UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A-1
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
ALLIS-CHALMERS CORPORATION
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
019 645 407
(CUSIP Number)
J. STEVEN EMERSON
1522 ENSLEY AVENUE
LOS ANGELES, CA 90024
(310) 553-4151
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
SEPTEMBER 29, 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.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 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 ("Act") 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. 019 645 407
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1. Names of Reporting Persons. I.R.S. Identification Nos. of above
persons (entities only)
J. Steven Emerson
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) |_|
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(b) |X|
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3. SEC Use Only
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4. Source of Funds (See Instructions)
PF
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5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) |_|
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6. Citizenship or Place of Organization
California, United States of America
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Number of 7. Sole Voting Power
Shares 1,124,000
Beneficially ---------------------------------------------------------
Owned by
Each 8. Shared Voting Power
Reporting 50,000
Person With ---------------------------------------------------------
9. Sole Dispositive Power
1,124,000
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10. Shared Dispositive Power
50,000
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
1,174,000
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12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) |_|
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13. Percent of Class Represented by Amount in Row (11)
9.999%
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14. Type of Reporting Person (See Instructions)
IN
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2
CUSIP No. 019645407
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1. Names of Reporting Persons. I.R.S. Identification Nos. of above
persons (entities only)
Emerson Partners, a California general partnership
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) |_|
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(b) |X|
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3. SEC Use Only
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4. Source of Funds (See Instructions)
OO
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5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) |_|
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6. Citizenship or Place of Organization
California, United States of America
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Number of 7. Sole Voting Power
Shares 0
Beneficially ---------------------------------------------------------
Owned by
Each 8. Shared Voting Power
Reporting 50,000
Person With ---------------------------------------------------------
9. Sole Dispositive Power
0
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10. Shared Dispositive Power
50,000
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
50,000
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12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
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13. Percent of Class Represented by Amount in Row (11)
0.4%
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14. Type of Reporting Person (See Instructions)
PN
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3
The Schedule 13D filed with the Securities and Exchange Commission (the
"Commission") on July 1, 1997 by J. Steven Emerson and Emerson Partners, as
reporting persons, is hereby amended to report the acquisition of additional
securities.
ITEM 1. SECURITY AND ISSUER
No amendments or supplements.
ITEM 2. IDENTITY AND BACKGROUND
No amendments or supplements.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The purchase price for the shares of Common Stock purchased by the reporting
persons was $2,934,000 for the shares purchased on August 10, 2004, and $588,000
for the shares purchased on September 29, 2004, which was funded from the
personal funds of the Reporting Persons.
ITEM 4. PURPOSE OF TRANSACTION
No amendments or supplements.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) As of the date of this Statement, the Reporting Persons beneficially owned
in the aggregate 1,164,000 Shares constituting 9.9% of the outstanding Shares.
The Reporting Persons may be deemed to have beneficial ownership of the Shares
as follows:
NAME NUMBER OF SHARES % OF OUTSTANDING SHARES
------------------- ----------------- -----------------------
J. Steven Emerson 1,174,000 9.9999%
Emerson Partners 50,000 0.4%
(b) J. Steven Emerson has the sole power to vote or direct the vote of 1,124,000
Shares and sole power to dispose or direct the disposition of such Shares.
Emerson Partners and J. Steven Emerson have the shared power to vote or direct
the vote of 50,000 Shares and the shared power to dispose or direct the
disposition of such Shares.
(c) The Reporting Persons purchased 978,000 Shares from the issuer in a private
placement completed on August 10, 2004 and purchased an additional 196,000
shares in a private placement completed on September 29, 2004. The Reporting
Persons paid $2,934,000, or $3.00 per share, for the Shares issued in the first
private placement, and $588,000, or $3.00 per share, for the Shares issued in
the second private placement.
(d) No other person is known to have the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, the Shares
covered by this Statement.
(e) Not applicable.
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
No amendments or supplements.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
There are hereby filed as exhibits the documents listed on the Exhibit Index to
this Schedule 13D/A-1
SIGNATURE
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.
October 1, 2004
---------------
DATE
/S/ J. STEVEN EMERSON
-----------------------------
SIGNATURE
J. STEVEN EMERSON
-----------------
NAME/TITLE
5
EXHIBIT INDEX
Exhibit Description
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1 Addendum to Stock Purchase Agreement dated September 24, 2004
2 Stock Purchase Agreement dated September 24, 2004
3 Amendment to Stock Purchase Agreement (undated)
4 Side Letter dated August 5, 2004, related to Stock Purchase Agreement
EXHIBIT 1
ADDENDUM TO
STOCK PURCHASE AGREEMENT
This ADDENDUM TO STOCK PURCHASE AGREEMENT (this "Agreement"), dated
September 24, 2004, is made by and among Allis-Chalmers Corporation, a Delaware
corporation (the "Company"), and the signatories hereto (the "Investors").
RECITALS
WHEREAS, the Company and certain investors (the "August Investors")
executed and delivered to each other a Stock Purchase Agreement dated August 10,
2004, as amended by an Amendment to Stock Purchase Agreement dated August 10,
2004, and a Letter regarding Stock Purchase Agreement dated August 5, 2004
(collectively, the "August Stock Purchase Agreement");
WHEREAS, the Company has agreed to issue and sell shares of its Common
Stock to the investors signatory hereto (the "Investors"), on the terms set
forth in the August Stock Purchase Agreement as modified hereby;
WHEREAS, the Company has delivered to the Investors a Private Placement
Memorandum dated July 13, 2004 (the "Private Placement Memorandum), describing
the business of the Company, and a copy of a Registration Statement on Form S-1
filed with the Securities and Exchange Commission on September 10, 2004 (the
"Registration Statement");
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows
(capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the August Stock Purchase Agreement):
1. PURCHASE AND SALE OF STOCK. Subject to the terms and
conditions of the August Stock Purchase Agreement, which terms and conditions
are incorporated herein by reference, as modified by this Agreement, the Company
will issue and sell to each Investor, and each Investor severally agrees to
purchase from the Company, the number of shares of the Company's authorized but
unissued Common Stock (the "Shares") set forth with respect to such Investor on
Schedule 1.1 hereto, at a price per share equal to $3.00. The closing (the
"Closing") of the sale of the Shares shall be effected at the offices of the
Company on or prior to the third business day following satisfaction in full of
all of the closing conditions set forth in Section 4 and 5 of the August Stock
Purchase Agreement, or waiver of any such conditions pursuant to the terms
thereof, or at such other time and place as may be agreed to by a Majority of
the Investors and the Company (the "Closing Date"). At the Closing, subject to
the terms and conditions hereof, the Company shall issue to the Investors
certificates representing the Shares purchased by such Investor from the
Company, against payment of the full amount of such Investor's aggregate
purchase price by wire transfer of immediately available funds to the Company's
bank account. The Company's obligation to sell shares to the Investors shall be
deemed to be a separate agreement from the August Stock Purchase Agreement and
shall be deemed made on and as of the date hereof.
2. DISCLOSURES. Attached hereto are current disclosure
schedules corresponding to Section 2 of the August Stock Purchase Agreement. The
Investors acknowledge that the Private Placement Memorandum and the August Stock
Purchase Agreement speak only as of the respective dates of each thereof, and
that such documents shall be deemed to be, and are hereby, modified to reflect
(a) that the Company is no longer pursuing the acquisition designated as
"Company "F" in the Private Placement Memorandum, (b) the disclosures set forth
in the Registration Statement, and (c) the press release released on September
23, 2004, relating to the acquisition of Safco-Oil Field Products, Inc. The
Company represents that except for the acquisition of Safco-Oil Field Products,
Inc., there has been no material change in its business since the date of the
Registration Statement. Subject to the foregoing, the representations and
warranties set forth in the August Stock Purchase Agreement are true and correct
as of the date hereof.
3. BOARD APPROVAL. The Investors acknowledge that consummation
of the transactions contemplated hereby is subject to the approval of the Board
of Directors of the Company, currently contemplated to be obtained on September
28, 2004.
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.
By:
Allis-Chalmers Corporation, TRANSCONTINENTAL CAPITAL CORP.
a Delaware corporation
/S/ RONALD GONZALEZ-BUNSTER
------------------------------
/S/ MUNAWAR H. HIDAYATALLAH Signature
------------------------------
Munawar H. Hidayatallah, RONALD GONZALEZ-BUNSTER
Chief Executive Officer ------------------------------
7660 Woodway, Suite 200 Name
Houston, Texas 77063
President/CEO
------------------------------
Title
2
[SIGNATURE PAGE CONTINUED]
MILTON H. DRESNER REVOCABLE LIVING TRUST
/S/ MILTON H. DRESNER
----------------------------------------
Signature
MILTON H. DRESNER
----------------------------------------
Name
JOSEPH S. DRESNER
/S/ JOSEPH S. DRESNER
----------------------------------------
Signature
JOSEPH S. DRESNER
----------------------------------------
Name
J. STEVEN EMERSON ROTH IRA
/S/ J. STEVEN EMERSON
----------------------------------------
Signature
J. STEVEN EMERSON
----------------------------------------
Name
Sole beneficiary, self-directed IRA
----------------------------------------
Title
3
[SIGNATURE PAGE CONTINUED]
WAVERLY LIMITED PARTNERSHIP
/S/ J. GRAHAM R. SMITH
------------------------------------------
Signature
GRAHAM R. SMITH
------------------------------------------
Name
Managing General Partner
------------------------------------------
Title
THE SCHMIEDING FOUNDATION, INC.
/S/ L.H. SCHMIEDING
------------------------------------------
Signature
L.H. SCHMIEDING
------------------------------------------
Name
Chief Executive Officer
------------------------------------------
Title
ROSEBURY, L.P.
/S/ ANTHONY R. DANAHER
------------------------------------------
Signature
ANTHONY R. DANAHER
------------------------------------------
Name
President of Guild Investment Management,
Inc., General Partner
------------------------------------------
Title
4
[SIGNATURE PAGE CONTINUED]
METEORIC, L.P.
/S/ ANTHONY R. DANAHER
------------------------------------------
Signature
ANTHONY R. DANAHER
------------------------------------------
Name
President of Guild Investment Management,
Inc., General Partner
------------------------------------------
Title
BARBARA C. CRANE
/S/ BARBARA C. CRANE
------------------------------------------
Signature
BARBARA C. CRANE
------------------------------------------
Name
BRISTOL INVESTMENT FUND, LTD.
/S/ PAUL KESSLER
------------------------------------------
Signature
PAUL KESSLER
------------------------------------------
Name
Director
------------------------------------------
Title
5
[SIGNATURE PAGE CONTINUED]
MEADOWBROOK OPPORTUNITY FUND LLC
/S/ MICHAEL RAGINS
------------------------------------------
Signature
MICHAEL RAGINS
------------------------------------------
Name
Manager
------------------------------------------
Title
KENNETH MALKES
/S/ KENNETH MALKES
------------------------------------------
Signature
KENNETH MALKES
------------------------------------------
Name
6
EXHIBIT 2
[LOGO] ALLIS-CHALMERS
7660 Woodway, Suite 200
Houston, Texas 77063 (713) 369-0550
STOCK PURCHASE AGREEMENT
BY AND AMONG
ALLIS-CHALMERS CORPORATION AND
THE INVESTORS NAMED HEREIN
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DATED SEPTEMBER 24, 2004
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated September 24,
2004, is made by and among Allis-Chalmers Corporation, a Delaware corporation
(the "Company"), and the Investors named on Schedule 1.1 hereto (the
"Investors").
RECITALS
WHEREAS, the Company has delivered to each Investor a Private Placement
Memorandum (the "Private Placement Memorandum") dated July 13, 2004, and an
Investor Questionnaire (the "Investor Questionnaire") relating to the
transactions contemplated in this Agreement.
WHEREAS, the Company proposes to issue and sell to Investors, and
Investors desire to purchase from the Company, shares of the Company's common
stock, par value $0.01 per share (the "Common Stock"), on the terms set forth
herein.
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. Subject to the terms and conditions of
this Agreement, the Company will issue and sell to each Investor, and each
Investor severally agrees to purchase from the Company, the number of shares of
the Company's authorized but unissued Common Stock (the "Shares") set forth with
respect to such Investor on Schedule 1.1 hereto, at a price per share equal to
$3.00. The closing (the "Closing") of the sale of the Shares shall be effected
at the offices of the Company on or prior to the second business day following
satisfaction in full of all of the closing conditions set forth in Section 4 and
5 hereof, or waiver of any such conditions pursuant to the terms thereof, or at
such other time and place as may be agreed to by a majority of the Investors
pursuant to Section 9.9 (a "Majority of the Investors") and the Company (the
"Closing Date"). At the Closing, subject to the terms and conditions hereof, the
Company shall cause the Depository Trust Company to enter a book entry on behalf
of each Investor representing the Shares purchased by such Investor from the
Company, against payment of the full amount of such Investor's aggregate
purchase price by wire transfer of immediately available funds to the Company's
bank account.
1.2 LEGENDS. All certificates representing the Shares shall bear the
following legend (in addition to any legend required by the blue sky or
securities laws of any state or jurisdiction to the extent such laws are
applicable to the shares represented by the certificate so legended):
"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."
1.3 STOP TRANSFER ORDERS. All certificates representing the Shares will
be subject to a stop transfer order with the Depository Trust Company or with
the Company's transfer agent that restricts the transfer of such shares except
in compliance with this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
makes the following representations and warranties to the Investors:
2.1 ORGANIZATION, ETC. The Company 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 the Company and its Subsidiaries (as
defined below), taken as a whole (for the Company and its Subsidiaries, a
"Material Adverse Effect"). Each company (each, a "Subsidiary") listed on
Schedule 2.1 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. Except for the
Subsidiaries, the Company 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 the Company, as currently in effect, are among the
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), except that such documents do not include a Certificate of
Amendment of the Certificate of Incorporation of the Company filed on April 9,
2004, the sole effect of which was to effect a one-to-five reverse stock split.
2
2.2 AUTHORITY. The Company 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 the Company's
Board of Directors. The issuance and sale of the Shares has been duly authorized
and if, as and when delivered to the Investors, the 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. The issuance
and sale of the Shares will not be subject to preemptive or other similar rights
of any holder of the Company's securities.
2.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Company and constitutes a legal, valid and binding agreement and
obligation of the Company enforceable against it in accordance with its terms
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect generally relating to or affecting creditors'
rights.
2.4 NO VIOLATION. Except as set forth on Schedule 2.4, the execution
and the delivery by the Company of this Agreement and the performance by the
Company of its obligations hereunder, including the issuance and sale of the
Shares, 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 the Company or any
Subsidiary or any of their respective 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 the
Company or any Subsidiary or any of their respective properties or assets.
2.5 LITIGATION. Except as set forth in Schedule 2.5 or the SEC Reports
(as defined in Section 2.7 below), 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
2.6 CAPITALIZATION. The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock, par value $0.01 per share,
6,276,016 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 no
shares are outstanding on the date hereof. Except as set forth on Schedule 2.6,
the Company owns 100% of the capital stock of each of the Subsidiaries. Except
as set forth on Schedule 2.6 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 the Company or any Subsidiary.
2.7 ANNUAL REPORT; FINANCIAL STATEMENTS. The Company's Annual Report on
Form 10-K for the year ended December 31, 2003, as amended by Form 10-K/A filed
with the SEC on April 29, 2004, and Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004 (the " SEC 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 the Company filed any report on Form 8-K since December 31, 2003
other than Form 8-Ks filed on June 3, 2004 and June 23, 2004. All of the
consolidated financial statements included in the Reports (the "Company
Financial Statements"): (i) have been prepared from and on the basis of, and are
in accordance with, the books and records of the Company 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 the Company as of the date of each such
Company 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 the Company's independent public
accountants. Except as set forth in Schedule 2.7 or in the Company Financial
Statements, as of the date hereof, the Company has no liabilities other than (i)
liabilities which are reflected or reserved against in the Company Financial
Statements and which remain outstanding and undischarged as of the date hereof,
(ii) liabilities arising in the ordinary course of business of the Company since
December 31, 2003, (iii) liabilities incurred as a result of the transactions
described on Schedule 2.7 or (iv) liabilities which were not required by
generally accepted accounting principles to be reflected or reserved on the
Company Financial Statements. Since December 31, 2003, except as set forth on
Schedule 2.7 hereto, there has not been any event or change which has had or
could reasonably be expected to have a Material Adverse Effect and the Company
has no knowledge of any event or circumstance that would reasonably be expected
to result in such a Material Adverse Effect.
2.8 ABSENCE OF CERTAIN CHANGES. Since December 31, 2003 (the "Balance
Sheet Date"), except as set forth on Schedule 2.7 hereto and in the SEC Reports,
neither the Company nor any of its Subsidiaries has:
4
(a) redeemed, purchased or otherwise acquired directly or indirectly
any shares of any class or series of its capital stock, or any instrument or
security which consists of or includes a right to acquire such shares (other
than repurchases of restricted stock at cost required pursuant to agreements
outstanding on the date of this Agreement or entered into after the date of this
Agreement in compliance with the provisions hereof);
(b) paid, discharged or satisfied any claim, liability or obligation
(whether absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of liabilities and obligations reflected or reserved against in
the Company Financial Statements Sheet or incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date;
(c) permitted or allowed any of its material properties or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, claim, lien, security interest, encumbrance, restriction or
charge of any kind outside of the ordinary course of business;
(d) cancelled any debt or waived any claim or right of substantial
value;
(e) sold, transferred, licensed, leased, pledged, mortgaged or
otherwise disposed of any of its material properties or assets (real, personal
or mixed, tangible or intangible) or any material amount of property or assets,
except in the ordinary course of business;
(f) disposed of or permitted to lapse any right to the use of any
Proprietary Rights (as defined in Section 2.14 hereof), or disposed of or
disclosed to any person or entity, other than representatives of the Investors
and persons subject to a nondisclosure agreement, any trade secret, formula,
process, know-how or other Proprietary Right not yet a matter of public
knowledge;
(g) granted any material increase or accrual in or accelerated, any
benefit or compensation payable or to become payable to any officer, director,
employee or consultant, including any such increase, accrual or acceleration
pursuant to any benefit plan except in connection with a promotion or job change
or any general increase in the compensation payable or to become payable to
officers, employees or directors in the ordinary course of business, or entered
into or amended in any material way any employment, material consulting,
severance, termination or material benefit plan agreement or arrangement other
than in the ordinary course of business;
5
(h) declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or redeemed, purchased or otherwise
acquired, directly or indirectly, any shares of capital stock or other
securities of the Company or any of its Subsidiaries;
(i) made any change in any method of tax or financial statement
accounting or accounting practice that would or would reasonably be expected to
result in any material change in the Company Financial Statements;
(j) paid, loaned or advanced any amount to, or sold, transferred or
leased any material properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any of its
officers or directors or employees or any Affiliate (as defined in Section 7.1)
of any of its officers or directors or employees, except for directors' fees,
and compensation to officers at rates not exceeding the rates of compensation
paid during the year ended December 31, 2003;
(k) amended its certificate of incorporation or by-laws or similar
organizational documents;
(l) issued, sold, transferred, pledged, disposed of or encumbered any
shares of any class or series of its capital stock, or securities convertible
into or exchangeable for, or options, warrants, calls, commitments or rights of
any kind to acquire, any shares of any class or series of its capital stock,
other than shares of Common Stock reserved for issuance on the date of this
Agreement pursuant to the Company's 2003 Incentive Stock Plan, the exercise of
any options to purchase Common Stock described on Schedule 2.6 or existing
agreements that require the Company to issue shares of Common Stock;
(m) terminated or materially modified or amended any of its material
contracts or waived, released or assigned any material rights under any material
contract or claims, except in the ordinary course of business and consistent
with past practice;
(n) revalued in any material respect any of its assets, including
writing down the value of inventory or writing-off notes or accounts receivable,
other than in the ordinary course of business consistent with past practice or
as required by GAAP;
(o) adopted a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries; or
(p) agreed, whether in writing or otherwise, to take any action
described in this section.
6
2.9 INCOME TAX RETURNS. The Company 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 the Company
or any Subsidiary, except such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided. The Company has no
knowledge of any pending assessments or adjustments of the income tax payable of
the Company or its Subsidiaries with respect to any year.
2.10 PERMITS, COMPLIANCE WITH LAW. The Company 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. The Company and
each Subsidiary are in compliance with all federal, state and local laws,
regulations and ordinances ("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.
2.11 ERISA. Except as set forth on Schedule 2.11, the Company and each
Subsidiary is in compliance in all material respects with all applicable
provisions of ERISA; the Company 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 employee
benefit plan ("Plan") initiated by the Company or any Subsidiary; the Company
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 2.11 describes each Plan
maintained by the Company and each of its Subsidiaries.
2.12 CONTRACTS. Schedule 2.12 sets forth a description of each
Contractual Obligation not filed as an exhibit to the SEC Reports which provides
for payments to or by the Company or any Subsidiary in excess of $25,000, or is
otherwise material to the operations of the Company or any Subsidiary. Except as
set forth on Schedule 2.4, neither the Company nor any Subsidiary is in default
on any Contractual Obligation, except for such defaults which would not have a
Material Adverse Effect.
2.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 2.13, since
January 1, 1989, the Company and its subsidiaries (including the Subsidiaries)
have at all times been in compliance in all material respects with all
applicable environmental laws and regulations. Except as described in the SEC
Reports or as set forth on Schedule 2.13, none of the operations of the Company
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. Except as set forth on Schedule 2.13, neither the Company 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.
7
2.14 TRADEMARKS, ETC. The Company 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 the Company or any Subsidiary necessary to their business as
now conducted, nor is the Company 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. To the Company's knowledge, neither the Company
nor any Subsidiary has violated or is in current violation of, and neither the
Company nor any Subsidiary has received any communications alleging that the
Company or any Subsidiary has violated or, by conducting its business as
proposed, would violate, any of the Proprietary Rights of any other person or
entity. The Company 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.
2.15 REAL PROPERTY. Schedule 2.15 sets forth all of the real property
which is owned and/or leased by each of the Company 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 the
Company and the Subsidiaries as presently conducted. Except as set forth in
Schedule 2.15 or in the SEC Reports, the leases relating to the Real Property
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 2.15, all real property, buildings and
structures owned or used by the Company 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.
2.16 EMPLOYEES. Except as set forth on Schedule 2.16, all employees of
the Company and each Subsidiary are employed "at will" and may be terminated
without payment of severance or incurrence of any other liability of the Company
or the Subsidiaries; no employee of the Company is in violation of any material
term of any employment contract, confidentiality agreement or any other material
Contractual Obligation relating to the right of any such employee to be employed
by the Company or any Subsidiary; and neither the Company 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
the Company or the Subsidiaries and their employees. The Company and the
Subsidiaries require each employee and consultant to execute an employee
inventions and proprietary rights assignment and confidentiality agreement.
2.17 INSURANCE. The Company 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"). The Company
8
(a) is not in material 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
2.17 sets forth a listing of all policies maintained by the Company and a
listing, by policy, of all outstanding claims and the amount thereof made by the
Company under each such policy.
2.18 DELAWARE GENERAL CORPORATION LAW SECTION 203. The Board of
Directors of the Company has approved the transactions contemplated by this
Agreement such that no Investor shall become an "interested person" within the
meaning of Section 203 of the Delaware General Corporation Law as a result of
the transactions contemplated by this Agreement.
2.19 TITLE TO PROPERTIES. The assets owned or leased by the Company and
its Subsidiaries are all of the assets necessary to conduct the business of the
Company and its Subsidiaries as currently being conducted. The Company 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 any charge, claim, lien, pledge, security interest or other
encumbrance ("Encumbrances"), except for: (a) liens for taxes not yet due and
payable, (b) Encumbrances described on Schedule 2.19 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 the Company, or the use or license of
certain of the assets of the Company, and (iii) have arisen in the ordinary
course of business consistent with past practice.
2.20 RELATED PARTY TRANSACTIONS. Except for those contracts described
in the SEC Reports or on Schedule 2.20 hereto, no existing Contractual
Obligation of the Company 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 the Company, (ii) any director, officer or similar representative of the
Company, (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 the Company's business and to the
actual knowledge of the Company, 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 the Company or has done business with the Company 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.
2.21 BROKERS. The Company will pay a placement fee of up to 7% of the
gross proceeds from the sale of the Shares to Investors. Except for such
payments the Company has not agreed to pay or incurred any obligation in respect
of any finder's fee, brokerage fee or other commission in connection with the
sale of Shares contemplated by this Agreement.
9
2.22 SECURITIES LAW MATTERS. To the best of its knowledge and except
for the Company's failure to hold annual meetings of its stockholders, since
January 1, 2000, the Company has filed all reports, registration statements,
proxy statements and other materials, together with any amendments required to
be made with respect thereto, that were required to be filed with (i) the SEC
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Security Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) any
applicable state securities authorities. No such 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 materially misleading. Subject to
the accuracy of the representations and warranties of the Investors set forth in
Section 3, the offer, sale and issuance of the Shares to the Investors will be
exempt from registration under the Securities Act.
2.23 NO ANTI-DILUTION RIGHTS. Except as set forth on Schedule 2.23, the
transactions contemplated hereby will not trigger any anti-dilution provisions
contained in any existing agreements.
2.24 FULL DISCLOSURE. No representation, warranty, schedule or
certificate of the Company made or delivered pursuant to this Agreement or in
the Private Placement Memorandum 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.
3. REPRESENTATIONS AND WARRANTIES OF INVESTORS. Each Investor,
severally and not jointly, hereby makes the following representations and
warranties as to such Investor:
3.1 ORGANIZATION. Investor, if not a natural person, is duly organized
and validly existing and in good standing under the laws of the state of its
organization.
3.2 AUTHORITY. Investor has the corporate or other authority to execute
and deliver this Agreement and the Investor Questionnaire to which such Investor
is a party and to perform its obligations hereunder.
3.3 NO VIOLATION. The execution and the delivery by Investor of this
Agreement and the Investor Questionnaire, and its purchase of the Shares 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 Investor is a party or is otherwise subject.
3.4 ENFORCEABILITY. This Agreement and the Investor Questionnaire
constitute the legal, valid and binding obligation of Investor and is
enforceable against Investor in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally relating to or affecting creditors' rights.
10
3.5 INVESTMENT INTENT. Investor 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. Investor is an
"accredited investor" as such term is defined in Regulation D under the
Securities Act. Investor acknowledges that the Shares 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 the Company.
3.6 INVESTIGATION. Investor acknowledges receipt of the Private
Placement Memorandum, and has been given full access by the Company to all
information concerning the business and financial condition, properties,
operations and prospects of the Company that Investor has deemed relevant for
purposes of making the investment contemplated by this Agreement. By reason of
Investor's knowledge and experience in financial and business matters in
general, the business of the Company and investments of the type contemplated by
this Agreement in particular, Investor is capable of evaluating the merits and
risks of making the investment in the Shares and is able to bear the economic
risk of the investment (including a complete loss of its investment in the
Shares). Subject to the truth and accuracy of the representations and warranties
made by the Company hereunder, Investor has conducted such investigation as it
deems relevant in connection with its consummation of the transactions
contemplated by this Agreement.
3.7 BROKERS. Investor has not agreed to pay or incurred any obligation
in respect of any finder's fee, brokerage fee or other commission in connection
with the sale of Shares contemplated by this Agreement.
4. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company 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 4, unless waived by the Company, on or prior to the
Closing Date.
4.1 REPRESENTATIONS AND WARRANTIES. If this Agreement is not signed on
the Closing Date, the representations and warranties of the Investors set forth
in Section 3 shall be true and correct in all material respects as of the
Closing Date as though made on and as of such date.
4.2 NO PROCEEDINGS. No order, injunction, decree or other action or
legal, administrative, arbitration or other proceeding by any person other than
the Company 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.
4.3 COMPLIANCE WITH LAWS. The purchase of the Shares by each Investor
hereunder shall be legally permitted by all laws and regulations to which each
Investor or the Company is subject.
11
4.4 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 the Company and its
counsel.
4.5 INVESTOR QUESTIONNAIRE. Each investor shall have completed and
executed and delivered to the Company an Investor Questionnaire in a manner
reasonably acceptable to the Company.
5. CONDITIONS TO THE OBLIGATIONS OF INVESTORS. The obligations of each
Investor 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 5, unless waived by each Investor, 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 Company 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; the Company shall have performed all
obligations and complied with all covenants required to be performed or complied
with by the Company under this Agreement on or prior to the Closing Date; and
each Investor shall have received on the Closing Date from the Company a
certificate or certificates, dated the Closing Date, to such effect, which
certificate or certificates shall be signed by an authorized officer of the
Company.
5.2 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 the Company, threatened, challenging or imposing a material
limitation on the execution, delivery or performance of this Agreement, the
consummation of any of the transactions contemplated thereby or the operation by
the Company of its businesses as now conducted.
5.3 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 Investor and its
counsel.
5.4 COMPLIANCE WITH LAWS. The purchase of the Shares by each Investor
hereunder shall be legally permitted by all laws and regulations to which each
Investor or the Company is subject.
5.5 NO MATERIAL ADVERSE CHANGE. Except as described in the SEC Reports
or in Schedule 2.7, there shall have been no event that has had or could
reasonably be expected to have a Materially Adverse Effect since December 31,
2003.
5.6 OPINION OF COUNSEL. Investor shall have received an opinion of
counsel to the Company in the form attached as Schedule 5.6 hereto.
12
6. CERTAIN COVENANTS OF THE COMPANY.
6.1 LISTING OF COMMON STOCK. The Company shall use its best efforts to
cause the Common Stock to be listed on the American Stock Exchange (or, if such
listing cannot be obtained, upon NASDAQ or another exchange which will result in
the Company being eligible to register the resale of the Shares sold hereby on
Form S-3 of the SEC) as soon as practicable following the date hereof. The
Company shall cause the Shares to be listed or included on each securities
exchange or automated quotation system on which similar securities issued by the
Company are then listed or included.
6.2 SHELF REGISTRATION. Provided the Company is then eligible to use
such form, the Company shall prepare and file or cause to be prepared and filed
with the SEC, as soon as practicable but in any event no later than sixty (60)
days after the date hereof, a Registration Statement on Form S-3 for an offering
to be made on a delayed or continuous basis pursuant to Rule 415 of the
Securities Act registering the resale from time to time by the Investors of the
Shares pursuant to plans of distribution reasonably acceptable to the Investors
(the "Registration Statement"). Each Investor agrees to promptly provide to the
Company, in writing, such information as the Company may reasonably request for
inclusion in the Registration Statement. The Company shall use its best efforts
to cause the Registration Statement to be declared effective under the
Securities Act no later than ten (10) Business Days after receipt of notice of
"no review" by the SEC or one hundred twenty (120) days from the date hereof in
the event of SEC review, and to keep such Registration Statement continuously
effective under the Securities Act until the earlier of (i) the second
anniversary of the date the Registration Statement is declared effective by the
SEC, and (ii) such date as all Shares registered on such Registration Statement
have been resold (the earlier to occur of (i) and (ii) is the "Registration
Termination Date").
(a) If a Registration Statement ceases to be effective for any reason
at any time prior to the applicable Registration Termination Date, the Company
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
(b) The Company shall supplement and amend the Registration Statement
if required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Registration Statement, if
required by the Securities Act or, to the extent to which the Company does not
reasonably object, as requested by the Investors.
(c) Each Investor agrees that if such Investor wishes to sell
securities pursuant to the Registration Statement, it will do so only in
accordance with this Agreement.
(d) All Registration Expenses incurred in connection with the
registrations pursuant to this Section 6.2 shall be borne by the Company.
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with this Section 6.2 hereof including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of one counsel (the
"Investors' Counsel") appointed to represent the Investors selected by a
Majority of the Investors, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
13
event by the Company and Selling Expenses, as defined hereinafter). All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the Investors. "Selling Expenses" shall mean all brokerage and selling
commissions applicable to a sale of the Shares pursuant to the Registration
Statement.
(e) The Company may suspend sales of Shares pursuant to the
Registration Statement for a period of not more than thirty (30) days during any
six (6) month period in the event it determines in good faith that such
Registration Statement contains or may contain an untrue statement of material
fact or omits or may omit to state a material fact required to be stated therein
or necessary to make the statement therein not misleading; provided that the
Company shall promptly amend such Registration Statement in order to correct any
untrue statement and/or ensure that such Registration Statement is not
misleading; provided further that subject to the time limitations set forth
above, the Company may delay such amendment if the Company determines that such
delay is in the best interest of the Company in order to avoid premature public
announcements of potential acquisitions or other extraordinary transactions. At
the time the Registration Statement is declared effective, each Investor shall
be named as a selling securityholder in the Registration Statement and the
related prospectus in such a manner as to permit such Investor to deliver such
prospectus to purchasers of Shares in accordance with applicable law.
(f) The Company shall reasonably cooperate with Investors' Counsel in
performing the Company's obligations under this Section 6.2 and shall: (i)
permit Investor Counsel to review and comment upon any offering pursuant to this
Section 6.2 and to review and comment upon (A) the Registration Statement prior
to its filing with the SEC and (B) all amendments and supplements thereto
(except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K and any similar or successor reports) prior to their
filing with the SEC; and (ii) promptly furnish to Investor Counsel, without
charge, (A) any correspondence from the SEC or the staff of the SEC to the
Company or its representatives relating to any Registration Statement, (B) after
the same is prepared and filed with the SEC, one copy of any Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference and all exhibits, and
(iii) upon the effectiveness of any Registration Statement, one copy of the
prospectus included in such Registration Statement and all amendments and
supplements thereto; provided that the Company will only be responsible for
reasonable fees and expenses of one counsel pursuant to this Section 6.2.
(g) The Company shall furnish to the Investors such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Shares owned by
them.
(h) The Company shall use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by the
Investors, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
14
(i) The Company shall notify immediately each Investor holding Shares
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of 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 a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing; provided, however, that, subject to Section 6.2(e) the Company
shall promptly amend such Registration Statement in order to correct any untrue
statement and/or ensure that such Registration Statement is not misleading.
6.3 INDEMNIFICATION.
(a) The Company will indemnify each Investor, its officers, directors,
employees, partners, affiliates, agents, representatives and legal counsel, and
each person controlling (or deemed controlling) such Investor within the meaning
of the Securities Act, (collectively, the "Investors' Agents") with respect to
which registration, qualification or compliance has been effected pursuant to
Section 6.2, against all claims, losses, damages and liabilities (or actions in
respect thereof), joint or several, arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other similar document or any amendments or
supplements thereto (including any related registration statement and amendments
or supplements thereto, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, or (ii) any violation by the Company
of any federal, state or common law rule or regulation applicable to the Company
in connection with any such registration, qualification or compliance, and will
reimburse each Investor, and each Investors' Affiliates, for any legal and any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, as incurred, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission based upon written information furnished to the
Company by an instrument duly executed by such Investor and stated to be
specifically for use therein or furnished in writing by such Investor to the
Company in response to a request by the Company stating specifically that such
information will be used by the Company therein.
(b) Each Investor will indemnify the Company, each of its directors and
officers, each legal counsel and independent accountant of the Company, each
person who controls the Company within the meaning of the Securities Act, any
underwriter, and each other Investor, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other similar
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made, and
will reimburse the Company, such directors, and officers, control persons,
underwriter and each other Investor for any legal or any other expenses
15
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, as incurred, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished in writing to the Company by an
instrument duly executed by such Investor and stated to be specifically for use
therein or furnished by such Investor to the Company in response to a request by
the Company stating specifically that such information will be used by the
Company therein; provided, however, that the indemnity agreement provided in
this Section 6.3 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
written consent of the Investor, which consent shall not be unreasonably
withheld. In no event shall an Investor's indemnification obligation exceed the
net proceeds received from its sale of Shares in such offering.
(c) Each party entitled to indemnification under this Section 6.3 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld). The Indemnified Party may participate in such defense at
such party's expense; provided, however, that the Indemnifying Party shall bear
the expense of such defense of the Indemnified Party if representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicts of interest. The failure of any Indemnified Party to give notice
within a reasonable period of time as provided herein shall relieve the
Indemnifying Party of its obligations under this Section 6.3, but only to the
extent that such failure to give notice shall materially adversely prejudice the
Indemnifying Party in the defense of any such claim or any such litigation. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, 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.
(d) If the indemnification provided for in this Section 6.3 is held to
be unavailable to an Indemnified Party with respect to any loss, liability,
claim, damage or expense referred to therein, then the Indemnifying Party, in
lieu of indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage or expense as well as any
other relevant equitable considerations; provided, that in no event shall any
contribution by an Investor under this Section 6.3 exceed the net proceeds from
the offering received by such Investor. The relative fault of the Indemnifying
Party and of the Indemnified Party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
16
(e) The obligations of the Company and each Investor under this Section
6.3 shall survive the completion of any offering of the Shares in a Registration
Statement under this Section 6.3, any investigation made by or on behalf of the
Indemnified Party or any officer, director or controlling Person of such
Indemnified Party and will survive the transfer of securities.
(f) Information by the Investor. Each Investor shall furnish to the
Company such information regarding such Investor and the distribution proposed
by such Investor as the Company may reasonably request in writing and as shall
be reasonably required in connection with any registration, qualification or
compliance referred to in this Section 6.3.
6.4 TERMINATION OF REGISTRATION RIGHTS. All rights and obligations
provided for in Section 6.2 shall terminate on the date on which the Company has
no obligation to maintain the effectiveness of the Registration Statement;
provided that the rights of any Investor under Section 6.2 shall terminate at
such time as the Investor is eligible to sell all securities of Allis-Chalmers
held by such Investor and such Investor's affiliates in a single transaction
pursuant to Rule 144 of the Securities and Exchange Commission.
6.5 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Investors the benefits of Rule 144 promulgated under the
Securities Act ("SEC Rule 144") and any other rule or regulation of the SEC that
may at any time permit Investors to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3, the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times so long as the Company
remains subject to the periodic reporting requirements under Sections 13 or
15(d) of the Exchange Act;
(b) use its best efforts to take such action as is necessary to enable
the Investors to utilize Form S-3 for the sale of their Shares;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Investor, so long as the Investor owns any Shares,
forthwith upon request (i) a written statement by the Company that it has
complied with the reporting requirements of the Securities Act and the Exchange
Act, or that it qualifies as a registrant whose securities may be resold
pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested in availing any
Investor of any rule or regulation of the SEC which permits the selling of any
such securities without registration or pursuant to such form.
17
7. INDEMNIFICATION.
7.1 INDEMNIFICATION BY THE COMPANY. In addition to all other
obligations provided for in this Agreement, the Company agrees to indemnify and
hold harmless the Investors 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 the Company in this Agreement;
PROVIDED, HOWEVER, that the Company shall not be liable under this Section 7:
(a) for any amount paid in settlement of claims without the Company'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,
the Company shall make the maximum contribution to the payment and satisfaction
of such indemnified Liability. In connection with the obligation of the Company
to indemnify for expenses as set forth above, the Company further agrees to
reimburse each indemnified party for all reasonable 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.
7.2 NOTIFICATION; PROCEDURE. Each indemnified party under this Section
7 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 the Company under this Section 7, notify the Company in
writing of the commencement thereof. The omission of any indemnified party so to
notify the Company of any such action shall not relieve the Company from any
liability which it may have to such indemnified party (i) other than pursuant to
this Section 7 or (ii) under this Section 7 unless, and only to the extent that,
such omission results in the Company'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 the Company of the commencement
thereof, the Company 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, 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 the Company or (b) any conflict or potential conflict exists
between the Company and such indemnified party that would make such separate
representation advisable; PROVIDED, HOWEVER, that in no event shall the Company
be required to pay fees and expenses under this sentence of this Section 7 for
18
more than one firm of attorneys in any jurisdiction in any one legal action or
group of related legal actions. The Company agrees that the Company will not,
without the prior written consent of the Investors, 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 Investors 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.
7.3 REGISTRATION RIGHTS. Notwithstanding anything to the contrary in
this Section 7, the indemnification and contribution provisions of Section 6.3
shall govern any claim made with respect to the Registration Statement or sales
made thereunder.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and agreements made by the Company and Investors in this Agreement or
in any certificate or other instrument delivered pursuant hereto shall survive
the Closing and any investigation and discovery by the Company or by Investors,
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 2.2 and the
Company's obligations under Section 6 (for which there shall be no time limit
imposed by this Section 8), neither Investors nor the Company 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.
9. MISCELLANEOUS PROVISIONS.
9.1 DELIVERIES. The Company and Investors 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.
9.2 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
except (a) by the Company with the consent of a Majority of the Investors (as
defined in Section 9.9), (b) by the Company in connections with a merger,
consolidation or sale of all or substantially all of its assets, (c) by an
Investor with the prior written consent of the Company or (d) by an Investor in
connection with a sale or other transfer of the Shares. None of the provisions
of this Agreement shall be for the benefit of or enforceable by any other
person.
9.3 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:
19
if to the Investors at the address set
forth on the signature page hereof:
if to the Company 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.
9.4 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.
9.5 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 Texas 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 9.3, such service to become effective 10 days after such
mailing.
9.6 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.
20
9.7 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.
9.8 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.
9.9 CONSENT OF INVESTORS. As used herein, a "Majority of the Investors"
means Investors who have agreed to or have purchased a majority of the Shares
pursuant to this Agreement. Any term or condition hereof may be waived or
amended with Investors holding at least 66 2/3% of the shares to be purchased
hereunder, provided that no such amendment or waiver of the provisions of
Section 1 hereof may be made without the consent of all affected Investors.
9.10 INTERPRETATION. Each of the Investors and the Company 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.
9.11 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.
9.12 PUBLIC ANNOUNCEMENTS. Except for such disclosure as the Company is
advised by counsel is required to be included in documents filed with the
Securities and Exchange Commission or otherwise required by law, the Company
shall not use the name of, or make reference to, any Investor or any of its
Affiliates in any press release or in any public manner (including any reports
or filings made by the Company under the Exchange Act) without such Investor's
prior written consent which consent shall not be unreasonably withheld.
21
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.
By:
Allis-Chalmers Corporation, TRANSCONTINENTAL CAPITAL CORP.
a Delaware corporation
/S/ RONALD GONZALEZ-BUNSTER
------------------------------
/S/ MUNAWAR H. HIDAYATALLAH Signature
------------------------------
Munawar H. Hidayatallah,
Chief Executive Officer RONALD GONZALEZ-BUNSTER
7660 Woodway, Suite 200 ------------------------------
Houston, Texas 77063 Name
President/CEO
------------------------------
Title
22
[SIGNATURE PAGE CONTINUED]
MILTON H. DRESNER REVOCABLE LIVING TRUST
/S/ MILTON H. DRESNER
----------------------------------------
Signature
MILTON H. DRESNER
----------------------------------------
Name
JOSEPH S. DRESNER
/S/ JOSEPH S. DRESNER
----------------------------------------
Signature
JOSEPH S. DRESNER
----------------------------------------
Name
J. STEVEN EMERSON ROTH IRA
/S/ J. STEVEN EMERSON
----------------------------------------
Signature
J. STEVEN EMERSON
----------------------------------------
Name
Sole beneficiary, self-directed IRA
----------------------------------------
Title
23
[SIGNATURE PAGE CONTINUED]
WAVERLY LIMITED PARTNERSHIP
/S/ J. GRAHAM R. SMITH
-----------------------------------------
Signature
GRAHAM R. SMITH
-----------------------------------------
Name
Managing General Partner
-----------------------------------------
Title
THE SCHMIEDING FOUNDATION, INC.
/S/ L.H. SCHMIEDING
-----------------------------------------
Signature
L.H. SCHMIEDING
-----------------------------------------
Name
Chief Executive Officer
-----------------------------------------
Title
ROSEBURY, L.P.
/S/ ANTHONY R. DANAHER
-----------------------------------------
Signature
ANTHONY R. DANAHER
-----------------------------------------
Name
President of Guild Investment Management,
Inc., General Partner
-----------------------------------------
Title
24
[SIGNATURE PAGE CONTINUED]
METEORIC, L.P.
/S/ ANTHONY R. DANAHER
-----------------------------------------
Signature
ANTHONY R. DANAHER
-----------------------------------------
Name
President of Guild Investment Management,
Inc., General Partner
-----------------------------------------
Title
BARBARA C. CRANE
/S/ BARBARA C. CRANE
-----------------------------------------
Signature
BARBARA C. CRANE
-----------------------------------------
Name
BRISTOL INVESTMENT FUND, LTD.
/S/ PAUL KESSLER
-----------------------------------------
Signature
PAUL KESSLER
-----------------------------------------
Name
Director
-----------------------------------------
Title
25
[SIGNATURE PAGE CONTINUED]
MEADOWBROOK OPPORTUNITY FUND LLC
/S/ MICHAEL RAGINS
-----------------------------------------
Signature
MICHAEL RAGINS
-----------------------------------------
Name
Manager
-----------------------------------------
Title
KENNETH MALKES
/S/ KENNETH MALKES
-----------------------------------------
Signature
KENNETH MALKES
-----------------------------------------
Name
26
SCHEDULE 1.1
------------
INVESTORS
---------------------------------------------- ---------------- ---------------
Name Number of Purchase Price
Shares
---------------------------------------------- ---------------- ---------------
Transcontinental Capital Corp. 420,667 $1,262,001
---------------------------------------------- ---------------- ---------------
Milton H. Dresner Revocable Living Trust 50,000 $150,000
---------------------------------------------- ---------------- ---------------
Joseph S. Dresner 50,000 $150,000
---------------------------------------------- ---------------- ---------------
J. Steven Emerson Roth IRA 196,000 $588,000
---------------------------------------------- ---------------- ---------------
Waverly Limited Partnership 100,000 $300,000
---------------------------------------------- ---------------- ---------------
The Schmieding Foundation, Inc. 100,000 $300,000
---------------------------------------------- ---------------- ---------------
Rosebury, L.P. 163,300 $489,900
---------------------------------------------- ---------------- ---------------
Meteoric, L.P. 136,700 $410,100
---------------------------------------------- ---------------- ---------------
Barbara C. Crane 33,300 $99,900
---------------------------------------------- ---------------- ---------------
Bristol Investment Fund, Ltd. 500,000 $1,500,000
---------------------------------------------- ---------------- ---------------
Meadowbrook Opportunity Fund LLC 200,000 $600,000
---------------------------------------------- ---------------- ---------------
Kenneth Malkes 6,667 $20,001
---------------------------------------------- ---------------- ---------------
Total 1,956,634 $5,869,902
---------------------------------------------- ---------------- ---------------
Schedule 1.1
EXHIBIT 3
[LOGO] ALLIS-CHALMERS
7660 Woodway, Suite 200
Houston, Texas 77063 (713) 369-0550
AMENDMENT TO
STOCK PURCHASE AGREEMENT
--------------------------------------------------------
DATED _____, 2004
--------------------------------------------------------
AMENDMENT TO
STOCK PURCHASE AGREEMENT
This AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Agreement"), dated
_______, 2004, is made by and among Allis-Chalmers Corporation, a Delaware
corporation (the "Company"), and the signatories hereto (the "Investors").
RECITALS
WHEREAS, the Company and certain investors (the "Investors") have
executed and delivered to each other a Stock Purchase Agreement (the "Stock
Purchase Agreement") dated August 10, 2004;
WHEREAS, certain Investors have requested that the Company enter into
certain additional covenants in connection with the transactions contemplated by
the Stock Purchase Agreement;
WHEREAS, the Company has agreed to make such additional covenants for
the benefit of all Investors; and
WHEREAS, the Company acknowledges that one or more Investors is
entering into the Stock Purchase Agreement in reliance upon the additional
covenants made by the Company herein;
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. ADDITIONAL SHARES. In the event the Company sells Additional Shares
of Common Stock (as defined below) within six months after the date hereof for a
price per share of less than $3.00 per share, then, and in each such event, the
Company shall issue additional shares (the "Additional Shares") of the Common
Stock to each Investor so that the average price paid by each Investor for the
Initial Shares and all Additional Shares issued to such Investor shall be the
same as the lowest per share price paid by any other person for Additional
Shares of Common Stock. The Additional Shares shall be "Shares" for all purposes
hereunder. As used herein, "Additional Shares of Common Stock" shall (a) include
the issuance of Common Stock by the Company, (b) include the issuance by the
Company of securities ("Convertible Securities") convertible into or
exchangeable for Common Stock, in which event the price deemed to be paid for
the underlying Common Stock shall be equal to the minimum amount that may be
paid for such Common Stock taking into account the amount paid for the
Convertible Securities as well as any additional amount payable upon exercise or
conversion of such Convertible Securities, but without taking into account
customary anti-dilution rights, and (c) not include the issuance of options and
1
Common Stock pursuant to the agreements and other rights described in Schedule
2.6 hereof, including upon exercise of options granted in the future pursuant to
the Company's 2003 Incentive Stock Plan. The closing of the issuance of any
Additional Shares shall be effected at the offices of the Company on or prior to
the tenth business day following the date of issuance of any Additional Shares
of Common Stock triggering the issuance of Additional Shares. At the Closing,
the Company shall cause the Depository Trust Company to enter a book entry on
behalf of each Investor representing the Additional Shares issued to such
Investor.
2. TRANSACTION RESTRICTIONS.
(a) The Shares may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of Shares
other than pursuant to an effective registration statement, to the Company, to
an Affiliate of an Investor or in connection with a pledge as contemplated in
Section 2(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Shares
under the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have the
rights of an Investor under this Agreement.
(b) The Company acknowledges and agrees that an Investor may
from time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of the
Shares to a financial institution that is an "accredited investor" as defined in
Rule 501(a) under the Securities Act and who agrees to be bound by the
provisions of this Agreement and, if required under the terms of such
arrangement, such Investor may transfer pledged or secured Shares to the
pledgees or secured parties. Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith, provided
that the pledgee certifies to the Company that the requirements set forth in
this Section 2(b) are met. Further, no notice shall be required of such pledge.
At the appropriate Investor's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Shares may reasonably
request in connection with a pledge or transfer of the Shares, including, if the
Shares are subject to registration pursuant to this Agreement, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.
(c) Certificates evidencing the Shares shall not contain any
legend or stop transfer order, including the legend set forth in Section 1 of
the Stock Purchase Agreement: (i) while a registration statement (including the
Registration Statement) covering the resale of such Shares is effective under
the Securities Act, or (ii) following any sale of such Shares pursuant to Rule
144, or (iii) if such Shares are eligible for sale under Rule 144(k), or (iv) if
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the SEC). The Company shall cause its counsel to issue a legal opinion to the
Company's transfer agent promptly after the Effective Date if required by the
Company's transfer agent to effect the removal of the legend hereunder. The
Company agrees that following the Effective Date or at such time as such legend
2
is no longer required under this Section 2(c), it will, no later than five
business days following the delivery by an Investor to the Company or the
Company's transfer agent of a certificate representing Shares issued with a
restrictive legend (such date, the "Legend Removal Date"), deliver or cause to
be delivered to such Investor a certificate representing such Shares that is
free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section 2.
3. SHELF REGISTRATION. The Company makes the following additional
covenants relating to the Registration Statement described in Section 6 of the
Stock Purchase Agreement:
(a) The Company shall prepare and file the Registration
Statement or cause the Registration Statement to be prepared and filed with the
SEC, as soon as practicable but in any event no later than thirty (30) days
after the date hereof, on Form S-3 or such other form as the Company is then
eligible to use for an offering to be made on a delayed or continuous basis
pursuant to Rule 415 of the Securities Act. The Company shall use its best
efforts to cause the Registration Statement to be declared effective under the
Securities Act no later than three (3) business days after receipt of notice of
"no review" by the SEC or one hundred twenty (120) days from the date hereof in
the event of SEC review. The Registration Statement may also register the sale
of shares of Common Stock of the Company by other Stockholders of the Company.
(b) The Company shall not suspend sales of Shares pursuant to
the Registration Statement for a period of more than thirty (30) days during any
twelve (12) month period pursuant to Section 6.2(e) of the Stock Purchase
Agreement.
(c) The Company shall pay to Investors, as liquidated damages
and as the sole remedy for the Company's failure to timely comply with such
obligations, a penalty of one percent (1.0%) of the amount paid for the Shares
by each Investor for the first thirty (30) day period of non-compliance, and a
penalty of two percent (2%) of the amount paid for the Shares by each Investor
for each subsequent thirty (30) days of non-compliance (if any period of
non-compliance exceeds thirty (30) days) with its obligation to timely file the
Registration Statement, to cause the Registration Statement to become effective
within the time periods set forth above, and to maintain the effectiveness of
the Registration Statement as set forth above.
4. APPROVAL. This Amendment has been approved by Investors purchasing
at least 66-2/3% of the Shares to be purchased pursuant to the Stock Purchase
Agreement, as required by Section 9.9 of the Stock Purchase Agreement.
5. INTERPRETATION. Except as modified hereby the Stock Purchase
Agreement remains in full force and effect.
3
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.
By:
Allis-Chalmers Corporation, INVESTOR
a Delaware corporation
---------------------------------
Signature
--------------------------------
Munawar H. Hidayatallah,
Chief Executive Officer ---------------------------------
7660 Woodway, Suite 200 Name
Houston, Texas 77063
---------------------------------
Title
Address:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
email
4
EXHIBIT 4
ALLIS-CHALMERS CORPORATION
5075 Westheimer Suite 890
Houston, Texas 77056
September 29, 2004
VIA FAX AND E-MAIL SEMERSON@EMERSONIG.COM
-----------------------------------------
Steve Emerson
Emerson Investments
RE: PRIVATE PLACEMENT OF COMMON STOCK BY ALLIS-CHALMERS CORPORATION
---------------------------------------------------------------
Dear Mr. Emerson:
The purpose of this letter is to confirm that, in connection with your
investment in the Common Stock of Allis-Chalmers Corporation pursuant to the
Stock Purchase Agreement dated August 10, 2004 (the "Stock Purchase Agreement"):
(1) you will not be required to suspend sales of shares pursuant to the
Registration Statement (as defined in the Stock Purchase Agreement) as
a result of any secondary offering of shares by the Allis-Chalmers
Corporation;
(2) Section 6.4 of the Stock Purchase Agreement shall not be deemed to
reduce Allis-Chalmers Corporation's obligations under the last sentence
of Section 6.2 of the Stock Purchase Agreement (except with respect to
a person eligible to sell all Shares in a single transaction pursuant
to Rule 144); and
(3) With respect to Section 1 of the Amendment to Stock Purchase Agreement
dated August 10, 2004: during the referenced six month period the
Company will not issue any rights to acquire, or enter into any
agreement involving the issuance of, its Common Stock, unless (a) the
transaction is one contemplated by said Section 1, i.e., the issuance
of Common Stock or convertible securities for cash (and not the
issuance of other types of securities or a bundle of two or more types
of securities), or (b) the Company and you mutually agree upon the
number of additional shares of Common Stock to be issued to
Steve Emerson
Emerson Investments
September 29, 2004
Page 2
you in order to achieve the objectives of said Section 1, i.e., that
you obtain the same value for your investment as any subsequent
investor during the six month period.
Sincerely,
/s/ Todd A. Seward
Todd A. Seward,
Chief Accounting Officer