Credit, Inc., a Minnesota corporation o Saeed Sheikh o Munawar H. Hidayatallah o Colebrooke Investments, Limited, a Guernsey trust o Jeffrey R. Freedman o Howard S. Lorch o Jamie C. Lorch o John L. Palazzola o The Pension Benefit Guaranty Corporation, a federally chartered corporation 21 EXHIBIT "B" ----------- PRIOR REGISTRATION RIGHTS AGREEMENTS ------------------------------------ 1. Agreement and Plan of Merger dated May 9, 2001, by and among the Oil Quip Investors, Allis-Chalmers Corporation and others. 2. Registration Rights Agreement dated as of February 1, 2002, by and between Allis-Chalmers Corporation and Energy Spectrum Partners, L.P. 3. Shareholder Agreement dated as of February 1, 2002 by and among Jens Oilfield Services, Inc., Jens H. Mortensen and Allis-Chalmers Corporation. 4. Registration Rights Agreement dated as of March 31, 1999, by and between Allis-Chalmers Corporation and the Pension Benefit Guaranty Corporation. 5. Registration Rights Agreement dated February 1, 2002 by and between Allis-Chalmers Corporation and Wells Fargo Energy Capital, Inc. 22 EX-7.3 5 allis_13dex7-3.txt Exhibit 7.3 STOCK AND WARRANT PURCHASE AGREEMENT BY AND AMONG ALLIS-CHALMERS CORPORATION, DONALD ENGEL ENGEL INVESTORS DEFINED BENEFIT PLAN CHRISTOPHER ENGEL RER CORP., LEONARD TOBOROFF -------------------------------------------------------- DATED APRIL 2, 2004 -------------------------------------------------------- STOCK AND WARRANT PURCHASE AGREEMENT This STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement"), dated April 2, 2004, is made by and among Allis-Chalmers Corporation, a Delaware corporation ("A-C"), Donald Engel, Engel Purchaser Defined Benefit Plan and Christopher Engel (collectively "Engel"), RER Corp., a Michigan corporation ("Nederlander"), and Leonard Toboroff ("Toboroff, and, with Engel and Nederlander, the "Purchasers"). RECITALS WHEREAS, A-C proposes to issue and sell to Purchasers, and Purchasers desire to purchase from A-C, shares of A-C's common stock, par value $0.15 per share (the "Common Stock"), and warrants to purchase shares of the Common Stock. WHEREAS, it is a condition of the consummation of the transactions contemplated hereby that A-C concurrently obtain an extension of certain of its loan obligations and that it convert all of the outstanding shares of A-C's Series A 10% Cumulative Convertible Preferred Stock (the "Preferred Stock") held by Energy Spectrum Partners LP ("Energy Spectrum") into Common Stock, pursuant to the terms of a Preferred Stock Conversion Agreement (the "Conversion Agreement") in the form of Exhibit A hereto; WHEREAS, it is a condition of the consummation of the transactions contemplated hereby that A-C, the Purchasers and Energy Spectrum and others, simultaneously with the Closing (as defined herein): (1) enter into a Stockholders Agreement with respect to the governance of the affairs of A-C, and other matters (the "Stockholders Agreement"), a copy of which is attached to this Agreement as Exhibit B hereto, and (2) enter into a Registration Rights Agreement with respect to the Common Stock of A-C (the "Registration Rights Agreement"), a copy of which is attached to this Agreement as Exhibit C hereto; AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. PURCHASE 1.1 PURCHASE AND SALE OF STOCK AND WARRANT. Subject to the terms and conditions of this Agreement, A-C will issue and sell to each Purchaser the number of shares of its authorized but unissued Common Stock (the "Shares") set forth in Schedule 1.1 hereto, at a price per share equal to $0.50, and will issue and sell to each Purchaser a warrant in the form of Exhibit D hereto (each, a "Warrant" and collectively the "Warrants") to acquire the number of shares set forth on Schedule 1.1 hereto for the Purchase Price set forth as Schedule 1.1 hereto. The closing (the "Closing") of the sale of the Shares and the Warrants shall be effected by exchange of electronic documents signature pages on April 2, 2004, or on such other date as may be agreed upon in writing by Purchasers and A-C (the "Closing Date"). The purchase price for the Shares and the Warrants will be wire transferred by each Purchaser to A-C on the Closing Date in same-day funds. A-C shall deliver original certificates representing the Shares and Warrants sold to Purchasers within two business days following the Closing Date. 2 1.3 FORM OF CERTIFICATES. The Purchasers (as hereinafter defined) agree to the imprinting, so long as required by law, of a legend on certificates representing all of the Warrants and Common Shares to the following effect: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS." 2. CONVERSION; DELIVERY OF OTHER AGREEMENTS. At the Closing, (a) A-C shall execute and deliver (and shall use its best efforts to cause each other party thereto other than Purchasers to execute and deliver) to each Purchaser the Registration Rights Agreement and the Stockholders Agreement, executed by A-C and each party thereto other than the Purchasers and and (b) each Purchaser shall execute and deliver to A-C and each other party thereto the Registration Rights Agreement and the Stockholders Agreement. In addition, A-C shall use its best efforts to consummate the transactions contemplated by the Conversion Agreement. 3. REPRESENTATIONS AND WARRANTIES OF A-C. A-C hereby makes the following representations and warranties to the Purchasers: 3.1 ORGANIZATION, ETC. A-C is a corporation, duly organized and validly existing and in good standing under the laws of the State of Delaware, and is qualified or licensed to do business and is in good standing as a foreign corporation in each other jurisdictions in which the conduct of its business or the ownership of property requires such qualification or licensing, except where failure to be so qualified or licensed would not have a material adverse effect on the financial condition or operations of A-C and its Subsidiaries (as defined below), taken as a whole (for A-C and its Subsidiaries, a "Material Adverse Effect"). Each company (each, a "Subsidiary") listed on Schedule 3.1 hereof is duly organized and validly existing and in good standing under the laws of the jurisdiction of its organization, and is qualified or licensed to do business and is in good standing as a foreign corporation in each other jurisdiction in which the conduct of its business or the ownership of property requires such qualification or licensing, except where failure to be so qualified or licensed would not have a Material Adverse Effect on A-C. Except for the Subsidiaries, A-C does not own, of record or beneficially, the securities of any other entity. True and correct copies of the Certificate of Incorporation and Bylaws of A-C, as currently in effect, are among the documents (the "Commission Documents") that have been filed with the Securities and Exchange Commission (the "SEC") and are available on the SEC's website (www.sec.gov) (CIK No. 0000003982). 3 3.2 AUTHORITY. A-C has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and such action has been duly authorized by all necessary action of A-C's Board of Directors. The issuance and sale of the Common Stock and the issuance of the Warrants has been duly authorized and if, as and when delivered to the Purchasers, the Common Stock issued at the Closing and upon the exercise of the Warrants will be duly and validly issued and outstanding, fully paid and non-assessable and will be free of any Encumbrance (as defined below), other than those imposed pursuant to this Agreement and the Warrants and securities laws of general application. As used in this Agreement, "Encumbrance" shall mean any claim, lien, pledge, option, charge, easement, security interest, deed of trust, mortgage, right of way, encroachment, private building or use restriction, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title. 3.3 ENFORCEABILITY. Each of this Agreement, the Warrants, the Stockholders Agreement and the Registration Rights Agreement (collectively, the "Transaction Documents") has been duly executed and delivered by A-C and constitutes a legal, valid and binding agreement and obligation of A-C enforceable against it in accordance with its terms subject to: (i) judicial principles respecting election of remedies or limiting the availability of specific performance, injunctive relief, or other equitable remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect generally relating to or affecting creditors' rights; and (iii) public policy concerns (including, without limitation, the ability of a court to refuse to enforce unconscionable covenants, indemnification provisions or similar provisions). 3.4 NO VIOLATION. Except as set forth on Schedule 3.4, the execution and the delivery by A-C of the Transaction Documents does not and will not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in a violation of, or (iv) require any authorization, consent or approval not heretofore obtained pursuant to, any binding written or oral agreement or instrument including, without limitation, any charter, bylaw, trust instrument, indenture or evidence of indebtedness, lease, contract or other obligation or commitment (each, a "Contractual Obligation") binding upon A-C or any Subsidiary or any of their properties or assets, or any law, rule, regulation, restriction, order, writ, judgment, award, determination, injunction or decree of any court or government, or any decision or ruling of any arbitrator (each, a "Requirement of Law") binding upon or applicable to A-C or any Subsidiary or any of their properties or assets. 4 3.5 LITIGATION. Except as set forth in Schedule 3.5 or the Commission Documents, there are no pending or overtly threatened actions, claims, orders, decrees, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which would have a Material Adverse Effect. 3.6 CAPITALIZATION. The authorized capital stock of A-C consists of 100,000,000 shares of Common Stock, par value $0.15 per share, 19,633,340 shares of which have been validly issued and are outstanding as of the date hereof (and such issued shares are fully paid and non-assessable), and 10,000,000 shares of preferred stock, par value $0.01 per share, of which 3,500,000 shares of Preferred Stock have been issued and are outstanding on the date hereof (and such issued shares are fully paid and non-assessable). Except as set forth on Schedule 3.6, A-C owns 100% of the capital stock of each of the Subsidiaries. Except as set forth on Schedule 3.6 hereto, there do not exist any other authorized or outstanding securities, options, warrants, calls, commitments, rights to subscribe or other instruments, agreements or rights of any character, or any pre-emptive rights, convertible into or exchangeable for, or requiring or relating to the issuance, transfer or sale of, any shares of capital stock or other securities of A-C or any Subsidiary. 3.7 ANNUAL REPORT; FINANCIAL STATEMENTS. A-C's Annual Report on Form 10-K for the years ended December 31, 2001 and December 31, 2002 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003, June 30, 2003 and September 30, 2003 (the "Reports") have been filed with the SEC and the Reports complied in all material respects with the rules of the SEC applicable to such Reports on the date filed with the SEC, and the Reports did not contain, on the date of filing with the SEC, any untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not materially misleading. The Reports have not been amended, nor as of the date hereof has A-C filed any report on Form 8-K since September 30, 2003 other than a Form 8-K filed November 21, 2003. All of the consolidated financial statements included in the Reports (the "A-C Financial Statements"): (i) have been prepared from and on the basis of, and are in accordance with, the books and records of A-C and with generally accepted accounting principles applied on a basis consistent with prior accounting periods; (ii) fairly and accurately present in all material respects the consolidated financial condition of A-C as of the date of each such A-C Financial Statement and the results of its operations for the periods therein specified; and (iii), in the case of the annual financial statements, are accompanied by the audit opinion of A-C's independent public accountants. Except as set forth in Schedule 3.7 or in the A-C Financial Statements, as of the date hereof, A-C has no liabilities other than (i) liabilities which are reflected or reserved against in the A-C Financial Statements and which remain outstanding and undischarged as of the date hereof, (ii) liabilities arising in the ordinary course of business of A-C since September 30, 2003, (iii) liabilities incurred as a result of the transactions contemplated by the Transaction Documents or (iv) liabilities which were not required by generally accepted accounting principles to be reflected or reserved on the A-C Financial Statements. Since September 30, 2003, except as set forth on Schedule 3.7 hereto, there has not been any event or change which has or will have a Material Adverse Effect and A-C has no knowledge of any event or circumstance that would reasonably be expected to result in such a Material Adverse Effect. 5 3.8 [INTENTIONALLY LEFT BLANK] 3.9 INCOME TAX RETURNS. A-C and the Subsidiaries have filed all federal and state income tax returns which are required to be filed, and have paid, or made provision for the payment of, all taxes which have become due pursuant to said returns or pursuant to any assessment received by A-C or any Subsidiary, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. A-C has no knowledge of any pending assessments or adjustments of the income tax payable of A-C or its Subsidiaries with respect to any year. 3.10 PERMITS, COMPLIANCE WITH LAW. A-C and each Subsidiary possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable them to conduct the business in which it is now engaged in compliance with applicable law, except where failure to do so would not have a Material Adverse Effect. A-C and each Subsidiary are in compliance with all Requirements of Law in the conduct of its business and corporate affairs, except where failure to comply, singly or in the aggregate, would not have a Material Adverse Effect. 3.11 ERISA. Except as set forth on Schedule 3.11, A-C and each Subsidiary is in compliance in all material respects with all applicable provisions of ERISA; A-C and each Subsidiary has not violated any provision of any Plan maintained or contributed to by it; no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by A-C or any Subsidiary; A-C and each Subsidiary has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles. Schedule 3.11 describes each Plan maintained by A-C and each of its Subsidiaries. 3.12 CONTRACTS. Schedule 3.12 sets forth a description of each Contractual Obligation not included in the Commission Documents which provides for payments to or by A-C or any Subsidiary in excess of $25,000, or is otherwise material to the operations of A-C or any Subsidiary. Except as set forth on Schedule 3.4, neither A-C nor any Subsidiary is in default on any Contractual Obligation, except for such defaults which would not have a Material Adverse Effect. 3.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.13, since January 1, 1989, A-C and its subsidiaries (including the Subsidiaries) have at all times been in compliance in all material respects with all applicable Environmental Laws. Except as described in the Commission Documents or as set forth on Schedule 3.13, none of the operations of A-C or any Subsidiary is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. To A-C's knowledge, except as set forth on Schedule 3.13, neither A-C nor any Subsidiary has received notice of any actual or threatened claim, investigation, proceeding, order or decree in connection with any release of any toxic or hazardous waste or substance into the environment. This Section 3.13 shall be the sole representation and warranty of A-C concerning environmental matters, and no other representation and warranty in the Transaction Documents shall apply to environmental matters. 6 3.14 TRADEMARKS, ETC. A-C and the Subsidiaries own, have sufficient title to, or have the right to use (or can obtain the right to use on reasonable commercial terms), all patents, trademarks, service marks, trade names, copyrights, licenses, trade secrets or other proprietary rights (collectively, the "Proprietary Rights") necessary to their business as now conducted without infringing upon the right of any person. Except for employee confidentiality agreements with employees and consultants, there are no outstanding material options, licenses or agreements relating to intellectual property rights of A-C or any Subsidiary necessary to their business as now conducted, nor is A-C or any Subsidiary bound by or a party to any material options, licenses or agreements with respect to the Proprietary Rights of any other person or entity. Neither A-C nor any Subsidiary has received any communications alleging that A-C has violated or, by conducting its business as proposed, would violate, any of the Proprietary Rights of any other person or entity. A-C and the Subsidiaries are not aware of any material violation by a third party of any of their Proprietary Rights necessary to their business as now conducted. 3.15 REAL PROPERTY. Schedule 3.15 sets forth all of the real property which is owned and/or leased by each of A-C and the Subsidiaries (collectively, the "Real Property"). The Real Property constitutes all of the real property now used in and necessary for the conduct of the business of A-C and the Subsidiaries as presently conducted. A-C has delivered to Purchasers true and complete copies of all leases relating to such properties (the "Leases"). The Leases are in full force and effect and are valid, binding, and enforceable in accordance with their terms, and no event of default has occurred which (whether with or without notice, lapse of time or both or the happening or occurrence of any other event) would constitute a default on the part of any party. Except as set forth in Schedule 3.15, all real property, buildings and structures owned or used by A-C and the Subsidiaries are in good condition and suitable for the purpose or purposes for which it is being used, reasonable wear and tear excepted, and is in such condition and repair as to permit the continued operation of said businesses. None of the Real Property, buildings or structures is in need of material maintenance or repairs except for ordinary, routine maintenance and repairs. 3.16 EMPLOYEES. Except as set forth on Schedule 3.16, all employees of A-C and each Subsidiary are employed "at will" and may be terminated without payment of severance or incurrence of any other liability of A-C or the Subsidiaries; no employee of A-C is in violation of any term of any material employment contract, confidentiality agreement or any other material Contractual Obligation relating to the right of any such employee to be employed by A-C or any Subsidiary; and neither A-C nor any Subsidiary has any employee severance agreement covering any of its employees. There are no labor disputes or union organization activities pending or threatened between A-C or the Subsidiaries and their employees. A-C and the Subsidiaries require each employee and consultant to execute an employee inventions and proprietary rights assignment and confidentiality agreement, and copies of such agreements have been made available to Purchasers. 7 3.17 INSURANCE. A-C and the Subsidiaries currently maintain, in full force and effect, all insurance policies that are reasonably required to be maintained for the conduct of its business or the ownership of its properties (both real and personal) (collectively, the "Insurance Policies"). A-C (a) is not in default regarding the provisions of any Insurance Policy; (b) has paid all premiums due thereunder; and (c) has not failed to present any notice or material claim thereunder in a due and timely fashion. The coverage provided by the Insurance Policies, with respect to any insured act or event occurring on or prior the Effective Date, will not in any way be affected by or terminate or lapse by reason of the transactions contemplated hereby. Schedule 3.17 sets forth a listing of all policies maintained by A-C and a listing, by policy, of all outstanding claims and the amount thereof made by A-C under each such policy. 3.18 [INTENTIONALLY LEFT BLANK] 3.19 TITLE TO PROPERTIES. The assets owned or leased by A-C and its Subsidiaries are all of the assets necessary to conduct the business of A-C and its Subsidiaries as currently being conducted. A-C and its Subsidiaries have good and marketable title to substantially all of the assets they own, real and personal, movable and immovable, tangible and intangible, free and clear of all Encumbrances, except for: (a) liens for taxes not yet due and payable, (b) Encumbrances described on Schedule 4.19 hereto, or (c) minor imperfections of title and encumbrances, if any, which (i) are not substantial in amount, (ii) do not detract from the value of the property subject thereto, impair the operations of the business of A-C, or the use or license of certain of the assets of A-C, and (iii) have arisen in the ordinary course of business consistent with past practice. 3.20 RELATED PARTY TRANSACTIONS. Except for those contracts described in the Commission Documents or on Schedule 3.20 hereto, no existing Contractual Obligation of A-C or its Subsidiaries is with or for the direct benefit of (i) any party owning, or formerly owning, beneficially or of record, directly or indirectly, in excess of five percent (5%) of the outstanding capital stock of A-C, (ii) any director, officer or similar representative of A-C, (iii) any natural person related by blood, adoption or marriage to any party described in (i) or (ii), or (iv) any entity in which any of the foregoing parties has, directly or indirectly, at least a five percent (5%) beneficial interest (a "Related Party"). Without limiting the generality of the foregoing, no Related Party, directly or indirectly, owns or controls any material assets or material properties which are used in A-C's business and to the knowledge of A-C, no Related Party, directly or indirectly, engages in or has any significant interest in or connection with any business which is, or has been within the last two years, a competitor, customer or supplier of A-C or has done business with A-C or which currently sells or provides products or services which are similar or related to the products or services sold or provided in connection with the Business. 8 3.21 BROKERS. The transactions contemplated hereby have been carried out by A-C directly with the Purchasers without the intervention of any person on behalf of A-C in such manner as to give rise to any valid claim against A-C for a finder's fee, brokerage commission or similar payment. 3.22 SECURITIES LAW MATTERS. To the best of its knowledge and except for A-C's failure to hold annual meetings of its stockholders, since January 1, 1999 A-C 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 of 1933, as amended (the "Securities Act"), or the Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) any applicable state securities authorities. To the knowledge of A-C, no such Commission Filing, 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. Subject to the accuracy of the representations and warranties of the Purchasers set forth in Section 4, the offer, sale and issuance of the Shares and the Warrants to the Purchasers, and the issuance of Common Stock upon exercise of the Warrants in accordance with the terms of the Warrants, will be exempt from the Securities Act. 3.23 NO ANTI-DILUTION RIGHTS. Except as set forth on Schedule 3.23, the transactions contemplated hereby will not trigger any anti-dilution provisions contained in any existing agreements. 3.24 FULL DISCLOSURE. No representation, warranty, schedule or certificate of A-C made or delivered pursuant to the Transaction Documents contains or will contain any untrue statement of fact, or omits or will omit to state a material fact the absence of which makes such representation, warranty or other statement misleading. 4. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser, severally and not jointly, hereby makes the following representations and warranties as to such Purchaser: 4.1 ORGANIZATION. Purchaser, if not a natural person, is a duly organized and validly existing and in good standing under the laws of the state of its organization. 4.2 AUTHORITY. Purchaser has the corporate or other authority to execute and deliver the Transaction Documents to which such Purchaser is a party and to perform its obligations hereunder. 4.3 NO VIOLATION. The execution and the delivery by Purchaser of the Transaction Documents to which such Purchaser is a party, and its purchase of the Shares and the Warrants and the consummation of the transactions contemplated hereby or to be effected concurrently herewith do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under, (c) result in a violation of, or (d) require any authorization, consent or approval not heretofore obtained pursuant to, any Contractual Obligation or Requirement of Law to which Purchaser is a party or is otherwise subject. 9 4.4 ENFORCEABILITY. This Agreement constitutes the legal, valid and binding obligation of Purchaser and is enforceable against Purchaser in accordance with its terms, subject to: (i) judicial principles respecting election of remedies or limiting the availability of specific performance, injunctive relief, or other equitable remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect generally relating to or affecting creditors' rights; and (iii) public policy concerns (including, without limitation, the ability of a court to refuse to enforce unconscionable covenants, indemnification provisions or similar provisions). 4.5 INVESTMENT INTENT. Purchaser is acquiring the Shares and/or the Warrants for its own account for investment and not with a view to, or for resale in connection with, any "distribution" thereof for purposes of the Securities Act. Purchaser is an "accredited investor" as such term is defined in Regulation D under the Securities Act. Purchaser acknowledges that the Shares and Warrants shall be "restricted securities" within the meaning of Rule 144 ("Rule 144") under the Securities Act, will contain a transfer restriction legend and may only be resold pursuant to an effective registration statement filed with the SEC under the Securities Act, or pursuant to Rule 144 or another valid exemption from the registration requirements of the Act as established by an opinion of counsel reasonably acceptable to A-C. 4.6 INVESTIGATION. Purchaser is familiar with, and has been given full access by A-C to all information concerning the business and financial condition, properties, operations and prospects of A-C that Purchaser has deemed relevant for purposes of making the investment contemplated by this Agreement. By reason of Purchaser's knowledge and experience in financial and business matters in general, the business of A-C and investments of the type contemplated by this Agreement in particular, Purchaser is capable of evaluating the merits and risks of making the investment in the Shares and/or the Warrants and is able to bear the economic risk of the investment (including a complete loss of its investment in the Shares and/or the Warrants). Subject to the truth and accuracy of the representations and warranties made by A-C hereunder, Purchaser has conducted such investigation as it deems relevant in connection with its consummation of the transactions contemplated by this Agreement. 5. CONDITIONS TO THE OBLIGATIONS OF A-C. The obligations of A-C to consummate the transactions contemplated by this Agreement on the Closing Date shall be subject to the satisfaction of each of the conditions set forth in this Section 5, unless waived by A-C, on or prior to the Closing Date. 5.1 REPRESENTATIONS AND WARRANTIES. If this Agreement is not signed on the Closing Date, the representations and warranties of the Purchasers set forth in Section 4 shall be true and correct in all material respects as of the Closing Date as though made on and as of such date; Purchasers shall have performed all obligations and complied with all covenants required to be performed or complied with by Purchasers under this Agreement on or prior to the Closing Date; and A-C shall have received from each Purchaser a certificate to such effect with respect to such Purchaser's representations, warranties, obligations and covenants, dated the Closing Date, signed by an agent duly authorized to act on its behalf. 10 5.2 NO PROCEEDINGS. No order, injunction, decree or other action or legal, administrative, arbitration or other proceeding by any person other than A-C or investigation by any governmental agency or authority shall be pending or threatened, challenging or imposing a material limitation on the execution, delivery or performance of the Transaction Documents, or the consummation of any of the transactions contemplated hereby. 5.3 CONVERSION; EXECUTION AND DELIVERY OF OTHER AGREEMENTS. The Purchasers and the other parties thereto other than A-C shall execute and deliver the agreements described in Section 2 that are intended to be executed and delivered at the Closing. 5.4 APPROVAL OF DOCUMENTS. All proceedings taken in connection with the transactions contemplated hereby and all documents incident to such transactions shall be reasonably satisfactory in form and substance to A-C and its counsel. 6. CONDITIONS TO THE OBLIGATIONS OF PURCHASERS. The obligations of each Purchaser to consummate the transactions under this Agreement on the Closing Date shall be subject to the satisfaction of each of the conditions set forth in this Section 6, unless waived by each Purchaser, on or prior to the Closing Date. 6.1 REPRESENTATIONS AND WARRANTIES. If this Agreement is not signed on the Closing Date, the representations and warranties of A-C set forth in Section 2 shall be true and correct in all material respects as of the Closing Date as though made on and as of such date; A-C shall have performed all obligations and complied with all covenants required to be performed or complied with by A-C under this Agreement on or prior to the Closing Date; and each Purchaser shall have received on the Closing Date from A-C a certificate or certificates, dated the Closing Date, to such effect, which certificate or certificates shall be signed by an authorized officer of A-C. 6.2 NO PROCEEDINGS. No order, injunction, decree or other action or legal, administrative, arbitration or other proceeding by any person or investigation by any governmental agency or authority shall be pending or, to the knowledge of A-C, threatened, challenging or imposing a material limitation on the execution, delivery or performance of this Transaction Documents, the consummation of any of the transactions contemplated thereby or the operation by A-C of its businesses as now conducted. 11 6.3 APPROVAL OF DOCUMENTS. All proceedings taken in connection with the transactions contemplated hereby and all documents incident to such transactions shall be reasonably satisfactory in form and substance to each Purchaser and its counsel. 6.4 CONVERSION; DELIVERY OF OTHER AGREEMENTS. A-C and the other parties thereto other than the Purchasers shall execute and deliver the agreements described in Section 2 that are intended to be executed and delivered at the Closing. 6.5 EXTENSION OF MATURITY DATE ON FINANCING. Wells Fargo Business Credit and Wells Fargo Energy Capital shall have granted an extension of the maturity date of all senior debt and subordinated debt maturities for a period of one year. 6.7 NO MATERIAL ADVERSE CHANGE. Except as described in the Commission Documents or in Schedule 3.7, there shall have been no material adverse change, nor shall any such change be threatened, in the Condition of A-C since September 30, 2003. 6.8 OPERATION IN ORDINARY COURSE. Other than actions related to the consummation of the transactions contemplated hereby, A-C shall have conducted its business in the ordinary course from the date hereof to the Closing Date, and no extraordinary or other material transactions not in the ordinary course of business shall have occurred without the Purchasers' consent. 7. CERTAIN COVENANTS OF A-C. 7.1 RESERVATION OF SHARES. The Company shall at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issue or delivery upon exercise of the Warrants, such number of shares of Common Stock as shall then be issuable or deliverable upon the exercise of all Warrants. Such shares of Common Stock shall, when issued or delivered in accordance with the terms of the Warrants, be duly and validly issued and fully paid and non-assessable. 7.2 REGISTRATION AND LISTING. If any shares of Common Stock required to be reserved for purposes of exercise of the require registration with or approval of any Governmental Authority under any federal or state or other applicable law before such Common Stock may be issued or delivered, A-C will in good faith and as expeditiously as possible endeavor to cause such Common Stock to be duly registered or approved, as the case may be, unless such registration or approval is required solely because of a breach of a Purchaser's representation contained in Article 4. So long as the Common Stock is quoted on the OTC Bulletin Board, NASDAQ or listed on any national securities exchange, A-C will, if permitted by the rules of such system or exchange, quote or list and keep quoted or listed on such system or exchange, upon official notice of issuance, all Common Stock issuable or deliverable upon exercise of the Warrants. 12 8. INDEMNIFICATION. 8.1 INDEMNIFICATION BY A-C. In addition to all other sums due hereunder or provided for in this Agreement, A-C agrees to indemnify and hold harmless the Purchasers and their respective "Affiliates" (as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) and their respective officers, directors, agents, representatives, employees, subsidiaries, partners and controlling persons (each, an "indemnified party") from and against any and all losses, claims, damages, expenses (including reasonable fees, disbursements and other charges of counsel) or other liabilities ("Liabilities") resulting from any breach of any covenant, agreement, representation or warranty of A-C in this Agreement; provided, however, that A-C shall not be liable under this Section 8: (a) for any amount paid in settlement of claims without A-C's consent (which consent shall not be unreasonably withheld) or (b) to the extent that it is finally judicially determined that such Liabilities resulted primarily from the willful misconduct or bad faith of such indemnified party; provided, further, that if and to the extent that such indemnification is held, by final judicial determination to be unenforceable, in whole or in part, for any reason, A-C shall make the maximum contribution to the payment and satisfaction of such indemnified Liability. Notwithstanding the foregoing, with respect to claims made under this Section 8 for damages not resulting from an actual or threatened third party claim ("Third Party Claims"), A-C shall not be obligated to provide indemnity hereunder until the aggregate of all such claims for indemnification made by the Purchasers (excluding damage for Third Party Claims) exceeds $200,000, and then shall be obligated to provide indemnity hereunder only to the extent the damages exceed $200,000. In connection with the obligation of A-C to indemnify for expenses as set forth above, A-C further agrees to reimburse each indemnified party for all such expenses (including reasonable fees, disbursements and other charges of counsel) as they are incurred by such indemnified party; provided, however, that if an indemnified party is reimbursed hereunder for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Liabilities in question resulted primarily from the willful misconduct or bad faith of such indemnified party. 8.2 NOTIFICATION; PROCEDURE. Each indemnified party under this Section 8 will, promptly after the receipt of notice of the commencement of any action or other proceeding against such indemnified party in respect of which indemnity may be sought from A-C under this Section 8, notify A-C in writing of the commencement thereof. The omission of any indemnified party so to notify A-C of any such action shall not relieve A-C from any liability which it may have to such indemnified party (i) other than pursuant to this Section 8 or (ii) under this Section 8 unless, and only to the extent that, such omission results in A-C's forfeiture of substantive rights or defenses. In case any such action or other proceeding shall be brought against any indemnified party and it shall notify A-C of the commencement thereof, A-C shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that any indemnified party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action or proceeding in which both A-C and an indemnified party is, or is reasonably likely to become, a party, such indemnified party shall have the right to employ separate counsel at A-C's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such indemnified party, (a) there are or may be legal defenses available to such indemnified 13 party or to other indemnified parties that are different from or additional to those available to A-C or (b) any conflict or potential conflict exists between A-C and such indemnified party that would make such separate representation advisable; provided, however, that in no event shall A-C be required to pay fees and expenses under this sentence of this Section 8 for more than one firm of attorneys in any jurisdiction in any one legal action or group of related legal actions. The Company agrees that A-C will not, without the prior written consent of the Purchasers, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated hereby (if any indemnified party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of the Purchasers and each other indemnified party from all liability arising or that may arise out of such claim, action or proceeding. The rights accorded to indemnified parties hereunder shall be in addition to any rights that any indemnified party may have at common law, by separate agreement or otherwise. 8.3 REGISTRATION RIGHTS AGREEMENT. Notwithstanding anything to the contrary in this Section 8, the indemnification and contribution provisions of the Registration Rights Agreement shall govern any claim made with respect to registration statements filed pursuant thereto or sales made thereunder. 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations, warranties and agreements made by A-C and Purchasers in this Agreement or in any certificate or other instrument delivered pursuant hereto shall survive the Closing and any investigation and discovery by A-C or by Purchasers, as the case may be, made at any time with respect thereto; provided, however, that, other than with respect to the second sentence of Section 3.2 (for which there shall be no time limit), neither Purchasers nor A-C shall have any liability to the other for any misrepresentation, inaccuracy or omission in any representation or warranty, or any breach of any representation or warranty, unless the party asserting a claim with respect to any thereof gives to the other written notice of such claim on or before the date which is two years following the Closing Date. 10. MISCELLANEOUS PROVISIONS. 10.1 DELIVERIES. A-C and Purchasers hereby covenant and agree to use their respective best efforts to perform each of their obligations hereunder, to deliver all certificates and to satisfy all other conditions set forth in this Agreement and to close the transactions contemplated by this Agreement on the Closing Date. 10.2 SUCCESSORS AND ASSIGNS. This Agreement is executed by, and shall be binding upon and inure to the benefit of, the parties hereto and each of their respective successors and assigns; provided, however, that neither this Agreement nor any right pursuant hereto nor interest herein shall be assignable by (a) A-C without the prior written consent of the Purchasers, except as expressly permitted herein or (b) an Purchaser without the prior written consent of A-C, except to an Affiliate of such Purchaser or as otherwise expressly permitted herein. None of the provisions of this Agreement shall be for the benefit of or enforceable by any other person. 14 10.3 NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery: if to the Purchasers at the following address: RER Corp 1450 Broadway 20th Floor New York, NY 10022 with a copy to: Swidler Berlin Shereff Friedman, LLP 405 Lexington Avenue New York, NY 10174 Attn: Charles I. Weissman Engel Investors Defined Benefit Plan 570 Park Avenue New York, NY 10021 with a copy to: Swidler Berlin Shereff Friedman, LLP 405 Lexington Avenue New York, NY 10174 Attn: Charles I. Weissman Donald Engel 570 Park Avenue New York, NY 10021 with a copy to: Swidler Berlin Shereff Firedman, LLP 405 Lexington Avenue New York, NY 10174 Attn: Charles I. Weissman Christopher Engel 1075 Park Avenue New York, NY 10128 with a copy to: Swidler Berlin Shereff Firedman, LLP 405 Lexington Avenue New York, NY 10174 Attn: Charles I. Weissman Leonard Toboroff 39 N. Moore Street New York, NY 10013 15 with a copy to: Swidler Berlin Shereff Friedman, LLP 405 Lexington Avenue New York, NY 10174 Attn: Charles I. Weissman if to A-C at the following address: Allis-Chalmers Corporation 7660 Woodway, Suite 200 Houston, Texas 77063 Attn: President Fax: (713) 369-0555 with a copy to: Spolin Silverman Cohen & Bartlett LLP 1620 26th Street, Suite 2000N Santa Monica, California 90404 Attn: Joseph P. Bartlett Fax: 310 586 2444 All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; five Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is acknowledged, if telecopied. 10.4 COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart will for all purposes be deemed an original, and all such counterparts shall constitute one and the same instrument. 10.5 GOVERNING LAW; FORUM. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware applicable to contracts entered into and to be wholly performed therein. Each party to this Agreement hereby irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement or any agreements or transactions contemplated hereby shall be brought in the in the courts of the State of New York located in Manhattan or of the United States of America for the Southern District of New York and hereby expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address set forth in Section 10.3, such service to become effective 10 days after such mailing 16 10.6 ATTORNEYS' FEES. If any party should institute any action to enforce or interpret any term or provision of this Agreement, the party prevailing in such action, after all appeals have been exhausted, shall be entitled to its attorneys' fees, out-of-pocket disbursements and all other expenses from the non-prevailing party in such action. 10.7 ENTIRE AGREEMENT. This Agreement (together with all Exhibits and Schedules hereto) constitutes the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous written and oral negotiations, discussions, agreements and understandings with respect to such subject matter. 10.8 EXPENSES OF PURCHASERS. The Company shall reimburse the Purchasers for their reasonable actual legal expenses incurred in connection with the preparation, negotiation, execution and performance of this Agreement, the Warrants, the Stockholders Agreement and the Registration Rights Agreement and the transactions contemplated hereunder and thereunder, such reimbursement to be paid, in cash, (a) at the Closing, if invoiced within one business day prior to the Closing Date or (b) within seven days following the written request therefor by the Purchasers, if invoiced on or after the Closing Date. 10.9 [INTENTIONALLY LEFT BLANK] 10.10 INTERPRETATION. Each of the Purchasers and A-C have participated in the negotiation and drafting of this Agreement. Accordingly, each of the parties hereby waives any statutory provision, judicial precedent or other rule of law to the effect that contractual ambiguities are to be construed against the party who shall have drafted the same. 10.11 TERMINATION. This Agreement may be terminated by any party if the Closing does not occur on or before April 25, 2004. 10.12 SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be or become prohibited or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement except to the extent that any provision would clearly be contemplated by the parties to be conditioned upon the validity and enforceability of such invalid or prohibited provision. 17 10.13 SECTION HEADINGS. The section and subsection headings contained in this Agreement are included for convenience only and form no part of the agreement between the parties. 10.14 PUBLICITY. Except as may be required by applicable law, no party hereto shall issue a publicity release or announcement or otherwise make any public disclosure concerning this Agreement or the transactions contemplated hereby, without prior approval by the other parties hereto. If any announcement is required by law to be made by any party hereto, prior to making such announcement such party will deliver a draft of such announcement to the other parties and shall give the other parties a reasonable opportunity under the circumstances to comment thereon. 10.15 BROKERS AND FINDERS. Neither A-C nor any of the Purchasers, nor any person acting on behalf of any of them, has employed any broker, agent or finder, or incurred any liability for any brokerage fees, agents' commissions, finders' fees or advisory fees in connection with the transactions contemplated hereby; and A-C shall indemnify and hold each Purchaser harmless in respect of any "Damages" (as defined in Section 8.6 hereof) arising out of any agreements, arrangements or understandings claimed to have been made by A-C, or any person acting on its behalf, with any third party; and each Purchaser shall indemnify and hold A-C and the other Purchasers harmless in respect of any Damages arising out of any agreements, arrangements or understandings claimed to have been made by such Purchaser, or any person acting on its behalf, with any third party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective representatives hereunto duly authorized as of the date first above written. ALLIS-CHALMERS CORPORATION, a Delaware corporation /s/ Munawar H. Hidayatallah --------------------------------------------- By: Munawar H. Hidayatallah, President /s/ Leonard Toboroff --------------------------------------------- Leonard Toboroff Engel Investors Defined Benefit Plan /s/ Donald Engel --------------------------------------------- By: Donald Engel, Trustee RER Corp. /s/ Robert E. Nederlander --------------------------------------------- By: Robert E. Nederlander, President /s/ Donald Engel --------------------------------------------- Donald Engel /s/ Christopher Engel --------------------------------------------- Christopher Engel 19 SCHEDULE 1.1
PURCHASE # OF SHARES SUBJECT PURCHASER PRICE # OF SHARES TO WARRANT --------- ----- ----------- ---------- Donald Engel $299,850.25 464,768 599,701 Chris Engel $249,875.50 387,307 499,750 Engel Investors Defined $116,941.25 181,259 233,883 Benefit Plan RER Corp. $666,666.50 1,033,333 1,333,333 Leonard Toboroff $666,666.50 1,033,333 1,333,333 Total $2,000,000.00 3,100,000 4,000,000
PREFERRED STOCK CONVERSION AGREEMENT BY AND AMONG ALLIS-CHALMERS CORPORATION, AND ENERGY SPECTRUM PARTNERS LP -------------------------------------------------------- DATED APRIL 2, 2004 -------------------------------------------------------- PREFERRED STOCK CONVERSION AGREEMENT This PREFERRED STOCK CONVERSION AGREEMENT (this "Agreement"), dated April 2, 2004, is made by and among Allis-Chalmers Corporation, a Delaware corporation ("A-C"), and Energy Spectrum Partners LP, a Delaware limited partnership ("Energy Spectrum"). RECITALS WHEREAS, A-C proposes to issue to Energy Spectrum 8,590,449 shares of its Common Stock in consideration of the conversion of all of the outstanding shares of A-C's Series A 10% Cumulative Convertible Preferred Stock (the "Preferred Stock") held by Energy Spectrum, along with accrued but unpaid dividends; WHEREAS, it is a condition of the consummation of the transactions contemplated hereby that A-C will, simultaneously with the Closing (as defined below): (1) obtain a one year extension on the maturity date of certain loan obligations, and (2) enter into a Stock and Warrant Purchase Agreement (the "SWP Agreement"), in the form of Exhibit A hereto, pursuant to which A-C shall issue 3,100,000 shares of its Common Stock and warrants (the "Warrants") to purchase an additional 4,000,000 shares of Common Stock, pursuant to the terms of a Warrant in the form of Exhibit B hereto; WHEREAS, it is a condition of the consummation of the transactions contemplated hereby that A-C, the Purchasers, Energy Spectrum and others, simultaneously with the Closing: (1) enter into a Stockholders Agreement with respect to the governance of the affairs of A-C, and other matters (the "Stockholders Agreement"), a copy of which is attached to this Agreement as Exhibit C hereto, and (2) enter into a Registration Rights Agreement with respect to the Common Stock of A-C (the "Registration Rights Agreement"), a copy of which is attached to this Agreement as Exhibit D hereto. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. CONVERSION. 1.1 CONVERSION OF PREFERRED STOCK. Subject to the terms and conditions herein set forth, Energy Spectrum agrees to convert all of the 3,500,000 shares of Preferred Stock, Series A held by Energy Spectrum (including all accrued dividend rights), and in exchange therefore A-C agrees that it will issue to Energy Spectrum, 8,590,449 shares of Common Stock (the "Conversion"). The closing (the "Closing") of the Conversion shall be effected by exchange of electronic documents signature pages on April 2, 2004, or on such other date as may be agreed upon in writing by Purchasers and A-C (the "Closing Date"). Energy Spectrum shall cancel and return to A-C all certificates issued to Energy Spectrum representing the Preferred Stock on the Closing Date and A-C shall deliver original certificates representing the Shares issued to Energy Spectrum within two business days following the Closing Date. 2 1.3 FORM OF CERTIFICATES. Energy Spectrum (as hereinafter defined) agree to the imprinting, so long as required by law, of a legend on certificates representing all of the Warrants and Common Shares to the following effect: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS." 2. DELIVERY OF OTHER AGREEMENTS. At the Closing, (a) A-C shall execute and deliver (and shall use its best efforts to cause each other party thereto other than Energy Spectrum to execute and deliver) to Energy Spectrum the Registration Rights Agreement and the Stockholders Agreement, and (b) Energy Spectrum shall execute and deliver to A-C and each other party thereto the Registration Rights Agreement and the Stockholders Agreement. In addition, A-C shall use its best efforts to consummate the transactions contemplated by the SWP Agreement. 3. REPRESENTATIONS AND WARRANTIES OF A-C. A-C hereby makes the following representations and warranties to Energy Spectrum: 3.1 ORGANIZATION, ETC. A-C is a corporation, duly organized and validly existing and in good standing under the laws of the State of Delaware, and is qualified or licensed to do business and is in good standing as a foreign corporation in each other jurisdictions in which the conduct of its business or the ownership of property requires such qualification or licensing, except where failure to be so qualified or licensed would not have a material adverse effect on the financial condition or operations of A-C and its Subsidiaries (as defined below), taken as a whole (for A-C and its Subsidiaries, a "Material Adverse Effect"). Each company (each, a "Subsidiary") listed on Schedule 3.1 hereof is duly organized and validly existing and in good standing under the laws of the jurisdiction of its organization, and is qualified or licensed to do business and is in good standing as a foreign corporation in each other jurisdiction in which the conduct of its business or the ownership of property requires such qualification or licensing, except where failure to be so qualified or licensed would not have a Material Adverse Effect on A-C. Except for the Subsidiaries, A-C does not own, of record or beneficially, the securities of any other entity. True and correct copies of the Certificate of Incorporation and Bylaws of A-C, as currently in effect, are among the documents (the "Commission Documents") that have been filed with the Securities and Exchange Commission (the "SEC") and are available on the SEC's website (www.sec.gov) (CIK No. 0000003982). 3 3.2 AUTHORITY. A-C has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and such action has been duly authorized by all necessary action of A-C's Board of Directors. The issuance of the Common Stock has been duly authorized and if, as and when delivered to Energy Spectrum, such shares will be duly and validly issued and outstanding, fully paid and non-assessable and will be free of any Encumbrance (as defined below), other than those imposed pursuant to this Agreement and securities laws of general application. As used in this Agreement, "Encumbrance" shall mean any claim, lien, pledge, option, charge, easement, security interest, deed of trust, mortgage, right of way, encroachment, private building or use restriction, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title. 3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered by A-C and constitutes a legal, valid and binding agreement and obligation of A-C enforceable against it in accordance with its terms subject to: (i) judicial principles respecting election of remedies or limiting the availability of specific performance, injunctive relief, or other equitable remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect generally relating to or affecting creditors' rights; and (iii) public policy concerns (including, without limitation, the ability of a court to refuse to enforce unconscionable covenants, indemnification provisions or similar provisions). 3.4 NO VIOLATION. Except as set forth on Schedule 3.4, the execution and the delivery by A-C of this Agreement does not and will not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in a violation of, or (iv) require any authorization, consent or approval not heretofore obtained pursuant to, any binding written or oral agreement or instrument including, without limitation, any charter, bylaw, trust instrument, indenture or evidence of indebtedness, lease, contract or other obligation or commitment (each, a "Contractual Obligation") binding upon A-C or any Subsidiary or any of their properties or assets, or any law, rule, regulation, restriction, order, writ, judgment, award, determination, injunction or decree of any court or government, or any decision or ruling of any arbitrator (each, a "Requirement of Law") binding upon or applicable to A-C or any Subsidiary or any of their properties or assets. 3.5 LITIGATION. Except as set forth in Schedule 3.5 or the Commission Documents, there are no pending or overtly threatened actions, claims, orders, decrees, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which would have a Material Adverse Effect. 3.6 CAPITALIZATION. The authorized capital stock of A-C consists of 100,000,000 shares of Common Stock, par value $0.15 per share, 19,633,340 shares of which have been validly issued and are outstanding as of the date hereof (and such issued shares are fully paid and non-assessable), and 10,000,000 shares of preferred stock, par value $0.01 per share, of which 3,500,000 shares of Preferred Stock have been issued and are outstanding on the date hereof (and such issued shares are fully paid and non-assessable). Except as set forth on Schedule 3.6, A-C owns 100% of the capital stock of each of the Subsidiaries. Except as set forth on Schedule 3.6 hereto, there do not exist any other authorized or outstanding securities, options, warrants, calls, commitments, rights to subscribe or other instruments, agreements or rights of any character, or any pre-emptive rights, convertible into or exchangeable for, or requiring or relating to the issuance, transfer or sale of, any shares of capital stock or other securities of A-C or any Subsidiary. 4 3.7 ANNUAL REPORT; FINANCIAL STATEMENTS. A-C's Annual Report on Form 10-K for the years ended December 31, 2001 and December 31, 2002 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003, June 30, 2003 and September 30, 2003 (the "Reports") have been filed with the SEC and the Reports complied in all material respects with the rules of the SEC applicable to such Reports on the date filed with the SEC, and the Reports did not contain, on the date of filing with the SEC, any untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not materially misleading. The Reports have not been amended, nor as of the date hereof has A-C filed any report on Form 8-K since September 30, 2003 other than a Form 8-K filed November 21, 2003. All of the consolidated financial statements included in the Reports (the "A-C Financial Statements"): (i) have been prepared from and on the basis of, and are in accordance with, the books and records of A-C and with generally accepted accounting principles applied on a basis consistent with prior accounting periods; (ii) fairly and accurately present in all material respects the consolidated financial condition of A-C as of the date of each such A-C Financial Statement and the results of its operations for the periods therein specified; and (iii), in the case of the annual financial statements, are accompanied by the audit opinion of A-C's independent public accountants. Except as set forth in Schedule 3.7 or in the A-C Financial Statements, as of the date hereof, A-C has no liabilities other than (i) liabilities which are reflected or reserved against in the A-C Financial Statements and which remain outstanding and undischarged as of the date hereof, (ii) liabilities arising in the ordinary course of business of A-C since September 30, 2003, (iii) liabilities incurred as a result of the transactions contemplated by this Agreement or (iv) liabilities which were not required by generally accepted accounting principles to be reflected or reserved on the A-C Financial Statements. Since September 30, 2003, except as set forth on Schedule 3.7 hereto, there has not been any event or change which has or will have a Material Adverse Effect and A-C has no knowledge of any event or circumstance that would reasonably be expected to result in such a Material Adverse Effect. 3.8 [INTENTIONALLY LEFT BLANK] 3.9 INCOME TAX RETURNS. A-C and the Subsidiaries have filed all federal and state income tax returns which are required to be filed, and have paid, or made provision for the payment of, all taxes which have become due pursuant to said returns or pursuant to any assessment received by A-C or any Subsidiary, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. A-C has no knowledge of any pending assessments or adjustments of the income tax payable of A-C or its Subsidiaries with respect to any year. 5 3.10 PERMITS, COMPLIANCE WITH LAW. A-C and each Subsidiary possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable them to conduct the business in which it is now engaged in compliance with applicable law, except where failure to do so would not have a Material Adverse Effect. A-C and each Subsidiary are in compliance with all Requirements of Law in the conduct of its business and corporate affairs, except where failure to comply, singly or in the aggregate, would not have a Material Adverse Effect. 3.11 ERISA. Except as set forth on Schedule 3.11, A-C and each Subsidiary is in compliance in all material respects with all applicable provisions of ERISA; A-C and each Subsidiary has not violated any provision of any Plan maintained or contributed to by it; no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by A-C or any Subsidiary; A-C and each Subsidiary has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles. Schedule 3.11 describes each Plan maintained by A-C and each of its Subsidiaries. 3.12 CONTRACTS. Schedule 3.12 sets forth a description of each Contractual Obligation not included in the Commission Documents which provides for payments to or by A-C or any Subsidiary in excess of $25,000, or is otherwise material to the operations of A-C or any Subsidiary. Except as set forth on Schedule 3.4, neither A-C nor any Subsidiary is in default on any Contractual Obligation, except for such defaults which would not have a Material Adverse Effect. 3.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.13, since January 1, 1989, A-C and its subsidiaries (including the Subsidiaries) have at all times been in compliance in all material respects with all applicable Environmental Laws. Except as described in the Commission Documents or as set forth on Schedule 3.13, none of the operations of A-C or any Subsidiary is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. To A-C's knowledge, except as set forth on Schedule 3.13, neither A-C nor any Subsidiary has received notice of any actual or threatened claim, investigation, proceeding, order or decree in connection with any release of any toxic or hazardous waste or substance into the environment. This Section 3.13 shall be the sole representation and warranty of A-C concerning environmental matters, and no other representation and warranty in this Agreement shall apply to environmental matters. 3.14 TRADEMARKS, ETC. A-C and the Subsidiaries own, have sufficient title to, or have the right to use (or can obtain the right to use on reasonable commercial terms), all patents, trademarks, service marks, trade names, copyrights, licenses, trade secrets or other proprietary rights (collectively, the "Proprietary Rights") necessary to their business as now conducted without infringing upon the right of any person. Except for employee confidentiality agreements with employees and consultants, there are no outstanding material options, licenses or agreements relating to intellectual property rights of A-C or any Subsidiary necessary to their business as now conducted, nor is A-C or any Subsidiary bound by or a party to any material options, licenses or agreements with respect to the Proprietary Rights of any other person or entity. Neither A-C nor any Subsidiary has received any communications alleging that A-C has violated or, by conducting its business as proposed, would violate, any of the Proprietary Rights of any other person or entity. A-C and the Subsidiaries are not aware of any material violation by a third party of any of their Proprietary Rights necessary to their business as now conducted. 6 3.15 REAL PROPERTY. Schedule 3.15 sets forth all of the real property which is owned and/or leased by each of A-C and the Subsidiaries (collectively, the "Real Property"). The Real Property constitutes all of the real property now used in and necessary for the conduct of the business of A-C and the Subsidiaries as presently conducted. A-C has delivered to Energy Spectrum true and complete copies of all leases relating to such properties (the "Leases"). The Leases are in full force and effect and are valid, binding, and enforceable in accordance with their terms, and no event of default has occurred which (whether with or without notice, lapse of time or both or the happening or occurrence of any other event) would constitute a default on the part of any party. Except as set forth in Schedule 3.15, all real property, buildings and structures owned or used by A-C and the Subsidiaries are in good condition and suitable for the purpose or purposes for which it is being used, reasonable wear and tear excepted, and is in such condition and repair as to permit the continued operation of said businesses. None of the Real Property, buildings or structures is in need of material maintenance or repairs except for ordinary, routine maintenance and repairs. 3.16 EMPLOYEES. Except as set forth on Schedule 3.16, all employees of A-C and each Subsidiary are employed "at will" and may be terminated without payment of severance or incurrence of any other liability of A-C or the Subsidiaries; no employee of A-C is in violation of any term of any material employment contract, confidentiality agreement or any other material Contractual Obligation relating to the right of any such employee to be employed by A-C or any Subsidiary; and neither A-C nor any Subsidiary has any employee severance agreement covering any of its employees. There are no labor disputes or union organization activities pending or threatened between A-C or the Subsidiaries and their employees. A-C and the Subsidiaries require each employee and consultant to execute an employee inventions and proprietary rights assignment and confidentiality agreement, and copies of such agreements have been made available to Energy Spectrum. 3.17 INSURANCE. A-C and the Subsidiaries currently maintain, in full force and effect, all insurance policies that are reasonably required to be maintained for the conduct of its business or the ownership of its properties (both real and personal) (collectively, the "Insurance Policies"). A-C (a) is not in default regarding the provisions of any Insurance Policy; (b) has paid all premiums due thereunder; and (c) has not failed to present any notice or material claim thereunder in a due and timely fashion. The coverage provided by the Insurance Policies, with respect to any insured act or event occurring on or prior the Effective Date, will not in any way be affected by or terminate or lapse by reason of the transactions contemplated hereby. Schedule 3.17 sets forth a listing of all policies maintained by A-C and a listing, by policy, of all outstanding claims and the amount thereof made by A-C under each such policy. 7 3.18 [INTENTIONALLY LEFT BLANK] 3.19 TITLE TO PROPERTIES. The assets owned or leased by A-C and its Subsidiaries are all of the assets necessary to conduct the business of A-C and its Subsidiaries as currently being conducted. A-C and its Subsidiaries have good and marketable title to substantially all of the assets they own, real and personal, movable and immovable, tangible and intangible, free and clear of all Encumbrances, except for: (a) liens for taxes not yet due and payable, (b) Encumbrances described on Schedule 4.19 hereto, or (c) minor imperfections of title and encumbrances, if any, which (i) are not substantial in amount, (ii) do not detract from the value of the property subject thereto, impair the operations of the business of A-C, or the use or license of certain of the assets of A-C, and (iii) have arisen in the ordinary course of business consistent with past practice. 3.20 RELATED PARTY TRANSACTIONS. Except for those contracts described in the Commission Documents or on Schedule 3.20 hereto, no existing Contractual Obligation of A-C or its Subsidiaries is with or for the direct benefit of (i) any party owning, or formerly owning, beneficially or of record, directly or indirectly, in excess of five percent (5%) of the outstanding capital stock of A-C, (ii) any director, officer or similar representative of A-C, (iii) any natural person related by blood, adoption or marriage to any party described in (i) or (ii), or (iv) any entity in which any of the foregoing parties has, directly or indirectly, at least a five percent (5%) beneficial interest (a "Related Party"). Without limiting the generality of the foregoing, no Related Party, directly or indirectly, owns or controls any material assets or material properties which are used in A-C's business and to the knowledge of A-C, no Related Party, directly or indirectly, engages in or has any significant interest in or connection with any business which is, or has been within the last two years, a competitor, customer or supplier of A-C or has done business with A-C or which currently sells or provides products or services which are similar or related to the products or services sold or provided in connection with the Business. 3.21 BROKERS. The transactions contemplated hereby have been carried out by A-C directly with Energy Spectrum without the intervention of any person on behalf of A-C in such manner as to give rise to any valid claim against A-C for a finder's fee, brokerage commission or similar payment. 3.22 SECURITIES LAW MATTERS. To the best of its knowledge and except for A-C's failure to hold annual meetings of its stockholders, since January 1, 1999 A-C 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 of 1933, as amended (the "Securities Act"), or the Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) any applicable state securities authorities. To the knowledge of A-C, no such Commission Filing, 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. Subject to the accuracy of the representations and warranties of Energy Spectrum set forth in Section 4, the offer and issuance of the Shares to Energy Spectrum will be exempt from the Securities Act. 8 3.23 NO ANTI-DILUTION RIGHTS. Except as set forth on Schedule 3.23, the transactions contemplated hereby will not trigger any anti-dilution provisions contained in any existing agreements. 3.24 FULL DISCLOSURE. No representation, warranty, schedule or certificate of A-C made or delivered pursuant to this agreement contains or will contain any untrue statement of fact, or omits or will omit to state a material fact the absence of which makes such representation, warranty or other statement misleading. 4. REPRESENTATIONS AND WARRANTIES OF ENERGY SPECTRUM. Energy Spectrum hereby makes the following representations and warranties: 4.1 ORGANIZATION. Energy Spectrum is a duly organized and validly existing and in good standing under the laws of the state of its organization. 4.2 AUTHORITY. Energy Spectrum has the corporate or other authority to execute and deliver this Agreement and to perform its obligations hereunder. 4.3 NO VIOLATION. The execution and the delivery by Energy Spectrum of this Agreement, and the conversion of its Preferred Stock into Common Stock do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under, (c) result in a violation of, or (d) require any authorization, consent or approval not heretofore obtained pursuant to, any Contractual Obligation or Requirement of Law to which Energy Spectrum is a party or is otherwise subject. 4.4 ENFORCEABILITY. This Agreement constitutes the legal, valid and binding obligation of Energy Spectrum and is enforceable against Energy Spectrum in accordance with its terms, subject to: (i) judicial principles respecting election of remedies or limiting the availability of specific performance, injunctive relief, or other equitable remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect generally relating to or affecting creditors' rights; and (iii) public policy concerns (including, without limitation, the ability of a court to refuse to enforce unconscionable covenants, indemnification provisions or similar provisions). 9 4.5 INVESTMENT INTENT. Energy Spectrum is acquiring the Shares for its own account for investment and not with a view to, or for resale in connection with, any "distribution" thereof for purposes of the Securities Act. Energy Spectrum is an "accredited investor" as such term is defined in Regulation D under the Securities Act. Energy Spectrum acknowledges that the Shares and Warrants shall be "restricted securities" within the meaning of Rule 144 ("Rule 144") under the Securities Act, will contain a transfer restriction legend and may only be resold pursuant to an effective registration statement filed with the SEC under the Securities Act, or pursuant to Rule 144 or another valid exemption from the registration requirements of the Act as established by an opinion of counsel reasonably acceptable to A-C. 4.6 INVESTIGATION. Energy Spectrum is familiar with, and its representatives prior to Closing will have been given full access by A-C to all information concerning the business and financial condition, properties, operations and prospects of A-C that Energy Spectrum has deemed relevant for purposes of making the investment contemplated by this Agreement. By reason of Energy Spectrum's knowledge and experience in financial and business matters in general, the business of A-C and investments of the type contemplated by this Agreement in particular, Energy Spectrum is capable of evaluating the merits and risks of making the investment in the Shares and/or the Warrants and is able to bear the economic risk of the investment (including a complete loss of its investment in the Shares and/or the Warrants). Subject to the truth and accuracy of the representations and warranties made by A-C hereunder, Energy Spectrum has conducted such investigation as it deems relevant in connection with its consummation of the transactions contemplated by this Agreement. 5. CONDITIONS TO THE OBLIGATIONS OF A-C. The obligations of A-C to consummate the transactions contemplated by this Agreement on the Closing Date shall be subject to the satisfaction of each of the conditions set forth in this Section 5, unless waived by A-C, on or prior to the Closing Date. 5.1 REPRESENTATIONS AND WARRANTIES. If this Agreement is not signed on the Closing Date, the representations and warranties of Energy Spectrum set forth in Section 4 shall be true and correct in all material respects as of the Closing Date as though made on and as of such date; Energy Spectrum shall have performed all obligations and complied with all covenants required to be performed or complied with by Energy Spectrum under this Agreement on or prior to the Closing Date; and A-C shall have received from Energy Spectrum a certificate to such effect with respect to such Energy Spectrum's representations, warranties, obligations and covenants, dated the Closing Date, signed by an agent duly authorized to act on its behalf. 5.2 NO PROCEEDINGS. No order, injunction, decree or other action or legal, administrative, arbitration or other proceeding by any person other than A-C or investigation by any governmental agency or authority shall be pending or threatened, challenging or imposing a material limitation on the execution, delivery or performance of this Agreement, or the consummation of any of the transactions contemplated hereby. 10 5.3 EXECUTION AND DELIVERY OF OTHER AGREEMENTS. Energy Spectrum and the other parties thereto other than A-C shall execute and deliver the agreements described in Section 2 that are intended to be executed and delivered at the Closing. 5.4 APPROVAL OF DOCUMENTS. All proceedings taken in connection with the transactions contemplated hereby and all documents incident to such transactions shall be reasonably satisfactory in form and substance to A-C and its counsel. 6. CONDITIONS TO THE OBLIGATIONS OF ENERGY SPECTRUM. The obligations of Energy Spectrum to consummate the transactions under this Agreement on the Closing Date shall be subject to the satisfaction of each of the conditions set forth in this Section 6, unless waived by Energy Spectrum , on or prior to the Closing Date. 6.1 REPRESENTATIONS AND WARRANTIES. If this Agreement is not signed on the Closing Date, the representations and warranties of A-C set forth in Section 2 shall be true and correct in all material respects as of the Closing Date as though made on and as of such date; A-C shall have performed all obligations and complied with all covenants required to be performed or complied with by A-C under this Agreement on or prior to the Closing Date; and Energy Spectrum shall have received on the Closing Date from A-C a certificate or certificates, dated the Closing Date, to such effect, which certificate or certificates shall be signed by an authorized officer of A-C. 6.2 NO PROCEEDINGS. No order, injunction, decree or other action or legal, administrative, arbitration or other proceeding by any person or investigation by any governmental agency or authority shall be pending or, to the knowledge of A-C, threatened, challenging or imposing a material limitation on the execution, delivery or performance of this Agreement, the consummation of any of the transactions contemplated hereby or the operation by A-C of its businesses as now conducted. 6.3 APPROVAL OF DOCUMENTS. All proceedings taken in connection with the transactions contemplated hereby and all documents incident to such transactions shall be reasonably satisfactory in form and substance to Energy Spectrum and its counsel. 6.4 DELIVERY OF OTHER AGREEMENTS. A-C and the other parties thereto other than Energy Spectrum shall execute and deliver the agreements described in Section 2 that are intended to be executed and delivered at the Closing. 6.5 EXTENSION OF MATURITY DATE ON FINANCING. Wells Fargo Business Credit and Wells Fargo Energy Capital shall have granted an extension of the maturity date of all senior debt and subordinated debt maturities for a period of one year. 6.7 NO MATERIAL ADVERSE CHANGE. Except as described in the Commission Documents or in Schedule 3.7, there shall have been no material adverse change, nor shall any such change be threatened, in the Condition of A-C since September 30, 2003. 11 6.8 OPERATION IN ORDINARY COURSE. Other than actions related to the consummation of the transactions contemplated hereby, A-C shall have conducted its business in the ordinary course from the date hereof to the Closing Date, and no extraordinary or other material transactions not in the ordinary course of business shall have occurred without Energy Spectrum's consent. 7. CERTAIN COVENANTS OF A-C. 7.1 RESERVATION OF SHARES. The Company shall at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issue or delivery upon exercise of the Warrants, such number of shares of Common Stock as shall then be issuable or deliverable upon the exercise of all Warrants. Such shares of Common Stock shall, when issued or delivered in accordance with the terms of the Warrants, be duly and validly issued and fully paid and non-assessable. 7.2 REGISTRATION AND LISTING. If any shares of Common Stock required to be reserved for purposes of exercise of the require registration with or approval of any Governmental Authority under any federal or state or other applicable law before such Common Stock may be issued or delivered upon conversion or exchange, A-C will in good faith and as expeditiously as possible endeavor to cause such Common Stock to be duly registered or approved, as the case may be, unless such registration or approval is required solely because of a breach of Energy Spectrum's representation contained in Article 4. So long as the Common Stock is quoted on the OTC Bulletin Board, NASDAQ or listed on any national securities exchange, A-C will, if permitted by the rules of such system or exchange, quote or list and keep quoted or listed on such system or exchange all Common Stock issuable hereunder. 8. INDEMNIFICATION. 8.1 INDEMNIFICATION BY A-C. In addition to all other sums due hereunder or provided for in this Agreement, A-C agrees to indemnify and hold harmless Energy Spectrum and its "Affiliates" (as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) and their respective officers, directors, agents, representatives, employees, subsidiaries, partners and controlling persons (each, an "indemnified party") from and against any and all losses, claims, damages, expenses (including reasonable fees, disbursements and other charges of counsel) or other liabilities ("Liabilities") resulting from any breach of any covenant, agreement, representation or warranty of A-C in this Agreement; provided, however, that A-C shall not be liable under this Section 8: (a) for any amount paid in settlement of claims without A-C's consent (which consent shall not be unreasonably withheld) or (b) to the extent that it is finally judicially determined that such Liabilities resulted primarily from the willful misconduct or bad faith of such indemnified party; provided, further, that if and to the extent that such indemnification is held, by final judicial determination to be unenforceable, in whole or in part, for any reason, A-C shall make the maximum contribution to the payment and satisfaction of such indemnified Liability. Notwithstanding the foregoing, with respect to claims made under this Section 8 for damages not resulting from an actual or threatened third party claim ("Third Party Claims"), A-C shall not be obligated to provide indemnity hereunder until the aggregate of all such claims for indemnification made by Energy Spectrum (excluding damage for Third Party Claims) exceeds $200,000, and then shall be obligated to provide indemnity hereunder only to the extent the damages exceed $200,000. In connection with the obligation of A-C to indemnify for expenses as set forth above, A-C further agrees to reimburse each indemnified party for all such expenses (including reasonable fees, disbursements and other charges of counsel) as they are incurred by such indemnified party; provided, however, that if an indemnified party is reimbursed hereunder for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Liabilities in question resulted primarily from the willful misconduct or bad faith of such indemnified party. 12 8.2 NOTIFICATION; PROCEDURE. Each indemnified party under this Section 8 will, promptly after the receipt of notice of the commencement of any action or other proceeding against such indemnified party in respect of which indemnity may be sought from A-C under this Section 8, notify A-C in writing of the commencement thereof. The omission of any indemnified party so to notify A-C of any such action shall not relieve A-C from any liability which it may have to such indemnified party (i) other than pursuant to this Section 8 or (ii) under this Section 8 unless, and only to the extent that, such omission results in A-C's forfeiture of substantive rights or defenses. In case any such action or other proceeding shall be brought against any indemnified party and it shall notify A-C of the commencement thereof, A-C shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that any indemnified party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action or proceeding in which both A-C and an indemnified party is, or is reasonably likely to become, a party, such indemnified party shall have the right to employ separate counsel at A-C's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such indemnified party, (a) there are or may be legal defenses available to such indemnified party or to other indemnified parties that are different from or additional to those available to A-C or (b) any conflict or potential conflict exists between A-C and such indemnified party that would make such separate representation advisable; provided, however, that in no event shall A-C be required to pay fees and expenses under this sentence of this Section 8 for more than one firm of attorneys in any jurisdiction in any one legal action or group of related legal actions. The Company agrees that A-C will not, without the prior written consent of Energy Spectrum, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated hereby (if any indemnified party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of Energy Spectrum and each other indemnified party from all liability arising or that may arise out of such claim, action or proceeding. The rights accorded to indemnified parties hereunder shall be in addition to any rights that any indemnified party may have at common law, by separate agreement or otherwise. 13 8.3 REGISTRATION RIGHTS AGREEMENT. Notwithstanding anything to the contrary in this Section 8, the indemnification and contribution provisions of the Registration Rights Agreement shall govern any claim made with respect to registration statements filed pursuant thereto or sales made thereunder. 8.4 CERTAIN LIABILITIES. Notwithstanding any provision in this Agreement to the contrary, A-C makes no representations or warranties hereunder to Energy Spectrum to the extent any such representation or warranty is applicable to, and Energy Spectrum shall not be entitled to indemnification by A-C hereunder for any breach of any representation or warranty made by Energy Spectrum regarding, any matters with respect to the financial condition or results of operations taken as a whole of Strata Directional Drilling, Inc. ("Strata") , for periods ending prior to the date of acquisition of the capital stock of Strata by A-C; 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations, warranties and agreements made by A-C and Energy Spectrum in this Agreement or in any certificate or other instrument delivered pursuant hereto shall survive the Closing and any investigation and discovery by A-C or by Energy Spectrum, as the case may be, made at any time with respect thereto; provided, however, that, other than with respect to the second sentence of Section 3.2 (for which there shall be no time limit), neither Energy Spectrum nor A-C shall have any liability to the other for any misrepresentation, inaccuracy or omission in any representation or warranty, or any breach of any representation or warranty, unless the party asserting a claim with respect to any thereof gives to the other written notice of such claim on or before the date which is two years following the Closing Date. 10. MISCELLANEOUS PROVISIONS. 10.1 DELIVERIES. A-C and Energy Spectrum hereby covenant and agree to use their respective best efforts to perform each of their obligations hereunder, to deliver all certificates and to satisfy all other conditions set forth in this Agreement and to close the transactions contemplated by this Agreement on the Closing Date. 10.2 SUCCESSORS AND ASSIGNS. This Agreement is executed by, and shall be binding upon and inure to the benefit of, the parties hereto and each of their respective successors and assigns; provided, however, that neither this Agreement nor any right pursuant hereto nor interest herein shall be assignable by (a) A-C without the prior written consent of Energy Spectrum, except as expressly permitted herein or (b) Energy Spectrum without the prior written consent of A-C, except to an Affiliate of Energy Spectrum or as otherwise expressly permitted herein. None of the provisions of this Agreement shall be for the benefit of or enforceable by any other person. 10.3 NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery: 14 if to A-C at the following address: Allis-Chalmers Corporation 7660 Woodway, Suite 200 Houston, Texas 77063 Attn: President Fax: (713) 369-0555 with a copy to: Spolin Silverman Cohen & Bartlett LLP 1620 26th Street, Suite 2000N Santa Monica, California 90404 Attn: Joseph P. Bartlett Fax: 310 586 2444 if to Energy Spectrum at the following address: Energy Spectrum Partners LP 5956 Sherry Lane, Suite 900 Dallas, TX 75225 Attn: Thomas Whitener Fax: (214) 987-6110 with a copy to: Jackson Walker L.L.P. 901 Main Street, Suite 6000 Dallas, Texas 75202-3797 Attn: Frank P. McEachern Fax: (214) 953-5822 All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; five Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is acknowledged, if telecopied. 10.4 COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart will for all purposes be deemed an original, and all such counterparts shall constitute one and the same instrument. 10.5 GOVERNING LAW; FORUM. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas applicable to contracts entered into and to be wholly performed therein. Each party to this Agreement hereby irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement or any agreements or transactions contemplated hereby shall be brought in the in the courts of the State of Texas located in Houston or of the United States of America for the Southern District of Texas and hereby expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address set forth in Section 10.3, such service to become effective 10 days after such mailing. 15 10.6 ATTORNEYS' FEES. If any party should institute any action to enforce or interpret any term or provision of this Agreement, the party prevailing in such action, after all appeals have been exhausted, shall be entitled to its attorneys' fees, out-of-pocket disbursements and all other expenses from the non-prevailing party in such action. 10.7 ENTIRE AGREEMENT. This Agreement (together with all Exhibits and Schedules hereto) constitutes the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous written and oral negotiations, discussions, agreements and understandings with respect to such subject matter. 10.8 [INTENTIONALLY LEFT BLANK]. 10.9 EXPENSES OF ENERGY SPECTRUM. A-C agrees to promptly pay all reasonable legal expenses of Energy Spectrum and any director designated or nominated for service on A-C's Board of Directors by Energy Spectrum pursuant to Section 2.2 of the Stockholders Agreement related to (i) the transactions contemplated by this Agreement, the Registration Rights Agreement, the Warrants and the Stockholders Agreement (including Section 4), (ii) any amendments to any of the foregoing documents initiated by A-C or which A-C otherwise requests Energy Spectrum to consider or agree to, (iii) any other transaction or matter initiated by A-C or which A-C otherwise requests Energy Spectrum to consider or agree to, or (iv) the service of any such director on A-C's Board of Directors. 10.10 INTERPRETATION. Each of Energy Spectrum and A-C have participated in the negotiation and drafting of this Agreement. Accordingly, each of the parties hereby waives any statutory provision, judicial precedent or other rule of law to the effect that contractual ambiguities are to be construed against the party who shall have drafted the same. 10.11 TERMINATION. This Agreement may be terminated by any party if the Closing does not occur on or before April 25, 2004. 10.12 SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be or become prohibited or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement except to the extent that any provision would clearly be contemplated by the parties to be conditioned upon the validity and enforceability of such invalid or prohibited provision. 16 10.13 SECTION HEADINGS. The section and subsection headings contained in this Agreement are included for convenience only and form no part of the agreement between the parties. 10.14 PUBLICITY. Except as may be required by applicable law, no party hereto shall issue a publicity release or announcement or otherwise make any public disclosure concerning this Agreement or the transactions contemplated hereby, without prior approval by the other parties hereto. If any announcement is required by law to be made by any party hereto, prior to making such announcement such party will deliver a draft of such announcement to the other parties and shall give the other parties a reasonable opportunity under the circumstances to comment thereon. 10.15 BROKERS AND FINDERS. Neither A-C nor any of Energy Spectrum , nor any person acting on behalf of any of them, has employed any broker, agent or finder, or incurred any liability for any brokerage fees, agents' commissions, finders' fees or advisory fees in connection with the transactions contemplated hereby; and A-C shall indemnify and hold Energy Spectrum harmless in respect of any "Damages" (as defined in Section 8.6 hereof) arising out of any agreements, arrangements or understandings claimed to have been made by A-C, or any person acting on its behalf, with any third party; and Energy Spectrum shall indemnify and hold A-C harmless in respect of any Damages arising out of any agreements, arrangements or understandings claimed to have been made by Energy Spectrum, or any person acting on its behalf, with any third party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective representatives hereunto duly authorized as of the date first above written. ALLIS-CHALMERS CORPORATION, a Delaware corporation /s/ Munawar H. Hidayatallah ---------------------------------------- Munawar H. Hidayatallah, President ENERGY SPECTRUM PARTNERS LP By: Energy Spectrum Capital LP, General Partner By: Energy Spectrum LLC, General Partner By: /s/ James W. Spann ------------------------------------ Name: James W. Spann Title: Chief Investment Officer 17 THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR ASSIGNED TO ANY OTHER PERSON OR ENTITY, EXCEPT AS SET FORTH HEREIN. WARRANT TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF ALLIS-CHALMERS CORPORATION VOID AFTER 5:00 P.M., CENTRAL TIME, ON APRIL 1, 2006, OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN. AT 5:00 P.M., CENTRAL TIME ON THE IMMEDIATELY FOLLOWING BUSINESS DAY Date of Issuance: April 2, 2004 THIS CERTIFIES that, for good and valuable consideration, ______ (the "Purchaser"), or registered assigns, is entitled to subscribe for and purchase from Allis-Chalmers Corporation, a Delaware corporation (the "Company"), at the price of $0.50 per share (such price, as from time to time to be adjusted as hereinafter provided, being hereinafter called the "Warrant Price"), at any time and from time to time after the date hereof but not later than the Expiration Date (as defined below), up to such number of fully paid, nonassessable shares of Common Stock, par value $0.15 per share ("Common Stock"), of the Company as is specified in the following sentence, subject, however, to the provisions and upon the terms and conditions hereinafter set forth, including without limitation the provisions of Section 3 hereof. This Warrant shall be exercisable for up to _____ shares of Common Stock upon issuance, subject to adjustment as provided herein. "Expiration Date" shall mean 5:00 P.M., Central time, on April 1, 2006, PROVIDED, that if such day is not a Business Day, as defined herein, at 5:00 P.M., Central time, on the immediately following Business Day. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which banks in the State of Texas are authorized by law to remain closed. SECTION 1. EXERCISE OF WARRANT (a) CASH OR CASHLESS EXERCISE This Warrant may be exercised, at any time and from time to time but not later than the Expiration Date, by the holder hereof (hereinafter referred to as the "Warrantholder"), in whole or in part (but not as to a fractional share of Common Stock), by the completion of the subscription form attached hereto and by the surrender of this Warrant (properly endorsed) at the Company's offices at 7660 Woodway, Suite 200, Houston, Texas 77063 (or at such other location in the United States as the Company may designate by notice in writing to the Warrantholder at the address of the Warrantholder appearing on the books of the Company), and by payment to the Company of the Warrant Price for each share being purchased, (i) in cash or by certified or official bank check or (ii) by delivering notice to the Company that the Warrantholder is exercising this Warrant by authorizing the Company to reduce the number of shares of Common Stock subject to this Warrant by the number of shares having an aggregate Fair Market Value equal to the applicable Warrant Price. For purposes of this Warrant, the term "Fair Market Value" shall mean on any date specified herein, with respect to Common Stock, the amount per share equal to (a) the average of the closing prices thereof on the ten (10) trading days prior to such date, in each case as officially reported on the principal national securities exchange on which the same are then listed or admitted to trading, or (b) if no shares of Common Stock are then listed or admitted to trading on any national securities exchange, the average of the reported closing bid and asked prices thereof on the ten (10) trading days prior to such date as quoted in the Nasdaq National Market or, if no shares of Common Stock are then quoted in the Nasdaq National Market, as published by the National Quotation Bureau, Incorporated or any similar successor organization, and in either case as reported by any member firm of the New York Stock Exchange selected by the Company; PROVIDED that with respect to (b) above, if the average daily trading volume for the subject shares for the thirty (30) days prior to the date of determination shall be less than 1,000 shares per day, then the subject Market Price shall be the average of the closing bid price of such shares on the ten (10) trading days prior to the date of determination, or (c) if not so reported, the fair market value of the Common Stock, as determined in good faith by the Board of Directors of the Company. (b) PROCEDURE FOR EXERCISE In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the total number of whole shares of Common Stock so purchased, registered in the name of the Warrantholder, shall be delivered to the Warrantholder within a reasonable time, not exceeding five Business Days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of shares (except a remaining fractional share), if any, with respect to the unexercised portion of this Warrant shall also be issued to the Warrantholder within such time. With respect to any such exercise, the Warrantholder shall for all purposes be deemed to have become the holder of record of the number of shares of Common Stock evidenced by such certificate or certificates, from the date on which this Warrant was surrendered and, if exercise is pursuant to Section 1(a), payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date on which the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open. No fractional shares shall be issued upon exercise of this Warrant and no payment or adjustment shall be made upon any exercise on account of any cash dividends on the Common Stock issued upon such exercise. If any fractional interest in a share of Common Stock would, except for the provisions of this Section 1, be delivered upon any such exercise, the Company, in lieu of delivering the fractional share thereof, shall pay to the Warrantholder an amount in cash equal to the current Fair Market Value of such fractional interest, as determined above. 2 SECTION 2. ADJUSTMENT OF NUMBER OF SHARES Upon each adjustment of the Warrant Price for any stock dividend or distribution or any subdivision or combination of the outstanding shares of the Common Stock as provided in Section 3, the Warrantholder shall thereafter be entitled to purchase, at the Warrant Price resulting from such adjustment (each an "Adjusted Warrant Price"), the number of shares (calculated to the nearest hundredth of a share) obtained by multiplying the Warrant Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Adjusted Warrant Price resulting from such adjustment SECTION 3. ADJUSTMENT OF WARRANT PRICE AND OTHER MATTERS The Warrant Price and the number and kind of shares issuable hereunder shall be subject to adjustment from time to time upon the happening of certain events as provided in this Section 3. (a) ADJUSTMENTS FOR ISSUE OR SALE OF COMMON STOCK AT LESS THAN CONVERSION RATE If the Company shall issue or sell shares of its Common Stock (other than pursuant to this Warrant) for a consideration per share less than the Warrant Price (as the same shall be adjusted from time to time, as provided herein), then in each such case, the Warrant Price shall be reduced to an amount equal to the price per share received by the Company in such sale. (b) ADJUSTMENT PROVISIONS; OTHER MATTERS (1) If at any time prior to the exercise of this Warrant in full, the Company shall (A) declare a dividend or make a distribution on the Common Stock payable in shares of its capital stock (whether shares of Common Stock or of capital stock of any other class); (B) subdivide, reclassify or recapitalize its outstanding Common Stock into a greater number of shares; (C) combine, reclassify or recapitalize its outstanding Common Stock into a smaller number of shares; or (D) issue any shares of its capital stock by reclassification of its Common Stock (excluding any such reclassification in connection with a consolidation or a merger that is subject to Section 3(b)(4)), the Warrant Price in effect at the time of the record date of such dividend, distribution, subdivision, combination, reclassification or recapitalization shall be adjusted so that the Warrantholder shall be entitled to receive the aggregate number and kind of shares which, if this Warrant had been exercised in full immediately prior to such event, it would have owned upon such exercise and been entitled to receive by virtue of such dividend, distribution, subdivision, combination, reclassification or recapitalization. Any adjustment required by this Section 3(b) shall be made immediately after the record date, in the case of a dividend or distribution, or the effective date, in the case of a subdivision, combination, reclassification or recapitalization, to allow the purchase of such aggregate number and kind of shares. 3 (2) If at any time prior to the exercise of this Warrant in full, the Company shall make a distribution to all holders of the Common Stock of (i) stock of a subsidiary or securities convertible into or exercisable for such stock, or (ii) evidence of indebtedness of the Company or its subsidiaries or assets of the Company or its subsidiaries (excluding cash dividends or distributions out of earned surplus), then in lieu of an adjustment in the Warrant Price or the number of shares of Common Stock purchasable upon the exercise of this Warrant (and in addition to the Common Stock or other securities to be received upon exercise of this Warrant as provided herein), each Warrantholder, upon the exercise hereof at any time after such distribution, shall be entitled to receive from the Company, such subsidiary or both, as the Company shall determine, the stock or other securities to which such Warrantholder would have been entitled if such Warrantholder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Section 3, and the Company shall reserve, for the life of the Warrant, such securities of such subsidiary or other corporation; PROVIDED, HOWEVER, that no adjustment in respect of dividends or interest on such stock or other securities shall be made during the term of this Warrant or upon its exercise. (3) If at any time prior to the expiration of this Warrant in full, the Company shall issue rights or warrants entitling persons to subscribe for or purchase Common Stock in either case at a price per share or exercise price per share less than the current Warrant Price, then, in each such case the Warrant Price shall be reduced to the subject issue or exercise price, as appropriate. (4) In the event of any capital reorganization of the Company (other than an event referred to in Section 3(b)(1)), or in case of the consolidation of the Company with, the merger of the Company with or into or the sale of all or substantially all of the properties and assets of the Company to any other person, if in connection therewith consideration is payable to holders of Common Stock (or other securities or property purchasable upon exercise of this Warrant) in exchange therefor, this Warrant shall remain subject to the terms and conditions set forth in this Warrant and this Warrant shall, after such capital reorganization, consolidation, merger or sale be exercisable for the number of shares of stock or other securities or assets to which a holder of the number of shares of Common Stock purchasable (at the time of such capital reorganization, reclassification of such Common Stock, consolidation, merger or sale) upon exercise of this Warrant would have been entitled if this Warrant had been exercised immediately prior to such capital reorganization, reclassification of such Common Stock, consolidation, merger or sale; and in any such case, if necessary, the provisions set forth in this Warrant with respect to the rights and interests thereafter of the Warrantholder shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or assets thereafter deliverable on the exercise of this Warrant. The Company shall not effect any such consolidation, merger or sale, unless prior to or simultaneously with the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets or the appropriate corporation or entity shall assume, by written instrument, the obligation to deliver to the Warrantholder the shares of stock, securities or assets to which the Warrantholder may be entitled pursuant to this Section 3(b)(4). 4 (5) Notwithstanding Section 3(b)(4), (i) if the Company merges or consolidates with, or sells all or substantially all of its property and assets to, any other person and consideration is payable to holders of Common Stock in exchange for their Common Stock in connection with such merger, consolidation or sale which consists solely of cash, or (ii) in the event of the dissolution, liquidation or winding up of the Company, then the Warrantholder shall be entitled to receive distributions on the date of such event on an equal basis with holders of Common Stock (or other securities issuable upon exercise of this Warrant) as if this Warrant had been exercised immediately prior to such event, less the Warrant Price. Upon receipt of such payment if any, the rights of the Warrantholder shall terminate and cease and this Warrant shall expire. In case of any such merger, consolidation or sale of assets, the surviving or acquiring person and, in the event of any dissolution, liquidation or winding up of the Company, the Company shall promptly, after receipt of this surrendered Warrant, make payment by delivering a check in such amount as is appropriate (or, in the case of consideration other than cash, such other consideration as is appropriate) to such person as it may be directed in writing by the Warrantholder surrendering this Warrant. (6) No adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least one cent ($.0l) in such price; provided, however, that any adjustments which by reason of this Section 3(b)(6) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 3 shall be made to the nearest cent or to the nearest hundredth of a share, as the case may be. Notwithstanding anything in this Section 3 to the contrary, the Warrant Price shall not be reduced to less than the then existing par value of the Common Stock as a result of any adjustment made hereunder. (7) In the event that at any time, as the result of any adjustment made pursuant to this Section 3(b), the Warrantholder thereafter shall become entitled to receive any securities other than Common Stock, thereafter the number of such other securities so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Section 3(b). (c) NO ADJUSTMENT FOR CASH DIVIDENDS Except as provided in Section 3(b) of this Agreement, no adjustment in respect of any cash dividends shall be made during the term of this Warrant or upon the exercise of this Warrant. 5 (d) FORM OF WARRANT AFTER ADJUSTMENTS The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number or kind of the shares purchasable pursuant to this Warrant, and Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant, as initially issued, provided, however, that the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that does not affect the substance thereof. Any Warrant certificate thereafter issued, whether upon registration of transfer or, or in exchange or substitution for, an outstanding Warrant certificate may be in the form so changed. (e) TREATMENT OF WARRANTHOLDER Prior to due presentment for registration of transfer of this Warrant, the Company may deem and treat the Warrantholder as the absolute owner of this Warrant (notwithstanding any notation of ownership or other writing hereon) for all purposes and shall not be affected by any notice to the contrary. (f) NOTICE OF ADJUSTMENT Upon any adjustment of the Warrant Price, then and in each such case the Company shall give written notice thereof, by first-class mail, postage prepaid, addressed to each Warrantholder at the address of such holder as shown on the books of the Company, which notice shall state the Warrant Price resulting from such adjustments setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (g) STOCK TO BE RESERVED The Company will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the exercise of this Warrant as herein provided, such number of shares of Common Stock as shall then be issuable upon the exercise of this Warrant. The Company covenants that all shares of Common Stock which shall be so issued, upon full payment of the Warrant Price therefor or as otherwise set forth herein, shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, the Company covenants that it will from time to time take all such action as may be required to ensure that the par value per share, if any, of the Common Stock is at all times equal to or less than the effective Warrant Price. The Company will take all such action as may be necessary to ensure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange or automated quotation system upon which the Common Stock of the Company may be listed or quoted. The Company will not take any action which results in any adjustment of the Warrant Price if the total number of shares of Common Stock issued and issuable after such action upon exercise of this Warrant would exceed the total number of shares of Common Stock then authorized by the Company's Certificate of Incorporation. The Company has not granted and will not grant any right of first refusal with respect to shares issuable upon exercise of this Warrant, and there are no preemptive rights associated with such shares. 6 (h) ISSUE TAX The issuance of certificates for shares of Common Stock upon exercise of any Warrant shall be made without a charge to the Warrantholder for any issuance tax in respect thereto provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Warrantholder. (i) CLOSING OF BOOKS The Company will at no time close its transfer books against the transfer of the shares of Common Stock issued or issuable upon the exercise of this Warrant in any manner which interferes with the timely exercise of this Warrant. (j) OUTSTANDING WARRANTS; EMPLOYEE OPTIONS Notwithstanding the provisions of this Section 3, no adjustment in the exercise price or the number of shares of Common Stock issuable hereunder shall be made as a result of the issuance of shares of Common Stock upon the exercise of (1) the Warrants dated February 1, 2002 and February 19, 2003, issued to Energy Spectrum Partners LP, providing for the issuance of 1,325,000 shares of Common Stock at an exercise price of $0.15 per share, (2) the Warrants dated February 1, 2002, issued to Wells Fargo Energy Capital, providing for issuance of 1,165,000 shares of Common Stock at an exercise price of $0.15, or (3) options issued pursuant to the Company's 2003 Stock Incentive Plan so long as such options have an exercise price of at least $0.15 per share (adjusted for stock splits or similar events). (k) DEFINITION OF COMMON STOCK The shares purchasable pursuant to this Warrant shall include only securities designated as Common Stock of the Company. As used herein the term "Common Stock" shall mean and include the Common Stock, par value $.15 per share, of the Company as authorized on the date hereof, or shares of any class or classes resulting from any recapitalization or reclassification thereof which are not limited to any fixed sum or percentage and are not subject to redemption by the Company and in case at any time there shall be more than one such resulting class, the shares of each class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassification bears to the total number of shares of all such classes resulting from all such reclassification. SECTION 4. NOTICES OF RECORD DATES In the event of: (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution (other than cash dividends out of earned surplus), or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any right to sell shares of stock of any class or any other right; or 7 (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other corporation or entity; or (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company; or (d) any public offering or any issuance by the Company of additional shares of capital stock; then and in each such event the Company will give notice to the Warrantholder specifying; (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and stating the amount and character of such dividend, distribution or right, and (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock will be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be given at least 20 days and not more than 90 days prior to the date therein specified, and such notice shall state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or to a favorable vote of stockholders, if either is required. SECTION 5. STOCKHOLDERS RIGHTS AND LIABILITIES No provision hereof, in the absence of affirmative action by the Warrantholder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Warrantholder shall give rise to any liability of such Warrantholder for the Warrant Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 8 SECTION 6. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security reasonably satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Common Stock as provided for in such lost, stolen, destroyed or mutilated Warrant. SECTION 7. NOTICES All notices, requests and other communications required or permitted to be given or delivered hereunder shall be in writing, and shall be delivered, or shall be sent by certified or registered mail or overnight courier, postage prepaid and addressed, or by facsimile, and if to the Warrantholder to such Warrantholder at such address or facsimile number as shall have been furnished to the Company by notice from such Warrantholder and if to the Company, at 7660 Woodway, Suite 200, Houston, Texas 77063, facsimile (713) 369-0555 or at such other address or facsimile number as shall have been furnished to the Warrantholder by notice from the Company. SECTION 8. RESTRICTIONS ON TRANSFER This Warrant may not be sold, transferred, hypothecated or assigned to any other person or entity other than an affiliate of Purchaser. Purchaser agrees not to make any sale or other disposition of either the Warrant or the underlying Common Stock except pursuant to a registration statement which has become effective under the Securities Act, setting forth the terms of such offering, the underwriting discount and the commissions and any other pertinent data with respect thereto, or in a transaction exempt from registration under the Securities Act, in which case Purchaser shall, at the Company's request, provide the Company with an opinion of counsel reasonably acceptable to the Company that such registration is not required. This Warrant shall bear a legend setting forth the foregoing restriction. SECTION 9. AMENDMENTS AND WAIVERS This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by each of (i) a majority in interest of the holders of this Warrant and (ii) an authorized representative of the Company. SECTION 10. SEVERABILITY If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 9 SECTION 11. GOVERNING LAW THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. SECTION 12. HEADINGS The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect any of the terms hereof. SECTION 13. COUNTERPARTS This Warrant may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 10 IN WITNESS WHEREOF, the Company and Purchaser have executed this warrant on and as of the day and year first above written. COMPANY: ALLIS-CHALMERS CORPORATION By: ------------------------------------ Munawar H. Hidayatallah Its: Chief Executive Officer PURCHASER: By: ------------------------------------ Name Title -----END PRIVACY-ENHANCED MESSAGE-----