Exhibit 10.1


                                    AGREEMENT


         AGREEMENT  (this   "Agreement")  dated  as  of  March  31,  1999  among
Allis-Chalmers  Corporation,  a Delaware  corporation (the  "Company"),  and the
Pension Benefit Guaranty  Corporation,  a United States  government  corporation
acting  in  its  individual  capacity  and  as  trustee  of  the  Allis-Chalmers
Consolidated Pension Plan (the "Plan").

                              W I T N E S S E T H :

         WHEREAS, the Company was the contributing sponsor of the Plan;

         WHEREAS,  pursuant  to the  Agreement  for  Appointment  of Trustee and
Termination  of the Plan dated as of September 30, 1997, the Plan was terminated
and the Pension Benefit Guaranty  Corporation was appointed  trustee of the Plan
pursuant to 29 U.S.C. ss.1342;

         WHEREAS,  prior to termination of the Plan,  certain payments  required
under Code ss.412  were not made to the Plan  resulting  in the  creation of the
Funding Lien;

         WHEREAS, as a result of the termination of the Plan, the Company became
indebted  to  the  Pension  Benefit  Guaranty  Corporation,  in  its  individual
capacity, for an amount pursuant to 29 U.S.C. ss.1362(b),  and as trustee of the
Plan, for an amount pursuant to 29 U.S.C. ss.1362(c), in an aggregate amount not
less than $70 million (the "PBGC Liability"); and

         WHEREAS, the Company and Pension Benefit Guaranty Corporation desire to
settle the PBGC Liability and to agree to release the Funding Lien under certain
circumstances  in  accordance  with the  terms  and  subject  to the  conditions
contained herein.

         NOW, THEREFORE, in consideration of the representations, warranties and
agreements  contained  herein,  and intending to be legally  bound  hereby,  the
Company and the  Pension  Benefit  Guaranty  Corporation  each  hereby  agree as
follows:

                                   ARTICLE 1

                                   Definitions

         1.1 Definitions.  As used in this Agreement,  the following terms shall
have the meanings set forth below:

                  "AL-CH"   shall  mean   AL-CH,   L.P.,   a  Delaware   limited
         partnership.

                  "Board" shall mean the board of directors of the Company.
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                  "Business Day" means any day other than Saturday or Sunday and
         any  other  day on which  commercial  banks in New  York,  New York are
         required or permitted to be closed.

                  "By-laws" means the By-laws of the Company after giving effect
         to the amendments contemplated by Section 2.6 hereof.

                  "Certificate"  shall mean the  Company's  Amended and Restated
         Certificate of Incorporation in effect on the date hereof.

                  "Closing" and "Closing Date" shall have the meanings set forth
         in Section 2.1.

                  "Code"  shall  mean the  Internal  Revenue  Code of  1986,  as
         amended.

                  "Common Stock" shall mean the Common Stock, par value $.15 per
         share, of the Company.

                  "Common  Stock  Equivalents"  shall mean any capital  stock or
         security of the Company (other than Common Stock) which is convertible,
         exercisable or exchangeable for or into Common Stock.

                  "Continuing  Director" shall mean any of the three (3) Company
         directors continuing as directors and any person designated by AL-CH to
         fill any vacancy  created by the  departure  from the Board of any such
         person.  The initial  Continuing  Directors are Robert E.  Nederlander,
         Allan R. Tessler and Leonard Toboroff.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
         as amended.

                  "Funding  Lien"  shall  mean the lien  arising  under  Section
         412(n) of the Code in favor of the  Plan,  in an  amount  exceeding  $3
         million,  on all property  and rights to property  owned by the Company
         and its subsidiary, Houston Dynamic Service, Inc.

                  "GAAP" shall mean the generally accepted accounting principles
         in the United States of America in effect from time to time.

                  "Lock-Up  Agreement"  shall  mean the  lock-up  agreement,  in
         substantially the form attached hereto as Exhibit A and dated as of the
         Closing  Date,  between  the PBGC,  AL-CH the UAW Trust and the Non-UAW
         Trust.

                  "Majority Board  Approval" shall mean the affirmative  vote of
         not less than four (4) of the Company's 7-member Board.


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                  "Material Adverse Effect" shall mean a material adverse effect
         on the assets, business, properties,  liabilities,  financial condition
         or results of operation of the Company and its subsidiaries  taken as a
         whole.

                  "Non-UAW Trust" shall mean the trust created  pursuant to that
         certain Amended and Restated Retiree Health Trust Agreement for non-UAW
         Retired Employees of Allis-Chalmers Corporation.

                  "PBGC" shall mean the Pension Benefit Guaranty Corporation (in
         its  individual  capacity  and as trustee of the Plan) and its designee
         for purposes of holding the Common Stock to be delivered  hereunder and
         exercising the rights granted herein.

                  "PBGC  Director"  shall have the  meaning set forth in Section
         4.5 hereof.

                  "PBGC  Liability"  shall  have the  meaning  set  forth in the
         recitals to this Agreement.

                  "Person" or "person"  shall mean an  individual,  corporation,
         association,  partnership, group (as defined in Section 13(d)(3) of the
         Exchange Act), trust,  joint venture,  business trust or unincorporated
         organization,  or a government  or any agency or political  subdivision
         thereof.

                  "Plan"  shall have the  meaning  set forth in the  recitals to
         this Agreement.

                  "Release  Event" shall mean an event approved by the Company's
         Board  which  meets  either  of the  following  tests  (1) the  Company
         receives,   in  a  single   transaction  or  in  a  series  of  related
         transactions,  debt financing  which makes  available to the Company at
         least Ten Million  Dollars  ($10.0  million) of  borrowings  OR (2) the
         Company  consummates an  acquisition,  in a single  transaction or in a
         series of related  transactions,  of assets and/or a business where the
         purchase price (including  funded debt assumed) is at least Ten Million
         Dollars ($10.0 million).

                  "Release  Event Date" shall mean the earliest  date on which a
         Release Event occurs.

                  "Retiree   Health  Trust  Director"  shall  mean  the  Company
         director designated by the UAW Trust and the Non-UAW Trust.

                  "Registration  Rights  Agreement"  shall mean the registration
         rights agreement,  in substantially the form attached hereto as Exhibit
         B, to be executed by the Company and the PBGC at the Closing.

                  "Securities  Act" shall mean the  Securities  Act of 1933,  as
         amended.


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<PAGE>


                  "SEC" shall mean the United  States  Securities  and  Exchange
         Commission.

                  "Senior  Officer's  Certificate"  shall have the  meaning  set
         forth in Section 4.2(a).

                  "Stock  Compensation  Plan" shall mean the plan or plans to be
         adopted by the Company providing for stock options or comparable Common
         Stock-based  incentive  compensation  to  Company  directors,  officers
         and/or  employees;  provided,  however,  that the  number  of shares of
         Common  Stock  issued or issuable  pursuant to such Stock  Compensation
         Plan  shall not  exceed  167,171  shares of Common  Stock  (subject  to
         adjustment as provided in Section 6.13 hereof).

                  "Subsidiary" or  "subsidiary"  shall mean, with respect to any
         corporation (the "Parent") any other corporation,  association or other
         business  entity  of which  more than 50% of the  shares of the  voting
         stock are owned or controlled, directly or indirectly, by the Parent or
         one or more  Subsidiaries  of the  Parent,  or by the Parent and one or
         more of its Subsidiaries.

                  "Surviving  Person"  shall mean the  continuing  or  surviving
         Person of merger,  consolidation  or other corporate  combination,  the
         Person  receiving  a  transfer  of all  or a  substantial  part  of the
         properties and assets of the Company, or the Person  consolidating with
         or  merging  into  the  Company  in a  merger,  consolidation  or other
         corporate  combination  in  which  the  Company  is the  continuing  or
         surviving  Person,  but in  connection  with which the Common  Stock is
         exchanged or converted  into the  securities of any other person or the
         right to receive cash or any other property.

                  "Tax Benefits"  shall mean the net operating loss  carryovers,
         capital loss  carryovers,  and business credit  carryovers to which the
         Company is entitled pursuant to the Code.

                  "Tax Returns" means any return, amended return or other report
         required to be filed with respect to any Tax, including  declaration of
         estimated tax and information returns.

                  "Taxes"  means any  federal,  state,  local or foreign  taxes,
         including but not limited to income, gross receipts,  windfall profits,
         value added,  severance,  property,  production,  sales,  use, license,
         excise, franchise,  employment,  withholding or similar taxes, together
         with any interest,  additions or penalties with respect thereto and any
         interest in respect of such additions or penalties.

                  "Transaction   Documents"   shall  mean   collectively,   this
         Agreement, the Bylaws and the Registration Rights Agreement.



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<PAGE>


                  "Transferee"  shall  have the  meaning  set  forth in  Section
         4.6(a).

                  "UAW  Trust"  shall mean the trust  created  pursuant  to that
         certain  Amended and Restated  Retiree  Health Trust  Agreement for UAW
         Retired Employees of Allis-Chalmers Corporation.

                                   ARTICLE 2

                                     Closing

         2.1  Closing  Date.  Subject  to  the  satisfaction  or  waiver  of the
conditions  set  forth  in  this  Agreement,  the  closing  of the  transactions
contemplated  hereby (the "Closing") shall take place at the offices of Anderson
Kill & Olick,  P.C.,  counsel to the PBGC, at 1251 Avenue of the  Americas,  New
York, New York 10020,  on the first  Business Day following the date hereof,  on
which the conditions in Section 5.1 and 5.2 are satisfied or waived by the PBGC,
or the Company,  as the case may be (the "Closing Date"),  or at such other time
and place as may be mutually agreed upon by the PBGC and the Company.

         2.2 Issuance of Stock. On the Closing Date, the Company shall issue and
deliver 585,100 shares of Common Stock to the PBGC, which shares will constitute
35% of the  issued and  outstanding  shares of Common  Stock on a  fully-diluted
basis, after giving effect to the shares to be issued pursuant to the Management
Agreement.

         2.3 PBGC Liability and Funding Lien.

         (a) On the Release Event Date, any and all liability of the Company and
of any person within the Company's  controlled  group as defined for purposes of
29 U.S.C.  ss.ss.1301(a)(14)  and 1362(a) for the PBGC Liability shall be deemed
satisfied and discharged in full.

         (b) On the  Release  Event  Date,  the PBGC will  execute  and send for
recording  notices of release  with  respect to the Funding Lien as perfected in
the  jurisdictions  where the PBGC filed  notices  of such lien.  The PBGC shall
provide the Company  with copies of the notices or release  which have been file
stamped by the appropriate filing  jurisdiction,  within 10 Business Days of the
PBGC's receipt of such documents.

         (c) On and after the  Closing  Date,  the PBGC will not seek to enforce
any lien arising in favor of the Plan pursuant to 26 U.S.C.  ss.412(n) except as
may be  necessary by the PBGC to preserve or protect the rights of the Plan with
respect to the claims of a third party. On and after the Release Event Date, the
PBGC will not seek to enforce any lien arising in favor of the Plan  pursuant to
26 U.S.C.  ss.412(n).

         2.4 Board of  Directors.  On the Closing  Date,  the Company  shall (i)
cause the size of the Board to be decreased  to seven (7) members;  (ii) cause a
sufficient  number of Company  directors  to execute  and deliver to the Company
letters of  resignation  from the Board and all  committees  thereof;  and (iii)
cause  Thomas M.  Barnhart,  II,  Alexander P.  Sammarco


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<PAGE>


and David A. Groshoff, designees of the PBGC, to be elected to the Board as PBGC
Directors.  All  resignations  tendered  pursuant  to this  Section 2.4 shall be
effective upon delivery.

         2.5 Professional Fees. On the Closing Date, the Company shall deliver a
promissory  note to the PBGC evidencing its obligation to reimburse the PBGC for
the reasonable  professional  fees and  disbursements  of Anderson Kill & Olick,
P.C.,  counsel  to the  PBGC,  incurred  in  connection  with  the  negotiation,
execution  and  delivery  of the  Transaction  Documents  and  the  transactions
contemplated  thereby, in an amount not to exceed $75,000.  Such promissory note
shall be in the  appropriate  amount and shall have a maturity  date that is the
ninetieth (90th) day after the Release Event Date.

         2.6  By-laws.  The  Company  shall amend its By-laws on or prior to the
Closing Date as provided in the attached Exhibit C.

                                   ARTICLE 3

                         Representations and Warranties

         3.1  Representations  and Warranties of the Company. In order to induce
the PBGC to execute and deliver, and to consummate the transactions contemplated
by, the Transaction Documents, the Company hereby represents and warrants to the
PBGC that:

         (a)  Organization  and Good  Standing of the Company.  The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation  and has all requisite  corporate power and
authority to own,  operate and lease its properties and to carry on its business
as it is now being  conducted.  The Company is duly  licensed or  qualified as a
foreign  corporation  for the  transaction  of business and is in good  standing
under the laws of each other jurisdiction in which it owns or leases properties,
or conducts any business, so as to require such qualification,  except where the
failure to be so licensed or qualified in any such jurisdiction would not have a
Material Adverse Effect.

         (b) Authorization;  No Conflicts.  The Company has full legal power and
authority to enter into this  Agreement  and the  Transaction  Documents  and to
consummate  the  transactions  contemplated  hereby and thereby.  The execution,
delivery and  performance  of this  Agreement and each  Transaction  Document to
which the Company is party and the  consummation  of  transactions  contemplated
hereby have been duly authorized by the Board. No other corporate  proceeding on
the part of the Company are necessary to authorize the  execution,  delivery and
performance of this Agreement and each Transaction Document and the transactions
contemplated hereby and thereby. This Agreement has been, and on or prior to the
Closing Date each Transaction  Document to which it is a party will be, duly and
validly executed and delivered by the Company. This Agreement  constitutes,  and
upon its  execution  on or prior to the Closing Date each  Transaction  Document
will constitute,  a valid and binding obligation of the Company,  enforceable in
accordance  with its terms.  The  execution,  delivery and  performance  of this
Agreement  and the  Transaction  Documents  to which the  Company is party,  the
consummation of the  transactions by it contemplated  hereby and thereby and the


                                      -6-
<PAGE>


compliance by it with any of the provisions hereof and thereof will not conflict
with,  violate  or  result in a breach of any  provision  of,  require a consent
under, or constitute a default (or an event which,  with notice or lapse of time
or both,  would  constitute a default) under, or result in the termination of or
accelerate the  performance  required by, or result in a right of termination or
acceleration  under,  (i) any  provision  of the  Certificate  or By-laws of the
Company or (ii) any material mortgage,  note,  indenture,  deed of trust, lease,
loan  agreement,  warrant,  registration  rights  agreement  or  other  material
agreement  or  instrument,  the  violation  or breach of would  have a  Material
Adverse Effect.

         (c)  Consents.  No consent,  approval,  order or  authorization  of, or
registration, declaration or filing with, any Governmental Entity is required in
connection  with the execution,  delivery and  performance of this Agreement and
the  Transaction   Documents  by  the  Company  and  the   consummation  of  the
transactions hereunder and thereunder.

         (d) Common  Stock.  The Common  Stock being issued to the PBGC has been
duly  authorized by all necessary  corporate  action.  When issued and delivered
against receipt of the consideration therefor, such Common Stock will be validly
issued,   fully  paid  and   nonassessable   (except  as   provided  in  Section
180.0622(2)(b)  of the  Wisconsin  Business  Corporation  Law as applicable to a
foreign corporation qualified to do business in Wisconsin), will not subject the
holders  thereof  to any  personal  liability  and  will not be  subject  to any
preemptive  rights of any other  stockholder of the Company.  At the Closing the
PBGC will  receive  valid title to the Common Stock to be acquired on such date,
free and clear of any claim, lien, security interest or other encumbrance.

         (e)  Capitalization.  The  Company  has a single  class  of  authorized
capital  stock,  the Common  Stock,  of which  2,000,000  shares  are  currently
authorized,   and  1,003,028   shares  are  currently  issued  and  outstanding.
Immediately after the Closing  contemplated  herein, but disregarding the shares
which may be issued pursuant to the Management Agreement,  the Company will have
1,588,128  shares of Common  Stock  issued and  outstanding.  Except as provided
above and as  contemplated  by the Stock  Compensation  Plan and the  Management
Agreement, the Company has not issued options, warrants, rights to subscribe to,
scrip, calls or commitments of any kind or character  whatsoever relating to the
purchase of any class of its capital stock, including,  without limitation,  the
Common  Stock.  The  Company is not  subject to any  obligation  (contingent  or
otherwise) to repurchase or otherwise  acquire any of its capital stock.  Except
for the  proposed  Registration  Rights  Agreement,  there are no  contracts  or
agreements  between the Company and any Person granting such Person the right to
require the Company to file a  registration  statement  under the Securities Act
with  respect to the capital  stock of the Company  owned or to be owned by such
Person or to require  the  Company to include  such  capital  stock in any other
registration statement filed by the Company under the Securities Act.

         (f)  Legal  Proceedings.   Except  for  the  environmental   litigation
identified  in the  Company's  periodic  filings with the SEC under the Exchange
Act, there are no legal, administrative, arbitration or other legal proceedings,
claims, actions or governmental investigations of any nature pending against the
Company which, if adversely  decided,  would

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<PAGE>


have a Material Adverse Effect.  To the best of the Company's  knowledge,  there
are no legal,  administrative,  arbitration or other legal proceedings,  claims,
actions or  governmental  investigations  of any nature  threatened  against the
Company,  which,  if adversely  decided,  would have a Material  Adverse Effect.
Except for any order of the  bankruptcy  court in the  Southern  District of New
York having  jurisdiction  over the Company's  prior Chapter 11 bankruptcy,  the
Company  is not  subject to any order,  judgment  or decree of any  Governmental
Entity which,  individually or in the aggregate,  could have a Material  Adverse
Effect.

         (g) Compliance  with Law. To the best of the Company's  knowledge,  the
Company is in compliance with the laws, statutes,  orders, rules and regulations
of Federal, state and local governmental  authorities applicable to the Company,
the violation of which would have a Material Adverse Effect.

         (h) Internal Revenue  Service.  The Company has entered into an Amended
Offer In Compromise  with the Internal  Revenue Service ("IRS") and has paid the
$75,000  required to be paid by the Company as provided  therein,  which actions
have  effectively  resolved any dispute or disagreement  between the Company and
the IRS with respect to the Plan.

         (i) Financial  Statements.  The Company has previously delivered to the
PBGC  copies  of (a) the  consolidated  balance  sheet  of the  Company  and its
Subsidiaries  as of  December  31 for the fiscal  years  1996 and 1997,  and the
related  consolidated  statements of  operations,  statements  of  stockholders'
equity and cash flows for the fiscal  years 1995  through  1997,  inclusive,  as
reported in the  Company's  Annual Report on Form 10-K for the fiscal year ended
December 31, 1997,  filed by the Company with the SEC under the Exchange Act, in
each case accompanied by the audit report of Price  Waterhouse LLP,  independent
public  accountants  with  respect  to  the  Company,   and  (b)  the  unaudited
consolidated  balance sheet of the Company and its  Subsidiaries  as of June 30,
1998 and the related unaudited consolidated statement of operations,  statements
of  stockholders'  equity  capital  and cash flows for the three- and  six-month
periods then ended as reported in the  Company's  Quarterly  Report on Form l0-Q
for the quarter  ended June 30, 1998 filed with the SEC under the Exchange  Act.
All of such  financial  statements  fairly  present the  consolidated  financial
position  of the  Company  and its  Subsidiaries  as of the dates  shown and the
results of the consolidated  operations,  statements of stockholders' equity and
cash flows of the Company and its Subsidiaries for the respective fiscal periods
or as of the  respective  dates therein set forth,  in each case subject,  as to
interim  statements,  to changes  resulting from year-end  adjustments  (none of
which will be material in amount and effect) and the absence of  footnotes.  All
of such  financial  statements  have  been  prepared  in  accordance  with  GAAP
consistently applied during the periods involved,  except as otherwise set forth
in the notes thereto, and, except for the environmental litigation identified in
the Company's  periodic filings with the SEC under the Exchange Act and the PBGC
Liability,  the Company and its Subsidiaries  have no liabilities or obligations
of any nature (absolute,  accrued,  contingent or otherwise) which are not fully
reflected or reserved  against in the balance sheet as of June 30, 1998 included
in such financial statements, except for liabilities that may have arisen in the
ordinary  and usual  course of business and  consistent  with


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<PAGE>


past practice and that,  individually  or in the aggregate,  do not have and are
not reasonably expected to have a Material Adverse Effect.

         (j) Reports.  To the best of its knowledge and except for the Company's
failure to hold annual meetings of its  stockholders,  the Company has filed all
reports, registration statements, proxy statements and other materials, together
with any amendments required to be made with respect thereto, that were required
to be filed with (i) the SEC under the  Securities  Act or the Exchange Act (all
such  reports  and  statements  are  collectively  referred  to  herein  as  the
"Reports")  and  (ii)  any  applicable  state  securities  authorities.  To  the
knowledge of the Company, no such Report, as of the date it was filed, contained
any  untrue  statement  of a material  fact or omitted to state a material  fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.

         3.2  Representation  and  Warranties  of PBGC.  In order to induce  the
Company to execute and deliver, and to consummate the transactions  contemplated
by, the Transaction  Documents,  the PBGC represents and warrants to the Company
as follows:

         (a) Organization.  The PBGC is a corporation duly organized and validly
existing as a corporation under the laws of its jurisdiction of organization and
has the  requisite  power and  authority  to enter into this  Agreement  and the
Transaction Documents and to carry out its obligations hereunder and thereunder.

         (b)  Authorization;  No  Conflicts.  The execution and delivery of this
Agreement and the Transaction Documents and the consummation of the transactions
contemplated  hereby and thereby have been authorized by all necessary corporate
action.  This  Agreement  has  been,  and on or  prior to the  Closing  Date the
Transaction  Documents  will be,  executed  and  delivered  by the PBGC and this
Agreement  is, and upon their  execution on or prior to the Closing Date each of
the  Transaction  Documents  will be, valid and binding  obligations of the PBGC
enforceable against it in accordance with its terms. The execution, delivery and
performance  of  this  Agreement  and  the   Transaction   Documents,   and  the
consummation  of the  transactions  contemplated  hereby  and  thereby  and  the
compliance  by the PBGC with any of the  provisions  hereof and thereof will not
conflict  with,  violate or result in a breach of any  provision  of,  require a
consent under, or constitute a default (or an event, which, with notice or lapse
of time or both, would constitute a default) under, any organizational  document
of the PBGC.

                                   ARTICLE 4

                      Additional Agreements of the Parties

         4.1 Conduct of Business. During the term of this Agreement, without the
prior written consent of the PBGC, the Company covenants and agrees that it will
not:

         (a) Except for the Stock Compensation Plan, issue or agree to issue any
shares of Common Stock or any Common Stock  Equivalents for less than fair value
as determined by the Board.  The Company  covenants and agrees that,  except for
the Stock


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<PAGE>


Compensation  Plan and the  Management  Agreement,  it will not issue any Common
Stock or Common Stock  Equivalents  unless such fair value  determination  and a
decision to issue shares based upon said fair value determination have been made
by a Majority Board Approval.  In exercising its fiduciary duties,  the Board is
entitled,  but is not  required,  to rely on a fairness  opinion  or  comparable
financial  and/or  valuation  advice  from a  recognized  investment  banker  or
financial or business  valuation expert.  The parties  understand and agree that
the Company  may issue  capital  stock  other than  Common  Stock and other than
Common Stock Equivalents without securing Majority Board Approval.

         (b)  Except  with  a  Majority  Board  Approval,   enter  into:  (i)  a
consolidation  or merger of the Company with or into another person  (whether or
not the Company is the Surviving Person) or (ii) the sale, assignment, transfer,
lease,  conveyance  or  other  disposal  of fifty  percent  (50%) or more of the
property or assets of the Company in one or more related transactions.

         (c) Amend its  Certificate or By-laws in a manner that is  inconsistent
with or in breach of this  Agreement.  Without  limiting the  generality  of the
foregoing,  the Company agrees that it will not amend its Certificate or By-laws
to increase or decrease the 7-person Board contemplated by this Agreement.

         4.2 Financial  Statements and Other Reports. The Company covenants that
it will deliver to the PBGC:

         (a) As soon as  practicable  and in any event  within 45 days after the
end of each  quarterly  period  (other than the last  quarterly  period) in each
fiscal year, consolidated statements of operations,  statements of stockholders'
equity and cash flows of the Company for the period  from the  beginning  of the
then current fiscal year to the end of such quarterly period, and a consolidated
balance  sheet of the  Company as of the end of such  quarterly  period  setting
forth in each case in comparative form figures for the  corresponding  period or
date in the preceding  fiscal year,  together  with a certificate  from a senior
officer of the Company to the effect  that such  financial  statement  have been
prepared  in  accordance  with GAAP,  consistently  applied  during the  periods
involved  (subject to year-end  adjustments) and that such financial  statements
fairly  present the results of  operations  and changes in  financial  position,
stockholders'  equity,  cash flows and financial position of the Company and its
subsidiaries   as  of  and  for  the  period  then  ended   ("Senior   Officer's
Certificate');  provided, however, that delivery pursuant to clause (c) below of
a copy of the Company's  periodic report on Form 10-Q for such period filed with
the SEC, shall be deemed to satisfy the requirements of this clause (a).

         (b) As soon as  practicable  and in any event  within 90 days after the
end of each fiscal year, a  consolidated  balance sheet of the Company as of the
end of such fiscal year and the related  consolidated  statements of operations,
statements of stockholders'  equity and cash flows for such fiscal year, setting
forth in each  case in  comparative  form  the  corresponding  figures  from the
preceding  fiscal  year,  together  with the audit  report  of Price  Waterhouse
Coopers LLP or any other independent public  accountants of recognized  standing


                                      -10-
<PAGE>


selected by the Company; provided, however, that delivery pursuant to clause (c)
below of a copy of the Annual Report on Form 10-K of the Company for such fiscal
year  filed  with the SEC shall be deemed to satisfy  the  requirements  of this
clause (b).

         (c) Promptly after transmission  thereof,  copies of all such financial
statements,  proxy  statements,  notice  and  reports  as it  shall  send to its
stockholders generally and copies of all such registration statement, other than
registration  statements  relating to employee benefit or dividend  reinvestment
plans, and all such regular and periodic reports on Forms 10-K, 10-Q and 8-K (or
similar substitute forms) as it shall file with the SEC.

         (d) Such  other  information  relating  to the  Company as the PBGC may
reasonably request.

         4.3 Lost, Stolen,  Destroyed or Mutilated  Securities.  Upon receipt of
evidence  satisfactory  to  the  Company  of the  loss,  theft,  destruction  or
mutilation of any  certificate  for any security of the Company and, in the case
of loss,  theft or  destruction,  upon deliver of an  undertaking  by the holder
thereof to indemnify the Company (and, if requested by the Company, the delivery
of an indemnity  bond  sufficient  in the judgment of the Company to protect the
Company from any loss it may suffer if a certificate  is  replaced),  or, in the
case of mutilation,  upon surrender and cancellation  thereof,  the Company will
issue a new certificate for an equivalent  number of shares or another  security
of like tenor, as the case may be.

         4.4 Investment Representations; Transfer Restrictions.

         (a) The PBGC represents,  warrants and covenants to the Company,  which
representations,  warranties  and  covenants  shall  survive the purchase of the
Common Stock, that:

                  (1)  The  PBGC is an  "accredited  investor"  as that  term is
         defined in Rule 501 of Regulation D as promulgated by the SEC.

                  (2) The PBGC is entering into this  Agreement with a knowledge
         and  understanding of the risks associated with an investment in Common
         Stock. The PBGC has made its own independent investigation of the risks
         and potential  benefits of owning Common Stock, and has not relied upon
         any Company offering  materials or oral  representations,  or any third
         party.

                  (3) The PBGC  understands  that the Common  Stock has not been
         registered  under the Securities Act, on the grounds that the offer and
         sale of the Common  Stock are  exempt  from  registration  by reason of
         Section 4(2) of the Securities  Act and/or  Regulation D thereunder and
         have not been  registered  under any state or the  District of Columbia
         securities  law  (the  "Blue  Sky  Laws"),   based  in  part  upon  the
         representations herein.

                  (4) The PBGC is acquiring the Common Stock for  investment for
         PBGC's own account,  not on behalf of others, and with a view to resell
         or


                                      -11-
<PAGE>


         otherwise to distribute the Common Stock, and the PBGC will not sell or
         otherwise  distribute the Common Stock without  registration  under the
         Securities Act and applicable Blue Sky Laws, or exemptions therefrom.

                  (5) The PBGC  understands  and agrees that in accordance  with
         the  requirements  of the Securities Act and the rules and  regulations
         thereunder  and the Blue Sky Laws,  (i) stop  transfer  notations  with
         respect to the  Common  Stock  will be made on the  Company's  transfer
         records,   and  (ii)  a  legend  will  be  placed  on  any  certificate
         representing the Common Stock or other document evidencing ownership of
         the  Securities  to the Blue Sky Law and  that  they may not be  resold
         unless they are registered  under the Securities Act and any applicable
         Blue Sky Law or are exempt therefrom.

         (b) The PBGC  acknowledges  and agrees  that each  certificate  for its
Common Stock shall bear the following legend:

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  AND MAY NOT BE TRANSFERRED,  SOLD
OR  OTHERWISE  DISPOSED OF EXCEPT WHILE SUCH A  REGISTRATION  IS IN EFFECT UNDER
SUCH ACT AND APPLICABLE  STATE  SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT OR SUCH LAWS. THIS CERTIFICATE IS ISSUED PURSUANT TO
AND SUBJECT TO THE RESTRICTIONS ON TRANSFER,  A RIGHT OF FIRST REFUSAL AND OTHER
PROVISIONS OF AN AGREEMENT,  DATED AS OF MARCH 31, 1999, BETWEEN THE COMPANY AND
THE PBGC REFERRED TO THEREIN, A COPY OF WHICH IS ON FILE WITH THE COMPANY.

         Any  holder of Common  Stock may  request  the  Company  to remove  the
Securities Act legend  described  herein from the  certificates  evidencing such
Common Stock by  submitting to the Company such  certificates,  together with an
opinion of counsel  reasonably  satisfactory  to the  Company to the effect that
such legend is no longer required under the Securities Act.

         (c) Subject to the provisions of this Section and Section 4.6, the PBGC
may, in its sole  discretion  and at any time upon prior  written  notice to the
Company,  freely and  without  any  limitations,  transfer  any shares of Common
Stock.

         4.5 Board.

         (a) Notwithstanding anything to the contrary contained in the Company's
Certificate  or  By-laws,  during the term of this  Agreement  the PBGC shall be
entitled  to  designate  three (3) persons to serve on the Board and to fill any
vacancies  created by the  departure of any such person (each a "PBGC  Director"
and collectively,  the "PBGC Directors");  provided, however, that (i) if at any
time the PBGC beneficially owns at least 117,020 shares of Common Stock but less
than  292,550  shares of Common  Stock  (subject  to  adjustment  as provided in
Section 6.13 hereof) it shall have the right to designate  one (1)


                                      -12-
<PAGE>


PBGC  Director  and (ii)  the PBGC  shall  have no right to  designate  any PBGC
Directors once the PBGC's  beneficial  ownership is reduced below 117,020 shares
of Common Stock (subject to adjustment as provided In Section 6.13 hereof).  The
initial PBGC Directors are  identified in Section 2.4 hereof.  The Company shall
be advised by written  notice of the persons  nominated to be PBGC Directors and
such  notice  shall set forth as to each  person  proposed  for  nomination  all
information  relating  to such  persons  that is  required  to be  disclosed  in
solicitations  of proxies for election of directors  pursuant to Regulation  14A
under the Exchange Act (including  such person's  written consent to being named
in the  related  proxy  statement  as a nominee  and to serving as  director  if
elected).

         (b)  The  Company  shall  cause  the  PBGC  Directors,  the  Continuing
Directors and the Retiree Health Trust  Director to be renominated  for election
as  directors  at each  annual  meeting of Company  stockholders  held after the
Closing  Date.  The PBGC  covenants and agrees to vote, at any annual or special
meeting of the Company  stockholders and in any written  consent,  all shares of
Common Stock beneficially owned in favor of the election as director the persons
nominated for director by the Nominating  Committee of the Board, and to refrain
from taking any action contrary to or inconsistent with such obligation.

         (c) The parties  covenant and agree that they will use their respective
best  efforts to cause each of the  Nominating  Committee  and the  Compensation
Committee of the Board to consist of one (1) PBGC  Director,  one (1) Continuing
Director and the sole Retiree  Health Trust  Director.  The PBGC Director on the
Compensation Committee shall be the Chairman of that Committee.

         (d) No Company director shall be entitled to receive cash compensation,
whether structured as annual fees, meeting fees or otherwise,  until the earlier
of (i) the date the PBGC (or its  Transferee  pursuant to Section  4.6(d)) is no
longer  entitled to designate any PBGC  Directors  pursuant to Section 4.5(a) or
(ii) the fifth (5th) anniversary of the date hereof; provided, however, that the
Compensation Committee may determine compensation payable in cash for service as
a director  as long as payment of any such  compensation  is  deferred to a date
consistent with the foregoing.  The Compensation Committee may from time to time
determine  appropriate non-cash  compensation for directors.  Directors shall be
entitled  to  reimbursement  for  reasonable  travel,   lodging  and  comparable
out-of-pocket expenses incurred in attending Board meetings.

         4.6 Right of First Refusal.

         (a) The PBGC shall not sell any shares of Common Stock to any person or
persons that is not a party to this Agreement (the  "Transferee")  without first
offering all such shares of Common Stock to the Company for purchase at the same
price and on the same terms and subject to the same  conditions  as the proposed
transfer to the Transferee;  provided, however, that any general distribution of
shares of Common Stock by the PBGC made  pursuant to an  effective  registration
statement filed with the SEC pursuant to the Securities Act shall not be subject
to the provisions of this Section 4.6.

                                      -13-
<PAGE>



         (b) Prior to  consummating  any  transfer  that is  subject  to Section
4.6(a)  above,  the PBGC shall  first  notify  the  Company  and shall  offer to
transfer  to the  Company  the number of shares of Common  Stock  proposed to be
transferred  to the  Transferee  upon terms no less  favorable than the PBGC has
received  in a bona  fide  offer  for  such  shares  of  Common  Stock  from the
Transferee.  The Company shall have the right to purchase all, but not less than
all, of the shares of Common Stock offered pursuant to such notice.

         (c) Upon receipt of the written notice  provided for in Section 4.6(b),
the Company shall have the option,  for a period of 20 Business  Days  following
the date said notice is received, to purchase all, but not less than all, of the
shares of Common Stock  specified in such notice.  In the event that the Company
shall fail to  exercise  such  option and  purchase  all of the shares of Common
Stock being offered within such 20 Business Day period, then the PBGC shall have
the right, after the termination of such 20 Business Day period (or after waiver
by the  Company  in  writing  of its option to  purchase),  to  transfer  to the
Transferee,  for a period of 30 Business  Days after the  expiration of the time
period  during which the Company may exercise  its right of first  refusal,  the
shares of Common  Stock  that were the  subject of the  option,  but only in the
manner and on the terms and  conditions as set forth in the written notice given
by the PBGC or on other terms no more favorable to the  Transferee.  In no event
shall the PBGC be required to transfer any shares of Common Stock to the Company
pursuant to this right of first refusal unless the Company  purchases all of the
shares  of  Common  Stock  specified  in the  written  notice  on the  terms and
conditions stated therein and within the time periods specified herein.

         (d) If the PBGC,  after  complying  with the provisions of this Section
4.6,  sells all, but not less than all, of the shares of Common Stock then owned
by it to a single  Transferee  in a single  transaction  or a series of  related
transactions,  then in such an event the PBGC  shall have the right to assign to
such Transferee its right to designate  directors pursuant to Section 4.5 hereof
and its other rights under this  Agreement as long as such  Transferee  executes
and delivers a written  agreement in  substantially  the form of this  Agreement
agreeing to be bound by the liabilities, obligations and restrictions undertaken
by the PBGC hereunder as though such Transferee was an initial signatory hereof;
provided,  however,  that (i) such Transferee  shall have no right to assign any
right to designate directors or any right granted to the PBGC hereunder and (ii)
neither the Transferee (nor any transferee or assignee of such Transferee) shall
be subject to the right of first refusal provided in this Section 4.6.

         4.7  Annual  Meeting;  Amendments  to  Certificate.  The  Company  will
schedule an annual meeting of Company  stockholders to be held no later than one
hundred fifty (150) days after the Release  Event Date.  At this annual  meeting
the Company  will,  among other  things,  seek  stockholder  approval for (i) an
amendment to the  Certificate  to authorize a class of "blank  check"  preferred
stock,  (ii) an  amendment to Article  XIII A.(2) of the  Certificate  to exempt
expressly  any  transfer  by the PBGC of Common  Stock  subject to the terms and
conditions of this  Agreement  upon the  Company's  receipt of the legal opinion
required by the  Certificate,  (iii) an amendment to the  Certificate  to delete
Article XIV in its  entirety in light of the fact that such Article has expired,
and (iv) an amendment or


                                      -14-
<PAGE>


amendments to the Certificate to delete any corporate governance provisions with
respect to the Board to the extent  such  provisions  have been  included in the
By-laws.

                                   ARTICLE 5

                                   Conditions

         5.1 Conditions to PBGC's  Obligation to Close.  The  obligations of the
PBGC to consummate the transactions provided for herein are subject, in the sole
and absolute  discretion of the PBGC, to the  satisfaction  or waiver of each of
the following conditions on or prior to the Closing Date:

         (a) Representations and Warranties;  Covenants. The representations and
warranties  of the Company  contained  in this  Agreement  and the  Transactions
Documents  shall be true and correct in all  material  respects on and as of the
date of this Agreement or the date of such Transaction Document, as the case may
be, and on and as of the Closing Date with the same effect as though made on and
as of such date,  and the  Company  shall have  performed  all  obligations  and
complied with all agreements,  undertakings,  covenants and conditions  required
hereunder and thereunder to be performed by it at or prior to the Closing.

         (b) No  Injunction.  There shall not be in effect any order,  decree or
injunction  of a court or agency of  competent  jurisdictions  which  enjoins or
prohibits consummation of the transactions contemplated hereby.

         (c) Registration  Rights Agreement.  The Registration  Rights Agreement
shall have been  executed and  delivered by the parties  thereto and shall be in
full force and effect.

         (d)  Board  of  Directors.  The  persons  designated  by the PBGC to be
directors  pursuant  to  Section  2.4  hereof  shall  have been duly  elected or
appointed to the Board, effective as of the Closing.

         (e) Lock-up  Agreement.  The Lock-Up Agreement shall have been executed
and delivered by all parties thereto other than the PBGC.

         (f) Company Certificate. The Company shall have delivered to the PBGC a
certificate,  dated the Closing Date,  signed by its chief executive officer and
in form and substance  reasonably  satisfactory  to the PBGC, to the effect that
the conditions precedent set forth in this Section 5.1 have been satisfied.

         (g) IRS. The Company shall have delivered to the PBGC evidence that the
Company has  satisfied  its  obligations  to the IRS under the Amended  Offer In
Compromise.

         (h) Legal  Opinion.  The  Company  shall  have  delivered  the  written
opinion,  dated as of the Closing  Date,  of Foley & Lardner with respect to the
matters identified in Exhibit D.



                                      -15-
<PAGE>



         5.2 Conditions to the Company's  Obligations to Close.  The obligations
of the Company to consummate the  transactions  provided for hereby are subject,
in the sole and absolute  discretion  of the  Company,  to the  satisfaction  or
waiver of each of the following conditions on or prior to the Closing Date:

         (a) Representations and Warranties;  Covenants. The representations and
warranties of the PBGC contained in this Agreement  shall be true and correct in
all material  respects on and as of the date of this  Agreement and on and as of
the  Closing  Date with the same  effect as though made on and as of such dates,
and the  PBGC  shall  have  performed  all  obligations  and  compiled  with all
agreements,  undertakings,  covenants and conditions required to be performed by
it at or prior to the Closing.

         (b) No  Injunction.  There shall not be in effect any order,  decree or
injunction  of a court or agency of  competent  jurisdiction  which  enjoins  or
prohibits consummation of the transactions contemplated hereby.

                                   ARTICLE 6

                                  Miscellaneous

         6.1 Survival of  Representations  and  Warranties.  All  covenants  and
agreements  and  all  representations  and  warranties  made  herein  or in  any
certificates delivered in connection with the Closing shall survive the Closing.

         6.2   Notices.   All  demands,   notices,   requests,   consents,   and
communications  hereunder  shall be in writing  and shall be deemed to have been
duly given if personally delivered by courier service,  messenger,  or confirmed
telecopy at, or if duly deposited in the mails, by certified or registered mail,
postage prepaid,  return receipt requested,  to the following addresses, or such
other  addresses  as may be  furnished  hereafter  by notice in writing,  to the
following parties:

To the Company:            Allis-Chalmers Corporation
                           2255 Glades Road, Suite #307E
                           Boca Raton, FL  33431
                           Attn:  John Grigsby
                           Telecopy No.:  (561) 994-3298

With copies to:            Robert B. Nederlander
                           Nederlander Organization, Inc.
                           810 7th Avenue
                           New York, NY  10019
                           Telecopy No.:  (212) 586-5862

                                      -16-
<PAGE>



                           Foley & Lardner
                           777 E. Wisconsin Avenue
                           Milwaukee, WI  53202-5367
                           Attn:  Luke E. Sims
                           Telecopy No.:  (414) 297-4900

To the PBGC:               Pension Benefit Guaranty Corporation
                           1200 K Street, N.W.
                           Washington, D.C. 20005
                           Attn:  Frank McCulloch, Esq.
                           Telecopy No.:  (202) 326-4112

With copies to:            Anderson Kill & Olick, P.C.
                           1251 Avenue of the Americas
                           New York, NY  10020-1182
                           Attn:  Mark D. Silverschotz, Esq.
                           Telecopy No.:  (212) 278-1733

All demands,  requests,  consents, notices and communications shall be deemed to
have been given either:  (x) at the time of actual delivery  thereof;  or (y) if
given  by  certified  or   registered   mail,   five  (5)  Business  Days  after
certification  or  registration  thereof,  to  any  officer  (or  an  authorized
recipient of deliveries to the office) of the party to whom given.

         6.3 Specific  Performance.  Each of the parties to this Agreement shall
be entitled to enforce its rights under this Agreement, specifically, to recover
damages  and costs  (including  attorneys'  fees)  caused  by any  breach of any
provision of this  Agreement  and to exercise  all other rights  existing in its
favor. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement, and that any
party  may in its  sole  discretion  apply  to any  court  of law or  equity  of
competent  jurisdiction  (without  posting  any bond or  deposit)  for  specific
performance  and/or other  injunctive  relief in order to enforce or prevent any
violations of the provisions of this Agreement.

         6.4 Integration and  Severability.  This Agreement  embodies the entire
agreement  and  understanding   among  the  parties  and  supersedes  all  prior
agreements and understandings relating to the subject matter hereof. In case any
one or more of the provisions contained in this Agreement,  or in any instrument
contemplated  hereby, or any application thereof,  shall be invalid,  illegal or
unenforceable in any respect,  the validity,  legality and enforceability of the
remaining  provisions  contained herein and therein,  and any other  application
thereof shall not in any way be affected or impaired thereby.

         6.5  Counterparts.  This  Agreement  may be  executed  in  one or  more
counterparts,  each of  which  shall  be  deemed  an  original  but all of which
together shall constitute one and the same instrument.



                                      -17-
<PAGE>



         6.6 Covenant of Further Assurances. Each party hereto agrees to execute
any  and all  documents,  and to  perform  such  other  actions,  to the  extent
permitted  by law,  whether  before  or  after  the  Closing  Date,  that may be
reasonably  necessary or expedient to further the purposes of this  Agreement or
to further assure the benefits intended to be conferred hereby.

         6.7  Public  Announcements.  The  Company  and PBGC agree that no party
hereto shall make any public  announcement or other dissemination of information
concerning  the contents of this Agreement and the documents to be delivered and
transactions contemplated hereby, without the prior written consent of the other
parties  hereto.  Notwithstanding  the foregoing,  any party hereto may make any
disclosure   which  its  counsel  advises  is  required  by  applicable  law  or
governmental  rule and  regulation,  in which  case the other  parties  shall be
advised in advance,  and the  parties  shall use  reasonable  efforts to cause a
mutually  agreeable  release or announcement to be issued.  The parties agree to
issue a press release describing the transactions  contemplated  herein promptly
after Closing.

         6.8 Captions.  The captions used in this  Agreement are for purposes of
convenience  only and shall not be deemed to modify,  or  provide  any basis for
interpretation of, any of the provisions of this Agreement.

         6.9 Governing Law. This Agreement shall be construed in accordance with
and shall be governed by the internal laws of the State of Delaware.

         6.10  Jurisdiction.  The  courts  of the  State of New York in New York
County and the United  States  District  Court for the Southern  District of New
York shall have  jurisdiction  over the parties  with  respect to any dispute or
controversy between them arising under or in connection with this agreement and,
by  execution  and  delivery  of this  agreement,  each of the  parties  to this
Agreement submits to the jurisdiction of those courts, including but not limited
to the in personam and subject matter  jurisdiction of those courts,  waived any
objections to such jurisdiction on the grounds of venue or forum non conveniens,
the  absence of in  personam  or subject  matter  jurisdiction  and any  similar
grounds, consents to service of process by mail (in accordance with Section 6.2)
or any other manner permitted by law, and irrevocably  agrees to be bound by any
judgment rendered thereby in connection with this Agreement.

         6.11  Mutual  Waiver  of  Jury  Trial.   Because  disputes  arising  in
connection with complex financial transactions are most quickly and economically
resolved by an  experienced  and expert  person and the parties wish  applicable
state and federal laws to apply  (rather than  arbitration  rules),  the parties
desire that their disputes be resolved by a judge applying such applicable laws.
Therefore,  to achieve the best  combination  of the  benefits  of the  judicial
system and of  arbitration,  the parties hereto waive all right to trial by jury
in any  action,  suit or  proceeding  brought to enforce or defend any rights of
remedies under this Agreement.

         6.12  Term.  If at any time the PBGC,  or its  Transferee  pursuant  to
Section 4.6(d), is no longer entitled to designate any PBGC Directors,  then the
covenants,  agreements


                                      -18-
<PAGE>


and obligation undertaken by the Company hereunder shall automatically terminate
and be of no further  force and  effect;  provided,  however,  that the right of
refusal  provided in Section 4.6 hereof in favor of the Company  shall  continue
until  the PBGC  beneficially  owns  less than  117,020  shares of Common  Stock
(subject  to  adjustment  as  provided in Section  6.13  hereof),  except if the
Company has ever exercised its right of first refusal,  then such right of first
refusal shall continue until the PBGC no longer  beneficially owns any shares of
Common Stock.  Nothing contained in this Section 6.12 shall limit in any way any
covenant,  agreement or obligation undertaken by the Company in the Registration
Rights Agreement or the Lock-Up Agreement.

         6.13 Equitable Adjustment. In the event of a stock split, reverse stock
split,  recapitalization,  reorganization  or comparable change in the Company's
capital  structure (other than an issuance of Common Stock for fair value),  any
reference  to a  specific  number  of shares of  Common  Stock  herein  shall be
equitably adjusted to reflect such change.

         6.14 No Third Party  Beneficiaries.  No third party is a beneficiary of
this  Agreement,  and no third  party  shall be  entitled  to enforce any rights
hereunder.

         6.15 Assignment. Except to the extent expressly provided in Section 4.6
hereof,  the rights provided to the PBGC in this Agreement shall not be assigned
or  transferred,  and any  assignment  or  transfer  shall  be null and void and
without legal effect.

         IN WITNESS  WHEREOF,  the parties have executed  this  Agreement on the
date first above written.


                                        ALLIS-CHALMERS CORPORATION


                                        By: /s/John T. Grigsby, Jr.
                                            Name: John T. Grigsby, Jr.
                                            Title: Executive V.P. and CFO


                                        PENSION BENEFIT GUARANTY CORPORATION


                                        By: /s/Robert M. Klein
                                            Name: Robert M. Klein
                                            Title: Acting Chief Negotiator


                                      -19-
<PAGE>





                                  EXHIBIT LIST


          Exhibit             Description
          -------             -----------

             A                Lock-Up Agreement

             B                Registration Rights Agreement

             C                Amendments to By-laws

             D                Legal Opinion