<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-22276
ALLIED HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-0360550
- ---------------------------------------------- -----------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer ID Number)
or organization)
160 Clairemont Avenue, Suite 510, Decatur, Georgia 30030
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (404) 370-1100
------------------------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
----------------
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
--------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by referenced in Part III of this Form 10-K or any amendment to
this Form 10-K. [_]
As of March 12, 1997 Registrant had outstanding 7,810,000 shares of common
stock. The aggregate market value of the common stock held by nonaffiliates of
the Registrant, based upon the closing sales price of the common stock on March
12, 1997 as reported on the NASDAQ Stock Market, was approximately $ 31,590,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for Registrant's 1997 Annual Meeting of
Shareholders to be held May 22, 1997 are incorporated by reference in Part III.
<PAGE> 2
ALLIED HOLDINGS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Caption Number
------- ------
<S> <C> <C>
PART I.
ITEM 1. BUSINESS................................................. 3
ITEM 2. PROPERTIES............................................... 8
ITEM 3. LEGAL PROCEEDINGS........................................ 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...... 8
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...................................... 10
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA..................... 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................... 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............. 15
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..... 15
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT....... 15
ITEM 11. EXECUTIVE COMPENSATION................................... 15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT........................................... 16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........... 16
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K...................................... 16
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. BUSINESS.
1. General. Allied Holdings, Inc.(the "Company") is a holding
company which operates through its wholly-owned subsidiaries. The principal
subsidiary of the Company is the Allied Automotive Group, Inc. ("Allied
Automotive Group"). The Allied Automotive Group is comprised of Allied
Systems, Ltd. ("Allied Systems"), Auto Haulaway, Inc. ("Auto Haulaway"), Inter
Mobile, Inc. ("Inter Mobile"), Legion Transportation, Inc. ("Legion") and
Auto Haulaway Releasing Services (1981) Limited ("Releasing"). Allied Systems
was formed effective January 1, 1988 by the combination of The Motor Convoy,
Inc. ("Motor Convoy") and Auto Convoy, Co., Ltd. ("Auto Convoy"). The Company
acquired all of the outstanding capital stock of Auto Haulaway on October 31,
1994 (the "Acquisition"). Allied Systems and Auto Haulaway are engaged in the
business of transporting automobiles and light trucks from manufacturing
plants, ports, auctions, and railway distribution points to automobile
dealerships. Inter Mobile provides railroad terminal and loading services;
Legion brokers automobile transportation services; and Releasing provides
releasing services at Canadian manufacturing plants.
Axis Group, Inc. ("Axis"), a wholly owned subsidiary of the Company,
provides logistics solutions to selected segments of the automotive market
based on an underlying business philosophy of Move, Improve, Inform. This
involves identifying new and innovative methods of distribution as well as
better utilization of traditional and emerging technologies to help customers
solve the most complex transportation, distribution, inventory management, and
logistics problems. Axis is pursuing an increasing number of opportunities in
the growing and evolving remarketed vehicle market, working with companies
throughout the channel (such as used car superstores, leasing companies,
financial institutions, and auctions) to develop and implement logistics
solutions which are simple, consistent, cost-effective, time sensitive, and
responsive to market changes. Axis is also working with major vehicle
manufacturers as they begin redesigning their vehicle distribution systems to
be more market responsive. Other markets and market segments being addressed
by Axis are vehicle manufacturer service parts, aftermarket maintenance and
repair parts, and international automotive projects.
In addition to the Allied Automotive Group and the Axis, the Company
has three other operating subsidiaries that provide support services to the
Company's subsidiaries. Allied Industries Incorporated provides administrative,
financial, risk management, and other related services, Haul Insurance Limited
is a captive insurance company, and Link Information Systems, Inc. ("Link")
provides information systems hardware, software, and support.
The Company completed an initial public offering in October 1993 whereby
it sold 3,225,000 shares of its common stock, resulting in net proceeds to the
Company of $40,640,000 which were primarily used to retire debt and to redeem
certain limited partnership interests in the Company (the "Offering").
On October 31, 1994, the Company acquired all of the outstanding capital
stock of Auto Haulaway for an aggregate consideration of approximately $65
million; $30 million of which was paid in cash at closing and $35 million
through the refinancing of existing debt of Auto Haulaway.
The Company was incorporated in the State of Georgia in 1934. The
Company's executive offices are located at 160 Clairemont Avenue, Suite 510,
3
<PAGE> 4
Decatur, Georgia 30030 and its principal telephone number is (404) 370-1100.
2. Introduction. The Company is the parent company of several
subsidiaries engaged in the automotive distribution business, primarily the
delivery of automobiles and light trucks. Allied Automotive Group is the
second largest motor carrier in North America specializing in the delivery of
automobiles and light trucks. Ford Motor Company, Inc. ("Ford") and Chrysler
Corporation ("Chrysler") are the Company's largest customers, accounting for
approximately 53% and 18%, respectively, of the Company's revenues during 1996.
The Company hauled approximately 55% of Ford's North American production during
1996 and hauled approximately 46% of Chrysler's North American production. The
Company has served Ford since 1934 and Chrysler since 1980.
Allied Automotive Group operates 50 terminals located near rail ramps,
manufacturing plants, ports and auctions. Pursuant to contracts with domestic
and foreign automobile manufacturers, Allied Automotive Group provides carrier
services throughout the eastern half of the United States and all of Canada,
with its terminals predominately located in the Southeastern, Northeastern, and
Mid-Atlantic United States, Texas, and Missouri and in nine of the ten Canadian
provinces and the two Canadian territories. Allied Automotive Group operates a
fleet of approximately 2,000 modern, specialized tractor-trailers ("Rigs").
Allied Automotive Group operates primarily in the short-haul segment of the
automobile transportation industry with an average length of haul of less than
200 miles.
In April 1996, the Company formed Axis as a wholly-owned subsidiary. Axis
is pursuing opportunities in the remarketed finished vehicles market, including
the used vehicle superstore segment. Axis is also working with major vehicle
manufacturers on projects dealing with finished vehicle logistics systems in
North America and other countries, plus pursuing entrance into the automotive
service and after-market parts market. Axis is a primary sponsor of the
International Car Distribution Program North American research project.
In July 1996, the Company moved its information systems group into a
separate company, Link. The Company's strong industry reputation for its
systems and increased reliance on information systems by the business and its
customers, caused growth in this area. Link's plans include developing and
marketing its services externally with systems capabilities, which complement
the other subsidiaries of the Company.
3. Industry Overview. Allied Automotive Group was North America's
second largest carrier of vehicles in 1996. The Company's operating results are
directly related to new automobile and light truck sales, primarily by Ford,
Chrysler and other manufacturers.
4
<PAGE> 5
The following is a summary of North American automobile and light truck
production, excluding Mexican production not sold in the United States or
Canada, and United States and Canadian import sales for 1992 through 1996:
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
North American production(1) 11,837 13,318 14,767 14,799 14,788
Import sales 2,669 2,427 2,356 2,046 1,828
------ ------ ------ ------ -----
Total 14,506 15,745 17,123 16,845 16,616
====== ====== ====== ====== ======
Percentage increase (decrease) 5.1% 8.5% 8.8% (1.6)% (1.4)%
</TABLE>
(1) Includes vehicle production in North American plants by foreign
manufacturers and excludes Mexican production not sold in the United
States or Canada.
Source: Ward's Automotive Reports.
The following table shows the United States and Canadian market
share of sales of automobiles and light trucks of the leading
manufacturers:
<TABLE>
<CAPTION>
Manufacturer 1992 1993 1994 1995 1996
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
GM 34% 33% 33% 33% 31%
Ford 24 25 25 25 25
Chrysler 14 15 15 15 17
Toyota 8 7 7 7 7
Nissan 5 5 5 5 5
Mazda 3 3 3 2 2
Other 12 12 12 13 13
-- -- -- -- --
TOTAL 100% 100% 100% 100% 100%
=== === === === ====
</TABLE>
Source: Ward's Automotive Reports.
Domestic automotive manufacturing plants are typically dedicated to
manufacturing a particular model or models. Vehicles are usually shipped by
rail to rail ramps throughout the United States and Canada where trucking
companies handle final delivery to dealers. Vehicles destined for dealers
within a radius of approximately 250 miles from the plant are usually shipped
by truck. The rail or truck carrier is responsible for loading the vehicles on
railcars or trailers and for any damages incurred while the vehicles are in the
carrier's custody. Automobiles manufactured in Europe and Asia are transported
into the United States and Canada by ship and usually delivered directly to
dealers from seaports by truck or shipped by rail to rail ramps and delivered
by trucks to dealers. Vehicles transported by ship are normally unloaded by
stevedores and prepared for delivery in port processing centers, which
involves cleaning and may involve installing accessories. The port processor
releases the vehicles to the carrier
5
<PAGE> 6
which loads the vehicles and delivers them to a rail ramp or directly to
dealers.
4. Competition. Since the 1950's, competition has been
characterized by periods of stability, interrupted by periods of intense change
and heightened competition. First, advances in multi-level rail cars allowed
rail carriers to obtain a dominant position in the long-haul carriage of
automobiles, one that continues. Then, in the 1970's, particularly as
importers obtained a more significant share of U.S. automobile sales, new motor
carriers, some without union contracts, began to compete for automobile
traffic, even while rail carriers solidified their dominance over long haul.
In some instances, these new carriers were created, or their creation
facilitated, by importer interests.
Now, a confluence of a variety of changes has engendered a new era of
heightened competition and a reduction in real freight charges by rail and motor
carriers of automobiles. The elimination of I.C.C. regulation and collective
ratemaking provided the basis upon which automobile manufacturer have been able
to enhance their own competitiveness and profitability, as it relates to
transportation of their products. By the mid-1980's, nearly all transportation
was pursuant to contracts entered into by negotiation or competitive bid. The
competition for these contracts has been vigorous with bids from rail and motor
carriers and with motor carriers bidders including companies using Teamsters
drivers, those using drivers who are members of other unions, those using
non-union drivers, those using contractor drivers, and those using drivers
obtained from third parties. The marketplace is so competitive that many
negotiations and bids result in contracts which do not allow for recovery of
increased costs of labor or fuel over the contract term and many of which offer
initial rate reductions of varying magnitude.
Two other developments of recent vintage are now beginning to have
an impact. The first is the rise in the use of third party logistics
companies by auto makers. This is expected to convert further traffic to
competitive bidding and ease entry for less well capitalized, less sophisticated
haulers as the logistics companies provide the information systems and
integrate, more comprehensively, the full distribution function. The second is
the fundamental changes the automotive manufacturers are making to their
finished vehicle distribution systems in order to expediate the delivery time of
finished vehicles to the dealers. Manufacturers are creating vehicle mixing
centers where rail traffic from numerous manufacturing plants are re-mixed for
delivery to the closest railramp to the dealer. These mixing centers offer
opportunity for longer haul business to be obtained through competitive
bidding. In addition, manufacturers are creating new railramps in order to
place vehicles in more central locations closer to the markets but off the
dealer lots. These new rail ramps may reduce the average length of haul for
motor carriers of autos. In metropolitan areas, competition for traffic from
the railramps to the dealers could be very intense as local delivery carriers,
equipment and driver leasing companies and driveaway operators may become new
competitors for the traffic, with dealer pickup possibly expanding.
While there has been, and will continue to be, consolidation among the
traditional motor carrier transporters of automobiles, particularly those using
Teamster drivers, the trends also show growing competition from rail carriers
and, importantly, from non-traditional sources.
The company expects that, through the development of further
efficiencies and scale economies, it will respond to these new competitive
forces. It is prepared to entertain acquisitions which enhance its
efficiencies and competitiveness.
5. Strategy. The Company's mission is to meet its customers'
needs by being the leading provider of the highest quality and most cost
effective automotive distribution services. The Company's business strategy is
to capitalize on its established position and reputation to increase its volume
of business with existing customers and to attract business from customers with
which it has not previously done business.
The Company is making a major commitment to the logistics business,
having been encouraged by major manufacturers to help with their transportation
logistics both in North America and internationally. The Company's
relationship with the manufacturers, its industry leadership in information
systems, and its skill base have uniquely positioned the Company to provide
logistics services for vehicle distribution in the growing out source logistics
market.
In addition to internal growth, the Company intends to seek strategic
acquisitions of logistics skills based companies and other companies engaged in
the automotive distribution industry.
6. Customer Relationships. Ford is the largest customer of the
Company, accounting for approximately 53% of the Company's revenues in 1996.
In addition to Ford, Chrysler accounted for approximately 18% of 1996 revenues.
Other companies for which the Company provides transportation services include
Mazda Motor of America (Central), Inc., Nissan North America, Inc., Honda Motor
Co., General Motors Corporation, and Toyota Motor Sales USA, Inc., among
others.
6
<PAGE> 7
In the United States and Canada, Allied Automotive Group and Ford have
a five year agreement through May 1999. The agreement then continues
month-to-month thereafter unless cancelled upon 30 days' written notice. The
agreement provides that the Allied Automotive Group is the primary carrier from
24 locations in the United States and all of Ford's Canadian locations and
provides the applicable rates. If performance of the agreement has been made
"impracticable" by any unforeseen contingency, the agreement contains a
provision permitting it to be renegotiated, or terminated upon failure to
renegotiate, by either party.
The Allied Automotive Group and Chrysler Corporation have a contract
through June 30, 2000. The contract provides for the Allied Automotive Group to
be the primary carrier for 26 locations throughout the United States and Canada
and provides the applicable rates.
7. Employees. As of December 31, 1996 the Company had
approximately 3,600 employees, approximately 2,300 of whom are drivers for the
Allied Automotive Group. All Allied Automotive Group drivers and shop and yard
personnel, approximately 3,000 employees, are union labor represented by the
various labor unions. The compensation and benefits paid by Allied Automotive
Group to union employees are established by union contracts. These employee
amounts include approximately 200 owner-operators who deliver exclusively for
Auto Haulaway. The owner-operators are either paid a percentage of the
revenues they generate or they receive normal driver pay plus a truck
allowance.
The Master Agreement with the Teamsters Union to which Allied Systems,
along with other carriers in the United States which in the aggregate transport
more than 95% of all new vehicles are signatories, is for the period June 1,
1995 through May 31, 1999 and applies to Allied System's drivers and shop and
yard personnel. The obligations of each of the signatory employers under the
agreement are binding on any successors in the event of any merger, sale,
change of control or other form of business transfer.
In Canada, Auto Haulaway's drivers and shop and yard personnel,
including owner-operators, operate under collectively bargained contracts with
the Teamsters Union. There are four different labor agreements, each covering
certain of the Canadian provinces and territories. The labor contract for union
employees in the province of British Columbia expired December 31, 1996. The
Company is currently renegotiating the contract and the employees are operating
under the provisions of the existing contract until a new agreement is
finalized. The Company does not anticipate any stoppage of work prior to the
renegotiation of a new contract. The three remaining labor contracts expire at
various dates from May 31, 1998 to March 31, 2000.
Employee benefits for United States non-union employees include a
defined benefit pension plan, a 401(k) plan, life insurance, a medical plan and
disability coverage which provides benefits equal to two-thirds of the
employee's annual compensation up to age 65.
Employee benefits for Canadian non-union employees include, a defined
benefit pension plan, life insurance, a medical plan and disability coverage
which provides benefits equal to 70% of the employee's monthly compensation up
to a maximum of $10,000 monthly.
The Company believes its employee relations are good.
7
<PAGE> 8
ITEM 2. PROPERTIES.
The Company's executive offices are located in Decatur, Georgia, a suburb
of Atlanta, in an office building owned by a partnership controlled by officers
and directors of the Company. The Company leases approximately 62,493 square
feet of space for its executive offices, which is sufficient to permit the
Company to conduct its operations. The Company operates from 50 terminals
which are located at or near manufacturing plants, ports, and railway
terminals. The Company currently owns 14 of its terminals and 3 shop
facilities. The Company leases the remainder of its facilities. Most of the
leased facilities are leased on a year to year basis from railroads at rents
that are not material to the Company.
Over the past 10 years, changes in governmental regulations have
gradually permitted the lengthening of Rigs from 55 to 75 feet. This has
increased load factors and improved operating efficiency by permitting Allied
Automotive Group to haul more vehicles with fewer Rigs and employees. Allied
Automotive Group has worked closely with manufacturers to develop specialized
equipment to efficiently meet the specific needs of manufacturers.
Allied Automotive Group's fleet consists of approximately 2,000 Rigs, of
which approximately 99% in the United States and 85% in Canada are 75 foot
models. Allied Automotive Group has historically invested heavily in both new
equipment and equipment upgrades, which have served to increase efficiency and
extend the useful life of Rigs. Currently, new 75 foot Rigs cost between
$120,000 and $140,000. When possible, Allied Automotive Group modifies its
trailers to lengthen them which costs substantially less than purchasing new
Rigs. A Rig, consisting of a tractor and a trailer, usually stays together
throughout the life of the Rig.
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings pending or threatened against the
Company. The Company is routinely a party to litigation incidental to its
business, primarily involving claims for personal injury and property damage
incurred in the transportation of vehicles. The Company maintains insurance
which it believes is adequate to cover its liability risks.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE
8
<PAGE> 9
Executive Officers of the Registrant
The following table sets forth certain information regarding the
Company's executive officers:
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<S> <C> <C>
Robert J. Rutland 55 Chairman of the Board of Directors and Chief
Executive Officer
Guy W. Rutland, III 60 Chairman Emeritus and Director
A. Mitchell Poole, Jr. 49 President, Chief Operating Officer and Director
Bernard O. De Wulf 48 Vice Chairman, Executive Vice President and
Director
Berner F. Wilson, Jr. 58 Vice Chairman, Secretary and Director
Guy W. Rutland, IV 33 Vice President and Director
Joseph W. Collier 54 President of Allied Automotive Group and
Director
Douglas R. Cartin 43 President of Axis Group
Douglas A. Lauer 33 President of Link Information Systems
Daniel H. Popky 32 Vice President, Finance
</TABLE>
Robert Rutland has been Chairman and Chief Executive Officer of the
Company since December 1995. Mr. Rutland served as President and Chief
Executive Officer of the Company from 1986 to December 1995. Prior to October
1993, Mr. Rutland was Chief Executive Officer of each of the Company's
subsidiaries.
Guy Rutland, III was elected Chairman Emeritus in December 1995. Mr.
Rutland served as Chairman of the Board of the Company from 1986 to December
1995. Prior to October 1993, Mr. Rutland was Chairman or Vice Chairman of each
of the Company's subsidiaries.
Mr. Poole has been President and Chief Operating Officer of the Company
since December 1995. Prior to December 1995, Mr. Poole served as Executive
Vice President and Chief Financial Officer of the Company. Mr. Poole joined
Allied Systems in 1988 as Senior Vice President and Chief Financial Officer.
He was appointed President of Allied Industries Incorporated in December 1990
and continues to serve in such capacity. Prior to joining the Company in 1988,
Mr. Poole was an audit partner with Arthur Andersen LLP, independent public
accountants.
Mr. De Wulf has been Vice Chairman and an Executive Vice President of
the Company since October 1993. Prior to such time, Mr. De Wulf was Vice
Chairman of each of the Company's subsidiaries. Mr. De Wulf was Vice Chairman
of Auto Convoy from 1983 until 1988 when the Company and Auto Convoy became
affiliated.
Mr. Wilson has been Vice President of the Company since October 1993 and
9
<PAGE> 10
Vice Chairman of the Board of Directors and Secretary since December 1995.
Prior to October 1993, Mr. Wilson was an officer or Vice Chairman of several of
the Company's subsidiaries. Mr. Wilson joined the Company in 1974 and has held
various finance, administration, and operations positions.
Mr. Rutland, IV has been Vice President of the Company since October
1993 and Vice President - Reengineering Core Team of Allied Automotive Group,
Inc., since November 1996. From January 1996 to November 1996 Mr. Rutland was
Assistant Vice President of the Central and Southeast Region of Operations for
Allied Systems, Ltd. From March 1995 to January 1996 Mr. Rutland was Assistant
Vice President of the Central Division of Operations for Allied Systems, Ltd.
From June 1994 to March 1995, Mr. Rutland was Assistant Vice President of the
Eastern Division of Operations for Allied Systems, Ltd. From 1993 to June 1994
Mr. Rutland was assigned to special projects with an assignment in Industrial
Relations/Labor Department and from 1988 to 1993, Mr. Rutland was Director of
Performance Management.
Mr. Collier was appointed as a director of the Company in December 1995.
Mr. Collier has been the President of Allied Automotive Group, Inc. since
December 1995. Mr. Collier had been Executive Vice President of Marketing and
Sales and Senior Vice President of Allied Systems, Ltd. since 1991. Prior to
joining the Company in 1979, Mr. Collier served in management positions with
Bowman Transportation and also with the Federal Bureau of Investigation.
Mr. Cartin has been President of Axis Group since October 1995. From
April 1995 to October 1995 Mr. Cartin was Vice President of Allied Industries.
Mr. Cartin has 20 years of international senior management level expertise in
providing third party integrated supply chain logistics solutions. Prior to
joining the Company, he held a number of positions over a 13 year period at
National Freight Consortium (NFC).
Mr. Lauer has been President of Link Information Systems since July
1996. From January 1996 to July 1996 Mr. Lauer was Vice President and Chief
Information Officer of Allied Industries. Mr. Lauer has 11 years of information
technology experience. Prior to joining the Company, he was Director,
Information Systems at Exel Logistics.
Mr. Popky has been Vice President, Finance of the Company since December
1995. From January 1995 to December 1995 Mr. Popky was Vice President and
Controller and from October 1994 to January 1995 he was Assistant Vice
President and Controller for the Company. Prior to joining the Company, Mr.
Popky held various positions with Arthur Andersen LLP for 9 years.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is traded on the NASDAQ National Market tier
of the NASDAQ Stock Market under the symbol HAUL. The common stock began
trading on September 29, 1993. Prior to September 29, 1993, there had been no
established public trading market for the common stock. Market information
regarding the common stock is set forth in "Financial Statements and
Supplementary Data" included elsewhere herein.
As of March 12, 1997 there were approximately 2,000 holders of the
Company's common stock. The Company has paid no cash dividends in the last two
years.
10
<PAGE> 11
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for each of the
five years in the period ended December 31, 1996 are derived from the Company's
Consolidated Financial Statements which have been audited by Arthur Andersen
LLP, independent public accountants. The selected consolidated financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and notes thereto.
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands except per share amounts)
--------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Revenues $392,547 $381,464 $297,236 $241,981 $ 212,655
------- ------- ------- ------- -------
Operating expenses:
Salaries, wages and fringe benefits 204,838 195,952 157,979 134,054 116,901
Operating supplies and expenses 62,880 62,179 51,532 44,090 40,154
Purchased transportation 34,533 32,084 9,486 3,223 2,002
Rent expense 4,975 5,354 3,214 3,485 6,051
Insurance and claims 16,849 16,022 12,043 9,745 9,553
Operating taxes and licenses 16,122 16,564 14,301 12,223 10,084
Depreciation and amortization 26,425 25,431 16,314 11,683 8,878
Communications and utilities 3,111 3,434 1,855 1,456 1,405
Other operating expenses 4,219 3,522 1,781 1,662 1,467
----- ----- ----- ----- -----
Total operating expenses 373,952 360,543 268,505 221,621 196,495
------- ------- ------- ------- -------
Operating Income 18,595 20,291 28,731 20,360 16,160
Minority interest in income -- -- -- (858) (1,034)
Interest expense (10,720) (11,260) (5,462) (6,042) (6,963)
Interest income 603 707 312 313 61
Other income (expense), net -- -- -- (49) (169)
-------- --------- --------- ---- ---------
Income before extraordinary item and cumulative effect of
accounting change 8,478 10,368 23,581 13,724 8,055
Income tax provision (1) (3,557) (4,222) (9,393) (4,183) (3,249)
----- ----- ----- ----- -----
Income before extraordinary item and cumulative effect of
accounting change 4,921 6,146 14,188 9,541 4,806
Extraordinary loss on early extinguishment of debt (935) -- (2,627) -- --
Cumulative effect of change in accounting for
postretirement benefits other than pensions(2) -- -- -- (2,592) --
-------- --------- ---------- ------- ---------
Net income $ 3,986 $ 6,146 $ 11,561 $ 6,949 $ 4,806
======== ========= ========== ======= =========
BALANCE SHEET DATA:
Current assets $49,202 $50,421 $50,861 $30,225 $27,270
Current liabilities 48,494 43,257 44,608 38,412 48,702
Total assets 211,083 214,686 218,806 119,897 89,722
Minority interest in consolidated subsidiary -- -- -- -- 12,224
Long-term debt and capital lease obligations less current
portion 93,708 106,634 120,136 41,845 34,740
Stockholders equity (deficit) 56,709 53,022 45,835 35,759 (5,944)
</TABLE>
(1) Prior to the Company's initial public offering, Allied Systems, Ltd. as
a limited partnership, and its general partners, as corporations, were
subject to taxation under Subchapter S and did not pay federal or most
state taxes. Accordingly, the Company's consolidated financial
statements for the periods prior to the offering include a pro forma
provision for income taxes.
(2) Effective January 1, 1993, the Company adopted the provisions of SFAS
106, "Employers Accounting for Postretirement Benefits Other Than
Pensions." Adoption of this accounting standard resulted in a one-time,
after pro forma tax, non-cash charge to earnings of $2,592,000.
11
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of expense items
to revenues for the periods indicated:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995 1994
---- ---- ----
Revenues 100.0% 100.0% 100.0%
----- ----- -----
<S> <C> <C> <C>
Operating Expenses:
Salaries, wages and fringe benefits 52.2 51.4 53.1
Operating supplies and expenses 16.0 16.3 17.3
Purchased transportation 8.8 8.4 3.2
Rent expense 1.3 1.4 1.1
Insurance and claims 4.3 4.2 4.1
Operating taxes and licenses 4.1 4.3 4.8
Depreciation and amortization 6.7 6.7 5.5
Communications and utilities 0.8 0.9 0.6
Other operating expenses 1.1 0.9 0.6
--- --- ---
Total operating expenses 95.3 94.5 90.3
---- ---- ----
Operating income 4.7 5.5 9.7
--- --- ---
Other income(expense):
Interest expense (2.8) (3.0) (1.8)
Interest income .2 .2 0.1
--- --- ---
Income before income taxes and extraordinary item (2.6) (2.8) (1.7)
--- --- ----
Income tax provision 2.1 2.7 8.0
Income before extraordinary item (.9) (1.1) (3.2)
-- --- ---
Extraordinary loss on early extinguishment of long term debt 1.2 1.6 4.8
Net Income
(0.2) -- (0.9)
--- ---- ---
1.0% 1.6% 3.9%
==== ==== ====
</TABLE>
1996 Compared to 1995
Revenues were $392,547,000 in 1996 compared to $381,464,000 in 1995,
an increase of $11,083,000, or 2.9%. The increase in revenues was primarily due
to an increase in the number of vehicles delivered. The Company delivered
approximately 5% more vehicles in 1996 compared to 1995. Additional revenues
generated from the increase in vehicle deliveries were offset by a decrease in
the revenue generated per vehicle delivered due to an increase in the
percentage of shorter haul shuttle and city deliveries.
The operating ratio (operating expenses as a percentage of revenues)
for 1996 was 95.3%, compared to 94.5% in 1995. The increase was primarily due
to planned start-up costs for the Axis Group together with increased fuel costs
and an increase in the percentage of light trucks hauled by the Allied
Automotive Group which led to lower load averages and increased costs.
Salaries, wages and fringe benefits increased from 51.4% of revenues
in 1995 to 52.2% of revenues in 1996. This change as a percent of revenues is
primarily due to the addition of payroll costs for the Axis Group,
inefficiencies and increased costs resulting from the General Motors strike
during March and again during October and the severe winter weather during the
first quarter of 1996.
Operating supplies and expenses as a percentage of revenues decreased
from 16.3% in 1995 to 16.0% in 1996. Operating supplies and expenses have
decreased despite the rise in diesel fuel prices. This decrease is primarily
due to an increase in the units delivered by owner-operators combined with the
use of newer, more efficient equipment
12
<PAGE> 13
which has reduced the costs to operate the Company's Rigs and has increased
fuel efficiency. Owner-operators are responsible for all costs to operate their
Rigs and such costs are included in purchased transportation. In addition, the
Company has implemented productivity and efficiency programs that have reduced
operating expenses.
Purchased transportation has increased from 8.4% of revenues in 1995
to 8.8% in 1996. This is mainly due to an increase in the number of units
hauled by owner-operators and by other carriers for the Company as part of an
exchange program to improve the backhaul ratio.
Interest expense for the year ended December 31, 1996 decreased to
$10,720,000 compared to $11,260,000 in 1995. This decrease is primarily the
result of reductions in long-term debt during the year due to debt repayments.
The effective tax rate increased from approximately 41% of pre-tax
income in 1995 to approximately 42% of pre-tax income in 1996. This increase
was due to higher state taxes.
1995 Compared to 1994
Revenues were $381,464,000 in 1995 compared to $297,236,000 in 1994,
an increase of $84,228,000 or 28.3%. The significant increase in revenues was
primarily attributable to the acquisition of Auto Haulaway which was completed
in October 31, 1994. Auto Haulaway contributed revenues amounting to
$123,426,000 in 1995. The additional revenues gained from the acquisition of
Auto Haulaway were offset by decreased revenues from the Company's U. S.
operations due to a decrease in vehicles delivered arising from a weaker U.S.
auto market compared to 1994.
The operating ratio for 1995 was 94.5%, compared to 90.3% in 1994. The
increase was primarily due to decreases in vehicles delivered because of
decreases in new vehicle production and sales. U. S. car and light truck sales
for 1995 decreased approximately 2% from 1994 and Canada's car and light truck
sales were approximately 7% below that of 1994. In addition, 1995 new vehicle
production in Canada for Auto Haulaway's largest customer decreased
approximately 22% from 1994, mainly due to model changeovers. New vehicle
production in the U.S. and Canada during 1995 was impacted by numerous model
changeovers as well as slower than expected ramp-up of production after the
model changeovers at two of the Company's primary customers. As a result of the
decline in new vehicle production and sales, the number of vehicles delivered
by Auto Haulaway during 1995 decreased 13% compared to 1994.
Salaries, wages and fringe benefits decreased from 53.1% of revenues
in 1994 to 51.4% of revenues in 1995. This decrease as a percentage of revenue
is primarily because Auto Haulaway utilizes approximately 200 owner-operators.
Owner-operators are either paid a percentage of the revenues they generate or
they receive normal driver pay plus a truck allowance, and amounts earned by
the owner-operators are included as purchased transportation expense. Prior to
the acquisition of Auto Haulaway, all of the Company's drivers were employees
of the Company.
Operating supplies and expenses as a percentage of revenues decreased
from 17.3% in 1994 to 16.3% in 1995. This decrease is primarily attributable to
the inclusion of a full year of Auto Haulaway's operating results as Auto
Haulaway's owner-operators are responsible for all costs to operate their Rigs,
so the operating supplies and expenses related to the vehicles delivered by the
owner-operator are greatly reduced.
Purchased transportation has increased from 3.2% of revenues in 1994
to 8.4% in 1995. As discussed above, this increase is the result of Auto
Haulaway utilizing owner-operators to deliver vehicles.
13
<PAGE> 14
Depreciation and amortization expense increased from 5.5% of revenues
in 1994 to 6.7% of revenues in 1995 mainly due to the acquisition of additional
Rigs together with the additional goodwill amortization resulting from the
acquisition of Auto Haulaway.
Interest expense for the year ended December 31, 1995 increased to
$11,260,000 compared to $5,462,000 in 1994. This increase was due to the
increase in long-term debt resulting from the acquisition of Auto Haulaway and
due to a rise in interest rates.
The effective tax rate increased from approximately 40% of pre-tax
income in 1994 to approximately 41% of pre-tax income in 1995. This increase
was due to higher effective tax rates in Canada.
Liquidity and Capital Resources
On October 31, 1994, the Company acquired all of the capital stock of
Auto Haulaway for approximately $30 million. In connection with the
Acquisition, the Company refinanced approximately $35 million of Auto
Haulaway's long-term debt. The source of funds utilized for the payment of the
purchase price and the debt refinancing was borrowings under the Company's
revolving credit agreement and available cash on hand.
The Company's sources of liquidity are funds provided by operations
and borrowings under credit agreements with financial institutions.
Net cash provided by operating activities totaled $39,621,000 for 1996
and $30,062,000 for 1995. This increase in cash flows from operations is mainly
due to changes in working capital.
Net cash used in investing activities totaled $33,026,000 and
$18,031,000 for 1996 and 1995, respectively. This increase was primarily due to
an increase in the number of new rigs that were acquired, modifications of
existing equipment, and renovations and additions to terminal and maintenance
facilities. This increase is also due to the Company investing funds held by
its captive insurance company in short term investments.
Net cash used in financing activities was $15,689,000 for 1996 versus
$12,779,000 during 1995. These amounts include repayments of long-term debt of
$57,691,000 in 1996 and $11,952,000 in 1995. During the first quarter of 1996,
the Company issued $40,000,000 of senior subordinated notes, the proceeds of
which were used to repay long-term debt.
In February 1996, The Company issued $40,000,000 of senior
subordinated notes ("Senior Notes") through a private placement. The Senior
Notes mature February 1, 2003 and bear interest at 12% annually. Proceeds from
the Senior Note were used to reduce borrowing under the Company's revolving
credit and term loan agreement (the "Agreement"). In connection with the
issuance of the Senior Notes, the Company refinanced the Agreement (the
"Refinancing") to provide for the Senior Notes. In addition, a floating rate
installment note payable in the amount of approximately $8,909,000 was amended
and refinanced to allow for the Senior Notes, and the interest rate was changed
from prime plus 2% to the LIBOR rate plus 2.25%.
The Agreement enables the Company to borrow up to the lesser of
$130,000,000 or the borrowing base amount, as defined in the Agreement. After
the refinancing, annual commitment fees are .375% of the undrawn portion of the
commitment. Amounts outstanding under the revolving portion of the Agreement,
after giving consideration to the refinancing, mature February 1998, subject to
one-year extensions, at which
14
<PAGE> 15
time the balance outstanding converts into a term loan which matures four
years after the maturity date of the revolving portion of the Agreement. The
interest rate for the Agreement is, at the Company's option, either (i) the
bank's base rate, as defined, or (ii) the bank's Eurodollar rate, as defined,
as determined at the date of each borrowing, plus an applicable margin.
At December 31, 1996, the Company had a working capital surplus of
approximately $708,000 compared to the 1995 working capital surplus of
$7,164,000. The decrease is mainly due to the utilization of working capital to
repay long-term debt. The Company believes that available borrowing under the
revolving credit agreement, available cash and internally generated funds will
be sufficient to support its working capital requirements for the foreseeable
future.
Seasonality and Inflation
The Company generally experiences its highest revenues during the
second and fourth quarters of each calendar year due to the shipment of new
models and because the first and third quarters are impacted by manufacturing
plant downtime. During the past three years, inflation has not significantly
affected the Company's results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary data are set forth on page F-1
of this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
NONE
PART III
Certain information required by Part III is omitted from this report
in that the Registrant will file a definitive Proxy Statement pursuant to
Regulation 14A (the "Proxy Statement") not later than 120 days after the end of
the fiscal year covered by this report, and certain information included
therein is incorporated herein by reference. Only those sections of the Proxy
Statement which specifically address the items set forth herein are
incorporated by reference. Such information does not include the Compensation
Committee Report or the Performance Graph included in the Proxy Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information concerning the Company's directors required by this
Item is incorporated by reference to the Company's Proxy Statement. The
information concerning the Company's executive officers required by this Item
is incorporated by reference to the section in Part I, Item 4, entitled
"Executive Officers of the Registrant."
The information regarding compliance with Section 16 of the Securities
Exchange Act of 1934, as amended, is to be set forth in the Proxy Statement and
is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by reference to
the Company's Proxy Statement.
15
<PAGE> 16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this Item is incorporated by reference to
the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated by reference to
the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) The following documents are filed as part of this report:
(1) Financial Statements:
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants......................... F-1
Consolidated Balance Sheets at December 31, 1996 and 1995........ F-2
Consolidated Statements of Operations for
the Years Ended December 31, 1996, 1995 and 1994................ F-3
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1996, 1995 and 1994..... F-4
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994.......................... F-5
Notes to Consolidated Financial Statements....................... F-6
</TABLE>
(2) Financial Statement Schedules:
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
----
Report of Independent Public Accountants......................... S-1
Schedule II - Valuation and Qualifying Accounts for the Years
Ended December 31, 1996, 1995 and 1994........................... S-2
All other schedules are omitted as the required information is inapplicable or
the information is presented in the financial statements or related notes.
(b) Reports on Form 8-K - None.
(c) Exhibits;
Exhibit Index filed as part of this report 22
16
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C> <C>
(1) 3.1 Amended and Restated Articles of Incorporation of the Company.
(1) 3.2 Amended and Restated Bylaws of the Company.
(1) 4.1 Specimen Common Stock Certificate.
10.1 Form of the Company's Employment Agreement with executive officers.
(1) 10.2 The Company's Long Term Incentive Plan dated July 1993.
(2) 10.3 The Company's 401(k) Retirement Plan and Defined Benefit Pension Plan and Trust.
(1) 10.4 Lease Agreement relating to the Company's main office between Allied and DELOS dated April 1,
1993, as amended.
10.5 Form of 12% Senior Subordinated Notes due February 1, 2003.
21.1 List of subsidiary corporations.
23.1 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney.
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
- -----------------------
(1) Incorporated by reference from Registration Statement (File Number
33-66620) as filed with the Securities and Exchange Commission on July
28, 1993 and amended on September 2, 1993 and September 17, 1993 and
deemed effective on September 29, 1993.
(2) Incorporated by reference from Registration Statement (File Number
33-76108) as filed with the SEC on March 4, 1994 and deemed effective
on such date, and Annual Report on Form 10-K for the year ended
December 31, 1993.
18
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ALLIED HOLDINGS, INC.
Date: March 26, 1997 By: /s/ Robert J. Rutland
-------------------------------------
Robert J. Rutland, Chairman and Chief
Executive Officer
Date: March 26, 1997 By: /s/ Mitchell Poole, Jr.
-------------------------------------
A. Mitchell Poole, Jr., President and
Chief Operating Officer
19
<PAGE> 19
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH
AUDITORS' REPORT
<PAGE> 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Allied Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of ALLIED HOLDINGS,
INC. (a Georgia corporation) AND SUBSIDIARIES as of December 31, 1996 and 1995
and the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Allied Holdings, Inc. and
subsidiaries as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 4, 1997
F-1
<PAGE> 21
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,973 $ 11,147
Short-term investments 8,520 0
Receivables, net of allowance for doubtful accounts of $564 and $689 in
1996 and 1995, respectively 22,673 22,690
Inventories 4,096 4,184
Prepayments and other current assets 11,940 12,400
--------- ---------
Total current assets 49,202 50,421
--------- ---------
PROPERTY AND EQUIPMENT, NET 132,552 134,873
--------- ---------
OTHER ASSETS:
Goodwill, net 22,081 23,568
Notes receivable due from related parties 573 573
Other 6,675 5,251
--------- ---------
Total other assets 29,329 29,392
--------- ---------
Total assets $ 211,083 $ 214,686
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,275 $ 4,368
Trade accounts payable 15,872 11,320
Accrued liabilities 30,347 27,569
--------- ---------
Total current liabilities 48,494 43,257
--------- ---------
LONG-TERM DEBT, LESS CURRENT MATURITIES 93,708 106,634
--------- ---------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 3,621 3,698
--------- ---------
DEFERRED INCOME TAXES 7,487 5,561
--------- ---------
OTHER LONG-TERM LIABILITIES 1,064 2,514
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTES 5, 7, AND 8)
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000 shares authorized, 7,810 and 7,725
shares outstanding at December 31, 1996 and 1995, respectively 0 0
Additional paid-in capital 43,657 42,977
Retained earnings 14,475 10,489
Foreign currency translation adjustment, net of tax (743) (444)
Unearned compensation (680) 0
--------- ---------
Total stockholders' equity 56,709 53,022
--------- ---------
Total liabilities and stockholders' equity $ 211,083 $ 214,686
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-2
<PAGE> 22
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
REVENUES $ 392,547 $ 381,464 $ 297,236
--------- --------- ---------
OPERATING EXPENSES:
Salaries, wages, and fringe benefits 204,838 195,952 157,979
Operating supplies and expenses 62,880 62,179 51,532
Purchased transportation 34,533 32,084 9,486
Insurance and claims 16,849 16,022 12,043
Operating taxes and licenses 16,122 16,564 14,301
Depreciation and amortization 26,425 25,431 16,314
Rent expenses 4,975 5,354 3,214
Communications and utilities 3,111 3,435 1,855
Other operating expenses 4,219 3,522 1,781
--------- --------- ---------
Total operating expenses 373,952 360,543 268,505
--------- --------- ---------
Operating income 18,595 20,921 28,731
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (10,720) (11,260) (5,462)
Interest income 603 707 312
--------- --------- ---------
(10,117) (10,553) (5,150)
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 8,478 10,368 23,581
INCOME TAX PROVISION (3,557) (4,222) (9,393)
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM 4,921 6,146 14,188
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT, net of income
tax benefit of $573 and $2,072 for the years ended December 31,
1996 and 1994, respectively (935) 0 (2,627)
--------- --------- ---------
NET INCOME $ 3,986 $ 6,146 $ 11,561
========= ========= =========
PER COMMON SHARE:
Income before extraordinary item $ 0.64 $ 0.80 $ 1.84
Extraordinary loss on early extinguishment of
debt (0.12) 0.00 (0.34)
--------- --------- ---------
NET INCOME PER COMMON SHARE $ 0.52 $ 0.80 $ 1.50
========= ========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,725 7,725 7,725
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 23
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL RETAINED CURRENCY
--------------- PAID-IN EARNINGS TRANSLATION UNEARNED
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT COMPENSATION TOTAL
------ ------ ------- --------- ---------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 7,725 $0 $42,977 $ (7,218) $ 0 $ 0 $ 35,759
Net income 0 0 0 11,561 0 0 11,561
Foreign currency translation adjustment, net
of income taxes of $978 0 0 0 0 (1,485) 0 (1,485)
----- -- ------- -------- ------- ----- --------
BALANCE, DECEMBER 31, 1994 7,725 0 42,977 4,343 (1,485) 0 45,835
Net income 0 0 0 6,146 0 0 6,146
Foreign currency translation adjustment, net
of income taxes of $701 0 0 0 0 1,041 0 1,041
----- -- ------- -------- ------- ----- --------
BALANCE, DECEMBER 31, 1995 7,725 $0 $42,977 $ 10,489 $ (444) 0 53,022
Net income 0 0 0 3,986 0 0 3,986
Foreign currency translation adjustment, net
of income taxes of $181 0 0 0 0 (299) 0 (299)
Restricted stock awards 85 0 680 0 0 (680) 0
----- -- ------- -------- ------- ----- --------
BALANCE, DECEMBER 31, 1996 7,810 $0 $43,657 $ 14,475 $ (743) $(680) $ 56,709
===== == ======= ======== ======= ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 24
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,986 $ 6,146 $ 11,561
-------- -------- ---------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 26,425 25,431 16,314
Gain on sale of property and equipment (13) (57) (401)
Extraordinary loss on early extinguishment of debt, net 935 0 2,627
Deferred income taxes 1,921 1,806 4,189
Change in operating assets and liabilities, excluding effect of
business acquired:
Receivables, net (9) 1,299 (3,155)
Inventories 82 163 457
Prepayments and other current assets 452 (444) (95)
Trade accounts payable 4,565 645 (1,907)
Accrued liabilities 1,277 (4,927) (1,482)
-------- -------- ---------
Total adjustments 35,635 23,916 16,547
-------- -------- ---------
Net cash provided by operating activities 39,621 30,062 28,108
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (25,972) (18,210) (30,545)
Proceeds from sale of property and equipment 3,447 768 1,032
Purchase of business, net of cash acquired 0 0 (32,332)
Increase in short-term investments (8,520) 0 0
Increase in the cash surrender value of life insurance (1,981) (589) (356)
-------- -------- ---------
Net cash used in investing activities (33,026) (18,031) (62,201)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (57,691) (11,952) (73,839)
Proceeds from issuance of long-term debt 42,657 0 113,113
Other, net (655) (827) (1,243)
-------- -------- ---------
Net cash (used in) provided by financing
activities (15,689) (12,779) 38,031
-------- -------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (80) 183 (137)
-------- -------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (9,174) (565) 3,801
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 11,147 11,712 7,911
-------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,973 $ 11,147 $ 11,712
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 25
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, AND 1994
1. ORGANIZATION AND OPERATIONS
Allied Holdings, Inc. (the "Company"), a Georgia corporation, is a holding
company which operates through its wholly owned subsidiaries. The
principal subsidiary of the Company is Allied Automotive Group, Inc.
("Allied Automotive Group"), a Georgia corporation. Allied Automotive
Group is comprised of Allied Systems, Ltd. ("Allied Systems"), a Georgia
limited partnership, Auto Haulaway, Inc. ("Auto Haulaway"), an Ontario,
Canada corporation, Inter Mobile, Inc. ("Inter Mobile"), Legion
Transportation, Inc. ("Legion"), and Auto Haulaway Releasing Services
(1981) Limited ("Releasing"). Allied Systems and Auto Haulaway are engaged
in the business of transporting automobiles and light trucks from
manufacturing plants, ports, auctions, and railway distribution points to
automobile dealerships. The Company acquired all of the outstanding
capital stock of Auto Haulaway on October 31, 1994 (Note 2). Currently,
Inter Mobile, Legion, and Releasing are not significant to the
consolidated financial position or results of operations of the Company.
During 1996, the Company incorporated Axis Group, Inc. ("Axis Group").
Axis Group provides logistics solutions to the finished vehicle, service,
and aftermarket parts segments of the automotive market. Axis Group
identifies new and innovative methods of distribution as well as better
use of traditional and emerging technologies to help customers solve the
most complex transportation, inventory management, and logistics problems.
The Company has three other operating subsidiaries, Allied Industries,
Inc. ("Allied Industries"), Haul Insurance Limited ("Haul"), and Link
Information Systems, Inc. ("Link"). These subsidiaries provide services to
Allied Systems, Auto Haulaway, and the other subsidiaries of the Company.
Allied Industries provides administrative, financial, risk management, and
other related services. During December 1995, the Company incorporated
Haul as a captive insurance company. Haul was formed for the purpose of
insuring general liability, automobile liability, and workers'
compensation for the Company. Link, which was incorporated in 1996,
provides information systems hardware, software, and support.
F-6
<PAGE> 26
2. ACQUISITION OF AUTO HAULAWAY
On October 31, 1994, the Company acquired all of the outstanding capital
stock of Auto Haulaway for approximately $30 million. The acquisition has
been accounted for under the purchase method, and accordingly, the
operating results of Auto Haulaway have been included in the accompanying
financial statements since the date of the acquisition.
In connection with the acquisition, the Company refinanced approximately
$35 million of Auto Haulaway's long-term debt which resulted in an
extraordinary loss on the extinguishment of the debt of approximately $2.6
million, net of income taxes of approximately $2.1 million. The source of
funds utilized for the payment of the purchase price and the debt
refinancing were borrowings under the Company's revolving credit agreement
and available cash on hand.
The following unaudited pro forma results of operations for the year ended
December 31, 1994 assume that the acquisition of Auto Haulaway had
occurred on January 1, 1994. The pro forma results are not necessarily
indicative of what actually would have occurred if the acquisition of Auto
Haulaway had been consummated on January 1, 1994. In addition, they are
not intended to be a projection of future results and do not reflect any
synergies that might be achieved from combined operations (in thousands,
except per share data).
<TABLE>
<CAPTION>
December 31,
1994
------------
<S> <C>
Revenues $410,631
Operating income 35,245
Income before extraordinary item 14,871
Net income 12,244
Income per share before extraordinary item $ 1.93
Net income per share $ 1.58
Average shares outstanding 7,725
</TABLE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions and
accounts have been eliminated.
F-7
<PAGE> 27
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's Canadian subsidiaries are
translated into U.S. dollars using current exchange rates in effect at the
balance sheet date, and revenues and expenses are translated at average
monthly exchange rates. The resulting translation adjustments are recorded
as a separate component of stockholders' equity, net of related income
taxes.
REVENUE RECOGNITION
Substantially all revenue is derived from transporting automobiles and
light trucks from manufacturing plants, ports, auctions, and railway
distribution points to automobile dealerships. Revenue is recorded by the
Company when the vehicles are delivered to the dealerships.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories consist primarily of tires, parts, materials, and supplies for
servicing the Company's tractors and trailers. Inventories are recorded at
the lower of cost (on a first-in, first-out basis) or market.
PREPAYMENTS AND OTHER CURRENT ASSETS
Prepayments and other current assets consist of the following at December
31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Tires on tractors and trailers $ 6,785 $ 5,944
Prepaid insurance 2,572 3,192
Other 2,583 3,264
------- -------
$11,940 $12,400
======= =======
</TABLE>
TIRES ON TRACTORS AND TRAILERS
Tires on tractors and trailers are capitalized and amortized to operating
supplies and expenses on a cents per mile basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major property additions,
replacements, and betterments are capitalized, while
F-8
<PAGE> 28
maintenance and repairs which do not extend the useful lives of these
assets are expensed currently. Depreciation is provided using the
straight-line method for financial reporting and accelerated methods for
income tax purposes. The detail of property and equipment at December 31,
1996 and 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 USEFUL LIVES
-------- -------- -------------
<S> <C> <C> <C>
Tractors and trailers $181,841 $164,422 4 to 10 years
Buildings and facilities (including leasehold
improvements) 23,679 22,951 4 to 25 years
Land 9,953 9,999
Furniture, fixtures, and equipment 10,520 9,745 3 to 10 years
Service cars and equipment 1,175 1,330 3 to 10 years
-------- --------
227,168 208,447
Less accumulated depreciation and
amortization 94,616 73,574
-------- --------
$132,552 $134,873
======== ========
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash paid during the year for interest $ 8,514 $11,470 $ 3,738
Cash paid during the year for income taxes,
net of refunds (280) 1,364 6,205
Liabilities assumed in connection with
business acquired 0 0 48,261
Capital lease obligations terminated 0 0 4,093
</TABLE>
GOODWILL
The acquisition of Auto Haulaway resulted in goodwill of approximately
$23,425,000. Goodwill related to the acquisition is being amortized on a
straight-line basis over 20 years. Other goodwill is being amortized on a
straight-line basis over ten years. Amortization (included in depreciation
and amortization expense) for the years ended December 31, 1996, 1995, and
1994 amounted to approximately $1,541,000, $1,407,000, and $607,000,
respectively. Accumulated amortization was approximately $5,623,000 and
$4,082,000 at December 31, 1996 and 1995, respectively. The Company
periodically evaluates the realizability of goodwill based upon
expectations of nondiscounted cash flows and operating income for each
subsidiary having a material goodwill balance. The Company believes no
impairment of goodwill exists at December 31, 1996.
F-9
<PAGE> 29
CASH SURRENDER VALUE OF LIFE INSURANCE
The Company maintains life insurance policies for certain employees of the
Company. Under the terms of the policies, the Company will receive, upon
the death of the insured, the lesser of aggregate premiums paid or the
face amount of the policy. Any excess proceeds over premiums paid are
remitted to the employee's beneficiary. The Company records the increase
in cash surrender value each year as a reduction of premium expense. The
Company has recorded approximately $4,127,000 and $2,146,000 of cash
surrender value as of December 31, 1996 and 1995, respectively, included
in other assets on the accompanying balance sheets.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements. Estimates also affect the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 ("SFAS No. 107"),
"Disclosures About Fair Value of Financial Instruments," requires
disclosure of the following information about the fair value of certain
financial instruments for which it is practicable to estimate that value.
For purposes of the following disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a
current transaction between willing parties other than in a forced sale or
liquidation.
The amounts disclosed represent management's best estimates of fair value.
In accordance with SFAS No. 107, the Company has excluded certain
financial instruments and all other assets and liabilities from its
disclosure. Accordingly, the aggregate fair value amounts presented are
not intended to, and do not, represent the underlying fair value of the
Company.
The methods and assumptions used to estimate fair value are as follows:
CASH AND CASH EQUIVALENTS
The carrying amount approximates fair value due to the relatively
short period to maturity of these instruments.
F-10
<PAGE> 30
SHORT-TERM INVESTMENTS
The Company's short-term investments are comprised of debt
securities, all classified as trading securities, which are
carried at their fair value based upon the quoted market prices
of those investments. Accordingly, net realized and unrealized
gains and losses on trading securities are included in net
earnings.
LONG-TERM DEBT
The carrying amount approximates fair value based on the
borrowing rates currently available to the Company for bank loans
with similar terms and average maturities.
INTEREST RATE CAP AGREEMENTS
The Company has entered into several interest rate protection
agreements which expire at various dates through February 1999.
The agreements protect outstanding floating rate debt at varying
amounts ranging from $47,000,000 in 1996 to $33,000,000 in 1999.
Under the agreements, the Company is reimbursed when actual
interest rates exceed a limit, as defined. The limit, based
primarily upon the 90-day LIBOR, ranges from 6.5% to 8% over the
protection period and certain of the agreements limit the
reimbursement if actual LIBOR exceeds a specified rate. The fair
value of the interest rate cap agreements is the amount at which
they could be settled, based on estimates obtained from brokers.
The asset and (liability) amounts recorded in the balance sheet and the
estimated fair values of financial instruments at December 31, 1996
consisted of the following (in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Cash and cash equivalents $ 1,973 $ 1,973
Short-term investments 8,520 8,520
Long-term debt (95,983) (95,983)
Interest rate cap agreements 309 0
</TABLE>
F-11
<PAGE> 31
ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1996 and 1995
(in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Wages and benefits $12,566 $14,540
Claims and insurance reserves 13,145 9,649
Other 4,636 3,380
------- -------
$30,347 $27,569
======= =======
</TABLE>
CLAIMS AND INSURANCE RESERVES
In the United States, the Company retains liability up to $500,000 for
each claim for automobile, workers' compensation, and general liability,
including personal injury and property damage claims. In addition to the
$500,000 per occurrence deductible for automobile liability, there is a
$250,000 aggregate deductible for those claims which exceed the $500,000
per occurrence deductible. In addition, the Company retains liability up
to $250,000 for each cargo damage claim. In Canada, the Company retains
liability up to CDN $100,000 for each claim for personal injury, property
damage, and cargo damage. The estimated costs of all known and potential
losses are accrued by the Company. In the opinion of management, adequate
provision has been made for all incurred claims.
INCOME TAXES
The Company follows the practice of providing for income taxes based on
SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires
recognition of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial
statements or tax returns (Note 4).
EARNINGS PER SHARE
Earnings per share is calculated by dividing net income by the weighted
average number of common shares outstanding for the years presented. The
dilutive effect of equivalent shares derived from stock options and
restricted stock was less than 3% for 1996 and 1995, and therefore, the
equivalent shares were not included in the computation of earnings per
share.
RECLASSIFICATION
Certain amounts in the December 31, 1995 and 1994 financial statements
have been reclassified to conform to the current year presentation.
F-12
<PAGE> 32
4. INCOME TAXES
For all periods presented, the accompanying financial statements reflect
provisions for income taxes computed in accordance with the requirements
of SFAS No. 109.
The following summarizes the components of the income tax provision (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Current:
Federal $ 369 $ 571 $3,991
State 269 177 607
Foreign 932 1,989 325
Deferred:
Federal 4,365 3,371 3,599
State 646 422 630
Foreign (3,024) (2,308) 241
------- ------- ------
Total income tax provision $ 3,557 $ 4,222 $9,393
======= ======= ======
</TABLE>
The provision for income taxes differs from the amounts computed by
applying federal statutory rates due to the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Provision computed at the federal statutory
rate $ 2,883 $ 3,525 $8,018
State income taxes, net of federal income tax
benefit 604 415 943
Insurance premiums, net of recovery (115) 54 42
Earnings in jurisdictions taxed at rates different from the
statutory U.S. federal rate (494) (252) 0
Other, net 679 480 390
------- ------- ------
Income tax provision $ 3,557 $ 4,222 $9,393
======= ======= ======
</TABLE>
The tax effect of significant temporary differences representing deferred
tax assets and liabilities at December 31, 1996 and 1995 is as follows (in
thousands):
F-13
<PAGE> 33
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Noncurrent deferred tax assets (liabilities):
Tax carryforwards $ 3,623 $ 1,775
Postretirement benefits 1,501 1,535
Depreciation and amortization (13,823) (10,085)
Other, net 1,212 1,214
-------- --------
Net noncurrent deferred tax liability (7,487) (5,561)
-------- --------
Current deferred tax assets (liabilities):
Tires on tractors and trailers (2,615) (2,244)
Liabilities not currently
deductible 2,470 3,881
Other, net 498 (511)
-------- --------
Net current deferred tax asset 353 1,126
-------- --------
Net deferred tax liabilities $ (7,134) $ (4,435)
======== ========
</TABLE>
The Company has certain tax carryforwards available to offset future
income taxes consisting of net operating losses that expire from 2002 to
2012, foreign tax credits that expire from 2001 to 2002, and alternative
minimum tax credits that have no expiration dates.
Management believes that a valuation allowance is not considered necessary
based upon the Company's earnings history, the projections for future
taxable income and other relevant considerations over the periods during
which the deferred tax assets are deductible.
5. LEASE COMMITMENTS
RELATED PARTIES
Prior to December 1995, the Company leased automobiles and service trucks
from a related party under leases generally having one-year to three-year
lease terms at fixed monthly rental rates. In addition, the Company leases
office space from a related party under a lease which expires in 2003.
Rental expenses under these noncancelable leases amounted to approximately
$1,030,000 in 1996, $1,652,000 in 1995, and $1,398,000 in 1994. In the
opinion of management, the terms of these leases are as favorable as those
which could be obtained from unrelated lessors.
UNRELATED PARTIES
The Company leases equipment and certain terminal facilities from
unrelated parties under noncancelable operating lease agreements which
expire in various years through 2003. Rental expenses under
F-14
<PAGE> 34
these leases amounted to approximately $3,245,000, $1,796,000, and
$454,000 in 1996, 1995, and 1994, respectively.
The Company also leases certain terminal facilities and revenue equipment
from unrelated parties under cancelable leases (i.e., month-to-month
terms). The total rental expenses under these leases were approximately
$2,142,000, $1,965,000, and $1,973,000 for the years ended December 31,
1996, 1995, and 1994, respectively.
Future minimum rental commitments under all noncancelable operating lease
agreements, excluding lease agreements that expire within one year, are as
follows as of December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
RELATED
PARTY OTHER TOTAL
------ ------ -------
<S> <C> <C> <C>
1997 $1,061 $2,840 $ 3,901
1998 1,093 2,563 3,656
1999 1,126 1,750 2,876
2000 1,159 812 1,971
2001 1,194 618 1,812
Thereafter 1,540 1,052 2,592
------ ------ -------
Total $7,173 $9,635 $16,808
====== ====== =======
</TABLE>
6. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1996 and 1995
(in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Revolving credit and term loan agreement $ 49,348 $ 100,000
Senior subordinated notes 40,000 0
Floating rate installment note payable with interest at LIBOR plus 2.25%
(8.48% at December 31, 1996) 6,635 8,909
Fixed rate installment note payable bearing interest at 10% 0 2,093
--------- ---------
95,983 111,002
Less current maturities of long-term debt (2,275) (4,368)
--------- ---------
$ 93,708 $ 106,634
========= =========
</TABLE>
In February 1996, the Company issued $40,000,000 of senior subordinated
notes ("Senior Notes") through a private placement. The Senior Notes
mature February 1, 2003 and bear interest at 12% annually. Proceeds from
the Senior Notes were used to reduce
F-15
<PAGE> 35
borrowings under the Company's revolving credit and term loan agreement
(the "Agreement"). In connection with the issuance of the Senior Notes,
the Company refinanced the Agreement (the "Refinancing") to provide for
the Senior Notes. In addition, the floating rate installment note payable
was amended and refinanced to allow for the Senior Notes, and the interest
rate was changed from prime plus 2% to the LIBOR plus 2.25%.
The Agreement enables the Company to borrow up to the lesser of
$130,000,000 or the borrowing base amount, as defined in the Agreement.
After the Refinancing, annual commitment fees are .375% of the undrawn
portion of the commitment. Amounts outstanding under the revolving portion
of the Agreement, after giving consideration to the Refinancing, mature
February 1998, subject to one-year extensions, at which time the balance
outstanding converts into a term loan which matures four years after the
maturity date of the revolving portion of the Agreement. The interest rate
for the Agreement is, at the Company's option, either (1) the bank's base
rate, as defined, or (2) the bank's Eurodollar rate, as defined, as
determined at the date of each borrowing, plus an applicable margin.
The Agreement is unsecured and contains restrictive covenants which, among
other things, limit indebtedness and distributions, require certain cash
flow and leverage ratios to be maintained, and require a minimum
consolidated tangible net worth, as defined.
After the Refinancing, and assuming that the extension of the revolving
portion of the Agreement is not exercised, future maturities of long-term
debt are as follows at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $ 2,275
1998 12,144
1999 11,956
2000 9,870
2001 7,403
Thereafter 52,335
-------
$95,983
=======
</TABLE>
At December 31, 1996, the weighted average interest rate on borrowings
under the revolving credit agreement was 7.3%, and approximately
$8,520,000 was committed under letters of credit. At December 31, 1996,
the Company had available borrowings under the Agreement of approximately
$48,000,000.
Property and equipment with a net book value of approximately $10,348,000
at December 31, 1996 are secured as collateral under an installment note
payable.
F-16
<PAGE> 36
7. EMPLOYEE BENEFITS
PENSION PLANS
The Company maintains the Allied Defined Benefit Pension Plan, a trusteed
noncontributory defined benefit pension plan for management and office
personnel in the United States, and the Pension Plan for Employees of Auto
Haulaway, Inc. and Associated Companies for management and office
personnel in Canada (the "Plans"). Under the Plans, benefits are paid to
eligible employees upon retirement based primarily on years of service and
compensation levels at retirement. Contributions to the Plans reflect
benefits attributed to employees' services to date and services expected
to be rendered in the future. The Company's funding policy is to
contribute annually at a rate that is intended to fund future service
benefits as a level percentage of pay and past service benefits over a
30-year period.
The following table sets forth the Plans' status and amounts recognized in
the Company's balance sheets as of December 31, 1996 and 1995 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $16,444 and $15,046 in 1996 and
1995, respectively $ 16,810 $ 15,349
======== ========
Projected benefit obligation $ 21,438 $ 19,609
Plan assets at fair value 19,052 17,106
-------- --------
Projected benefit obligation in excess of plan assets (2,386) (2,503)
Unrecognized net loss 2,787 3,180
Unrecognized prior service cost (472) (508)
Unrecognized net transition asset being recognized over approximately 15
years (270) (312)
-------- --------
Accrued pension cost recognized in the consolidated balance sheets $ (341) $ (143)
======== ========
</TABLE>
The net periodic pension cost consisted of the following components for
the years ended December 31, 1996, 1995, and 1994 (in thousands):
F-17
<PAGE> 37
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost for benefits earned during the period $ 993 $ 732 $ 826
Interest cost on projected benefit obligation 1,523 1,336 972
Actual (gain) loss on plan assets (2,226) (2,522) 69
Net amortization and deferral of actuarial gains and losses 713 1,169 (1,149)
------- ------- -------
Net periodic pension cost $ 1,003 $ 715 $ 718
======= ======= =======
The following assumptions were used:
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Weighted average discount rate 7.75% 7.5% 8.5%
Increase in future compensation levels 3.5-6.0 3.5-6.0 3.5-6.0
Expected long-term rate of return on assets--United
States 10.0 10.0 10.0
Expected long-term rate of return on assets--Canada 7.5 7.5 7.5
</TABLE>
At December 31, 1996, plan assets consisted primarily of U.S. and
international corporate bonds and stocks, convertible equity securities,
and U.S. and Canadian government securities.
A substantial number of the Company's employees are covered by
union-sponsored, collectively bargained, multiemployer pension plans. The
Company contributed and charged to expense approximately $11,444,000,
$10,916,000, and $8,350,000 for the years ended December 31, 1996, 1995,
and 1994, respectively, for such plans. These contributions are determined
in accordance with the provisions of negotiated labor contracts and are
generally based on the number of man-hours worked.
401(K) PLAN
The Company has a 401(k) plan covering all of its employees in the United
States. Prior to July 1, 1993, the Company did not contribute to this
plan; however, the Company did incur the cost of administering this plan.
The Company's administrative expense for the 401(k) plan was approximately
$165,000, $160,000, and $221,000 in fiscal years 1996, 1995, and 1994,
respectively. Beginning July 1, 1993, the Company contributes the lesser
of 3% of participant wages or $1,000 per year for each nonbargaining unit
participant of the plan. The Company contributed approximately $225,000,
$225,000, and $183,000 to the plan during the years ended December 31,
1996, 1995, and 1994, respectively.
F-18
<PAGE> 38
POSTRETIREMENT BENEFIT PLANS
The Company provides certain health care and life insurance benefits for
eligible employees who retired prior to July 1, 1993 and their dependents.
Generally, the medical plan pays a stated percentage of most medical
expenses reduced for any deductibles and payments by government programs
or other group coverage. The life insurance plan pays a lump-sum death
benefit based on the employee's salary at retirement. The plans are
unfunded. Employees retiring after July 1, 1993 are not entitled to any
postretirement medical or life insurance benefits.
The following table sets forth the status of the plan reconciled to the
accrued postretirement benefit cost recognized in the Company's balance
sheets at December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation, retirees $ 3,586 $ 4,111
Unrecognized net gain (loss) 338 (155)
------- -------
Accrued postretirement benefit cost 3,924 3,956
Less current portion (303) (258)
------- -------
$ 3,621 $ 3,698
======= =======
</TABLE>
Net periodic benefit cost for 1996, 1995 and 1994 included the following
components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost of benefits earned $ 0 $ 0 $ 0
Interest cost on accumulated postretirement benefit
obligation 260 308 325
---- ---- ----
Net periodic postretirement benefit cost $260 $308 $325
==== ==== ====
</TABLE>
Assumptions used in the computation of the accumulated postretirement
benefit obligation and net periodic benefit cost are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Discount rate 7.75% 7.5% 8.5%
Initial health care cost trend rate 10.25 11.0 12.5
Ultimate health care cost trend rate 5.5 5.5 5.5
Year ultimate health care cost trend rate reached 2003 2003 2003
</TABLE>
If the health care cost trend rate were increased 1%, the accumulated
postretirement benefit obligation as of December 31, 1996 would have
increased by approximately $177,000. The effect of
F-19
<PAGE> 39
this change on the periodic postretirement benefit cost for 1996 would be
approximately $13,000.
A substantial number of the Company's employees are covered by
union-sponsored, collectively bargained, multiemployer health and welfare
benefit plans. The Company contributed and charged to expense
approximately $14,811,000, $13,723,000, and $11,700,000 in 1996, 1995, and
1994, respectively, in connection with these plans. These required
contributions are determined in accordance with the provisions of
negotiated labor contracts and are for both active and retired employees.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigation and environmental matters
relating to employment practices, damages, and other matters arising from
operations in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial position or results of
operations.
The Company has entered into employment agreements with certain executive
officers of the Company. The agreements, which are substantially similar,
provide for compensation to the officers in the form of annual base
salaries and bonuses based on earnings. The employment agreements also
provide for severance benefits upon the occurrence of certain events,
including a change in control, as defined.
9. REVENUES FROM MAJOR CUSTOMERS
Substantially all of the Company's trade receivables and revenues are
realized through the automotive industry.
In 1996, 1995, and 1994, approximately 81%, 80%, and 77%, respectively, of
the Company's revenues were derived from three customers, one of which,
Ford Motor Company ("Ford"), accounted for approximately 53%, 52%, and 58%
of revenues, respectively.
The Company had accounts receivable from Ford of approximately $8,964,000
and $8,081,000 at December 31, 1996 and 1995, respectively.
10. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one industry segment: transporting automobiles and
light trucks from manufacturing plants, ports, auctions, and railway
distribution points to automotive
F-20
<PAGE> 40
dealerships. Prior to the acquisition of Auto Haulaway on October 31,
1994, the Company only operated in the United States. Auto Haulaway
operates in Canada. Geographic financial information for 1996, 1995 and
1994 is as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
United States $264,909 $258,038 $274,293
Canada 127,638 123,426 22,943
-------- -------- --------
$392,547 $381,464 $297,236
======== ======== ========
Operating income (loss):
United States $ 19,129 $ 19,821 $ 27,141
Canada (534) 1,100 1,590
-------- -------- --------
$ 18,595 $ 20,921 $ 28,731
======== ======== ========
Identifiable assets:
United States $133,618 $136,948 $139,179
Canada 77,465 77,738 79,627
-------- -------- --------
$211,083 $214,686 $218,806
======== ======== ========
</TABLE>
11. STOCKHOLDERS' EQUITY
The Company has authorized 5,000,000 shares of preferred stock with no par
value. No shares have been issued, and therefore, there were no shares
outstanding at December 31, 1996 and 1995. The board of directors has the
authority to issue these shares and to fix dividends, voting and
conversion rights, redemption provisions, liquidation preferences, and
other rights and restrictions.
In addition, the Company adopted a long-term incentive plan which allows
the issuance of grants or awards of incentive stock options, restricted
stock, stock appreciation rights, performance units, and performance
shares to employees and directors of the Company to acquire up to 400,000
shares of the Company's common stock.
During December 1996, the Company granted 85,000 shares of restricted
stock to certain employees of the Company. In connection with the award of
the restricted stock, the Company recorded $680,000 of unearned
compensation in the accompanying balance sheets which will be amortized
over five years, the vesting period of the restricted stock.
In addition, the Company has granted nonqualified stock options under the
long-term incentive plan. Options granted become exercisable after one
year in 20% or 33 1/3% increments per year and expire ten years from the
date of the grant. Approximately 41,867 options were exercisable at
December 31, 1996.
F-21
<PAGE> 41
<TABLE>
<CAPTION>
OPTION PRICE
SHARES (PER SHARE)
------ -----------
<S> <C> <C>
Outstanding as of January 1, 1995 8,550 $11.75
Granted 128,500 9.50
Exercised 0 N/A
Lapsed 0 N/A
------- ------------
Outstanding as of December 31, 1995 137,050 $9.50-$11.75
Granted 34,000 9.00
Exercised 0 N/A
Lapsed 0 N/A
------- ------------
Outstanding as of December 31, 1996 171,050 $9.00-$11.75
======= ============
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting
for the long-term incentive plan. If the Company had elected to recognize
compensation cost for the long-term incentive plan based on the fair value
at the grant dates for awards under the plan, consistent with the method
prescribed by SFAS No. 123, net income and earnings per share would have
been changed to the pro forma amounts indicated below at December 31, 1996
and 1995 (in thousands, except per share data):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net income:
As reported $ 3,986 $ 6,146
Pro forma 3,844 6,136
Earnings per share:
As reported $ 0.52 $ 0.80
Pro forma 0.50 0.79
</TABLE>
The fair value of the Company's stock options used to compute pro forma
net income and earnings per share disclosures is the estimated present
value at grant date using the Black-Scholes option pricing model with the
following weighted average assumptions for 1996 and 1995: dividend yield
of 0%, expected volatility of 34%, a risk-free interest rate of 5.7%, and
an expected holding period of five years.
F-22
<PAGE> 42
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1996
----------------------------------------------
FIRST SECOND THIRD FOURTH
----- ------ ----- ------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues $ 93,396 $107,169 $ 87,609 $104,373
Operating income 3,090 7,965 987 6,553
Income (loss) before extraordinary item* 360 3,098 (936) 2,399
Income (loss) per share before
extraordinary item* $ 0.05 $ 0.40 $ (0.12) $ 0.31
Net income (loss) (575) 3,098 (936) 2,399
Net income (loss) per share $ (0.07) $ 0.40 $ (0.12) $ 0.31
Average shares outstanding 7,725 7,725 7,725 7,725
Stock prices:
High $ 9.875 $ 10.500 $ 10.625 $ 10.500
Low 7.750 7.750 8.375 7.000
</TABLE>
<TABLE>
<CAPTION>
1995
-------------------------------------------
FIRST SECOND THIRD FOURTH
----- ------ ----- ------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues $101,062 $102,252 $ 82,192 $95,958
Operating income 6,265 7,617 632 6,407
Net income (loss) 2,063 2,848 (1,182) 2,417
Net income (loss) per share $ 0.27 $ 0.37 $ (0.15) $ 0.31
Average shares outstanding 7,725 7,725 7,725 7,725
Stock prices:
High $ 12.500 $ 11.000 $ 11.750 $10.000
Low 9.750 8.500 7.250 7.375
</TABLE>
* During the first quarter of 1996, the Company recorded an
extraordinary loss on extinguishment of debt of approximately
$935,000, net of taxes.
F-23
<PAGE> 43
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Allied Holdings, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in ALLIED HOLDINGS, INC.'S 1996
annual report to shareholders and this Form 10K, and have issued our report
thereon dated February 4, 1997. Our audit was made for the purpose of forming an
opinion on those financial statements taken as a whole. The schedule listed in
Item 14 of this Form 10-K is the responsibility of the Company' management, is
presented for purposes of complying with the Securities and Exchange Commissions
rules, and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Atlanta, Georgia
February 4, 1997
S-1
<PAGE> 44
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
CLASSIFICATION BEGINNING COSTS AND AT END
OF PERIOD EXPENSES DEDUCTIONS OF YEAR
- --------------------------------------------------- --------------- --------------- ---------------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful accounts $689 $ 0 $(125)(a) $564
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts 585 104 0 689
YEAR ENDED DECEMBER 31, 1994:
Allowance for doubtful accounts 425 160 0 585
</TABLE>
(a) Write-off of uncollectible accounts.
S-2
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the_______
day of _________________, ____, by and between ___________________________.
("Employee") and ___________________, a Georgia corporation ("Employer").
W I T N E S S E T H:
WHEREAS, Employer, through its Affiliates (as hereinafter defined), is
engaged in the transportation of automobiles and light trucks from the
manufacturer to retailers and related activities (the "Business"); and
WHEREAS, Employee has a number of years of experience in said industry
and in addition to having management skills of which Employer desires to avail
itself, Employee has established numerous contacts and relationships with
customers, potential customers and suppliers of Employer and its Affiliates,
which contacts and relationships are of great value to Employer,
NOW, THEREFORE, for and in consideration of the covenants and
conditions hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Employer and Employee
hereby mutually agree as follows:
1. DEFINITIONS.
(a) "Affiliate" means any corporation or partnership of
which at least eighty percent (80%) of the
outstanding equity and voting rights are owned,
directly or indirectly, by Employer.
(b) "Base Salary" means the annual salary payable
pursuant to Paragraph 4(a) hereof as adjusted, from
time to time, pursuant to Paragraph 4(b) hereof.
(c) "Cause" means (i) the commission by Employee of an
act constituting a felony and Employee's conviction
thereof; (ii) Employee's prolonged absence, without
the consent of Employer, other than as a result of
Employee's Disability or permitted absence or
vacation; (iii) conduct of Employee which amounts to
fraud, dishonesty, gross or willful neglect of
duties; or (iv) engaging in activities prohibited by
Paragraphs 10, 11 or 12 hereof.
(d) "Disability", with respect to Employee, shall
conclusively be deemed to have occurred (i) if
Employee shall be receiving payments pursuant to a
policy of disability income insurance; or (ii) if
Employee shall have no disability income coverage
then in force, then if any insurance company insuring
Employee's life shall agree to waive the premiums due
on such policy pursuant to a disability waiver of
premium provision in the contract of life
<PAGE> 2
insurance; or (iii) if Employee shall have no
disability waiver of premium provision in any
contract of life insurance, then if Employee shall be
receiving disability benefits from or through the
Social Security Administration; provided, however,
that in the event Employee's disability shall,
otherwise and in good faith, come into question (and,
for purposes of this proviso, "disability" shall mean
the permanent and continuous inability of Employee to
perform substantially all of the duties being
performed immediately prior to his disability coming
into question), and a dispute shall arise with
respect thereto, then Employee (or his personal
representatives) shall appoint a medical doctor,
Employer shall appoint a medical doctor, and said two
(2) doctors shall, in turn, appoint a third party
medical doctor who shall examine Employee to
determine the question of disability and whose
determination shall be binding upon all parties to
this Agreement.
(e) "Restricted Period" means the period commencing as of
the date hereof and ending on that date _____ (___)
year(s) after the termination of Employee's
employment with Employer for any reason, whether
voluntary or involuntary.
(f) "Term" means the Initial Term and any Renewal Term
(each as defined in Paragraph 2 hereof); provided,
however, that, in the event Employee's employment
shall terminate by reason of the applicability of
Paragraph 8 hereof then, in such event, the "Term"
shall end upon the termination of Employee's
employment.
2. TERM. Subject to the provisions hereinafter set forth, the Term of
this Agreement shall commence as of the date hereof and shall end on that date
__________ (___) years after such date (the "Initial Term"). Upon the expiration
of the Initial Term, and on the expiration of each successive Renewal Term (as
hereinafter defined), Employee's employment shall be automatically renewed for
an additional term of ______________ (___) years (the "Renewal Term(s)"), unless
written notification of termination is given by either party to the other party
not less than one (1) year prior to the expiration of the Initial Term or, as
the case may be, the then-current Renewal Term.
3. DUTIES.
(a) Employee shall, during the Term, serve as the
___________________, _________________ and
________________ of Employer, at the direction of the
Chairman and Board of Directors of Employer.
Employee's principal duties shall be such executive,
managerial and administrative duties as the Chairman
and Board of Directors of Employer may, from time to
time, reasonably request.
2
<PAGE> 3
(b) During the Term, Employee shall devote
substantially all of his time, energy and skill
to performing the duties of his employment
(vacations as provided hereunder and reasonable
absences because of illness excepted), shall
faithfully and industriously perform such duties,
and shall use his best efforts to follow and
implement all management policies and decisions of
Employer. Employee shall not become personally
involved in the management or operations of any
other company, partnership, proprietorship or other
entity, other than any affiliate of Employer,
without the prior written consent of Employer;
provided, however, that so long as it does not
interfere with Employee's employment hereunder,
Employee may (i) serve as a director, officer or
partner in a company that does not compete with the
Business of Employer so long as the aggregate amount
of time spent by Employee in all such capacities
shall not exceed ____________________ (____) hours
per month, and (ii) serve as an officer or director
of, or otherwise participate in, educational,
welfare, social, religious, civic, trade and
industry-related organizations.
(c) Employee shall not be required to relocate outside
of the metropolitan Atlanta, Georgia area.
4. BASE SALARY. For and in consideration of the services to be
rendered by Employee pursuant to this Agreement, Employer shall pay to Employee,
for each year during the Term, an annual salary of ___________________________
Dollars ($__________), adjusted as provided in the following paragraph of this
Paragraph 4, in equal semi-monthly installments in accordance with Employer's
payroll practices. Employee's salary shall be reviewed by the Board of Directors
of Employer annually (on each anniversary of the date hereof) and, in the sole
discretion of the Board of Directors, may be increased, but not decreased.
Commencing as of January 1, ____, and as of each January 1st
thereafter during the Term, the annual salary shall be increased, but not
decreased, by an amount equal to the greater of (i) such amount as shall be
determined by the Compensation Committee of the Board of Directors of Employer;
or (ii) the amount equal to the percentage, if any, by which the Consumer Price
Index (All Items Less Shelter), Urban Wage Earners and Clerical Workers, for the
Southeast Region/Population Size Class B, published by the United States
Government Bureau of Labor Statistics for the December 1 preceding such January
exceeds such Index for the December 1 of the preceding year. (As an example, as
of January 1, 199_, the difference will be between said Index as of December 1,
199_ compared to said Index as of December 1, 199_.)
5. BONUS COMPENSATION. Employee shall, with respect to each
calendar year of Employer ending during the Term, be entitled to participate in
the Allied Holdings, Inc. EVA Based Incentive Plan (as from time to time amended
and in effect), to the extent and on such terms and
3
<PAGE> 4
conditions as shall from time to time be determined by the Board of Directors of
Allied Holdings, Inc.; and to receive an annual bonus, if any, calculated
pursuant thereto.
6. OTHER BENEFITS. During the Term, Employer shall provide the
following benefits to Employee:
(a) Employee shall be elected to a seat on the Board of
Directors of Employer and each of its Affiliates, but
shall not, however, be entitled to any additional
compensation for such service;
(b) Employee shall be entitled to participate in all
group medical and hospitalization benefit programs,
dental care, sick leave, life insurance or other
benefit plans for highly compensated employees of
Employer as are now or hereafter provided by
Employer, in each case in accordance with the terms
and conditions of each such plan and benefit package;
(c) Employee shall be provided with the use of
automobiles at least comparable to any automobile
currently provided to Employee, and Employer shall
pay for the cost of all insurance, ad valorem taxes
and tag charges for such automobile and all operating
and maintenance charges for such automobile;
(d) Employee shall be provided with the use of a car
telephone, at no cost to
Employee;
(e) Employer shall reimburse Employee for dues paid by
Employee for membership in such professional
organizations and eating clubs as shall, from time to
time, be deemed appropriate and necessary by
Employee; and
(f) Employee shall, at all times, have available to him
an expense account to defray ordinary and necessary
business expenses incurred in the performance of his
duties hereunder. Employee shall be reimbursed for
such expenses upon presentation and approval of
expense statements or written vouchers or other
supporting documents as may be reasonably requested
in advance by Employer, which approval shall not be
unreasonably withheld or delayed.
The benefits described in subparagraph (b) of this Paragraph shall not
be construed to require Employer to establish any such plans or programs or to
prevent Employer from modifying or terminating any such plans or programs, and
no such action or failure thereof shall affect this Agreement; provided,
however, that in the event of any reduction in the group medical and
hospitalization benefits in place as of the date hereof, the salary payable to
Employee shall be increased, as of the effective date of such reduction, by that
amount necessary to enable Employee
4
<PAGE> 5
to supplement the benefits provided by Employer to maintain the level of
benefits currently provided to him by it.
7. VACATION. Employee shall receive ____ (_) weeks of paid
vacation for each year during the Term. Scheduling of vacation shall be subject
to the prior approval of Employer (which approval shall not be unreasonably
withheld). Vacation time shall not accrue, and in the event any vacation time
for any year shall not be used by Employee prior to the end of such year, it
shall be forfeited.
8. TERMINATION. Anything herein to the contrary notwithstanding,
Employee's employment hereunder shall terminate upon the first to occur of any
of the following events:
(a) Employee's Disability; or
(b) Employee's death; or
(c) Employee's materially breaching this
Agreement by the non-performance or non-observance
of any material term or condition of this
Agreement, which breach shall not be corrected
within ____________ (____) days after receipt of
written notice of same from Employer; or
(d) Employer's sending Employee written notice
terminating his employment hereunder; or
(e) Employee's voluntarily terminating his employment
with Employer.
9. TERMINATION PAYMENT. In the event
(a) Employee's employment shall terminate pursuant to
Paragraph 8(a) (Disability) or Paragraph 8(b)
(death) hereof; or
(b) Employee shall terminate his employment as a result
of
(i) any failure to elect or reelect or to appoint
or reappoint Employee to the position of
_________, ________________ and
_________________ of Employer unless agreed to
by Employee;
(ii) any material change by Employer in Employee's
function, duties, responsibility, importance,
or scope from the position and attributes
thereof described in Paragraph 3 hereof unless
agreed to by Employee (and any such material
change shall be deemed a continuing breach of
this Agreement);
5
<PAGE> 6
(iii) the liquidation, dissolution or consolidation
or merger of Employer (other than a merger of
Employer with an Affiliate);
(iv) any other material breach of this Agreement
by Employer which shall not be cured within
__________ (____) days after receipt of
written notice of same from Employee;
(v) Employer filing a petition for protection or
relief from creditors under the federal
bankruptcy law, or any petition shall be filed
against Employer under the federal bankruptcy
law, or Employer shall admit in writing its
inability to pay its debts or shall make an
assignment for the benefit of creditors, or a
petition or application for the appointment of
a receiver or liquidator or custodian of
Employer is filed, or Employer shall seek a
composition with creditors; or
(c) Employee's employment shall be terminated by Employer
for any reason other than (i) for Cause or (ii)
because Employer shall have elected not to renew the
Term at the end of the Initial Term or any Renewal
Term and shall have given written notice to Employee
at least ________ (____) months prior to the end of
the Initial Term or any Renewal Term (as the case
may be) of such election,
then Employer (x) shall immediately pay to Employee an amount equal to the sum
of
(1) ____________ percent (____%) of Employee's
then-effective annual Base Salary; and
(2) the average of the Bonus paid to Employee for the
____________ (____) fiscal years of Employer
immediately preceding the year in which Employee's
termination shall occur;
and (y) shall continue to provide to Employee (except in the case of
Employee's death), for a period of ______ (____) year after such termination,
the benefits enumerated in Paragraphs 6(b) and 6(c) hereof.
This Paragraph 9 shall survive the termination of this Agreement
accordingly.
10. INTENTION OF PARTIES. It is the express understanding and
intention of Employer and Employee that the provisions of Paragraph 5 and
Paragraph 9 be read together and be non-exclusive so that, in the event of a
termination of Employee's employment pursuant to Paragraph 9 of the Employment
Agreement, Employee shall receive both __________ percent (____%) of Employee's
then-effective Base Salary and a pro rata portion of Employee's Bonus based on
the
6
<PAGE> 7
number of days in the fiscal year falling within the Term, said amounts being in
addition to the benefits enumerated in Paragraphs 6(b) and 6(c) hereof.
11. COVENANT NOT-TO-SOLICIT. Employer and Employee acknowledge that,
during Employee's employment, Employer will spend considerable amounts of time,
effort and resources in providing Employee with knowledge relating to the
business affairs of Employer, including Employer's trade secrets, proprietary
information and other information concerning Employer's financing sources,
finances, customer lists, customer records, prospective customers, staff,
contemplated acquisitions (whether of business or assets), ideas, methods,
marketing investigations, surveys, research, customers' records and any other
information relating to Employer's Business.
Employer and Employee recognize that, during the course of Employee's
term of employment with Employer pursuant to this Agreement, Employee shall
contact, solicit or approach Employer's customers and prospective customers on
behalf of Employer. Employer and Employee further acknowledge that Employee has
and shall, during his term of employment with Employer, solicit business for
Employer from the customers listed on Exhibit A attached hereto and made a part
hereof (collectively, the "Restricted Customers").
To protect Employer from Employee's solicitation of business from such
customers during the Restricted Period, Employee agrees that, subject to
Paragraph 14 hereof, he shall not, directly or indirectly, for any person
(including Employee himself), corporation, firm, partnership, proprietorship or
other entity, other than Employer, engaged in the transportation of automobiles
and light trucks from manufacturers to retailers, solicit business from any
Restricted Customer. This Paragraph 11 shall, except as otherwise provided in
this Agreement, survive the termination of this Agreement.
12. COVENANT NOT-TO-DISCLOSE. Employer and Employee recognize that,
during the course of Employee's term of employment with Employer pursuant to
this Agreement, Employer will disclose to Employee information concerning
Employer, its products, its customers, its services, its trade secrets, its
proprietary information and other information concerning its business all of
which constitute valuable assets of Employer. Employer and Employee further
acknowledge that Employer has, and will, invest considerable amounts of time,
effort and corporate resources in developing such valuable assets and that
disclosure by Employee of such assets to the public shall cause irreparable
harm, damage and loss to Employer.
(a) To protect these assets, Employee agrees that he
shall not, during the Restricted Period, advise or
disclose to any person, corporation, firm,
partnership or other entity whatsoever (except
Employer), or any officer, director, stockholder,
partner or associate of any such corporation, firm,
partnership or entity any information received from
Employer by Employee during the course of Employee's
association with Employer relating to the business
affairs of Employer including information concerning
Employer's
7
<PAGE> 8
finances, services, customers, customer lists,
prospective customers, staff, contemplated
acquisitions (whether of business or assets), ideas,
proprietary information, methods, marketing
investigations, surveys, research and any other
information relating to the business and objectives
of Employer, except as permitted by Exhibit B hereof.
(b) Employee further agrees that he shall not, during the
term of his employment or any time thereafter, advise
or disclose to any person or entity any trade secret
which Employer has disclosed to Employee during the
course of his employment with Employer.
(c) In the event Employee's employment is terminated,
Employee agrees that, if requested by Employer, he
will acknowledge in writing that he received the
disclosures referred to herein and is under the
obligations referred to in this Agreement.
(d) This Paragraph 12 shall, except as otherwise provided
in this Agreement, survive the termination of this
Agreement.
This Paragraph 12 hereof shall not, and shall not be deemed to, prohibit
Employee from disclosing information regarding Employer that (i) is already
public information other than because of any breach of Paragraph 12 by Employee;
(ii) shall be required by applicable Federal or state laws; (iii) shall not be
confidential or proprietary and shall be required in the ordinary course of
business; and (iv) shall be required pursuant to the order of any court or
administrative agency having jurisdiction; provided, however, that the foregoing
shall not permit the disclosure of any trade secret of Employer.
13. COVENANT NOT-TO-INDUCE. Employee covenants and agrees that during
the Restricted Period, he will not, directly or indirectly, on his own behalf or
in the service or on behalf of others, hire, solicit, take away or attempt to
hire, solicit or take away an employee or other personnel of Employer. This
Paragraph 13 shall, except as otherwise provided in this Agreement, survive the
termination of this Agreement.
14. PARAMOUNT PROVISION. Anything in this Agreement to the
contrary notwithstanding, the provisions of Paragraph 11 and Paragraphs 12(a)
and 12(c) hereof shall not apply to Employee, and shall be absolutely null and
void, in the event:
(a) Employer shall not renew this Agreement, at the end
of the Initial Term, for at least ________ (___)
Renewal Term; or
(b) Employee shall terminate his employment hereunder
for any one of the reasons set forth in Paragraph
9(b) hereof.
8
<PAGE> 9
15. SPECIFIC ENFORCEMENT. Employer and Employee expressly agree
that a violation of the covenants not-to-solicit, not-to-disclose and
not-to-induce contained in Paragraphs 11, 12 and 13 hereof, or any provision
thereof, shall cause irreparable injury to Employer and that, accordingly,
Employer shall be entitled, in addition to any other rights and remedies it may
have at law or in equity, to an injunction enjoining and restraining Employee
from doing or continuing to do any such act and any other violation or
threatened violation of said Paragraphs 11, 12 and 13 hereof.
16. SEVERABILITY. In the event any provision of this Agreement
shall be found to be void, the remaining provisions of this Agreement shall
nevertheless be binding with the same effect as though the void part were
deleted; provided, however, if Paragraphs 11, 12 and 13 shall be declared
invalid, in whole or in part, Employee shall execute, as soon as possible, a
supplemental agreement with Employer, granting Employer, to the extent legally
possible, the protection afforded by said Paragraphs. It is expressly
understood and agreed by the parties hereto that Employer shall not be barred
from enforcing the restrictive covenants contained in each of Paragraphs 11, 12
and 13 as each are separate and distinct, so that the invalidity of any one or
more of said covenants shall not affect the enforceability and validity of the
other covenants.
17. INCOME TAX WITHHOLDING. Employer or any other payor may
withhold from any compensation or benefits payable under this Agreement such
Federal, State, City or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
18. WAIVER. The waiver of a breach of any term of this Agreement
by any of the parties hereto shall not operate or be construed as a waiver by
such party of the breach of any other term of this Agreement or as a waiver of a
subsequent breach of the same term of this Agreement.
19. RIGHTS AND LIABILITIES UPON NOTICE OF TERMINATION. As soon as
notice of termination of this Agreement is given, Employee shall immediately
cease contact with all customers of Employer and shall forthwith surrender to
Employer all customer lists, documents and other property of Employer then in
his possession, compliance with which shall not be deemed to be a breach of this
Agreement by Employee. Pending the surrender of all such customer lists,
documents and other property to Employer, Employer may hold in abeyance any
payments due Employee pursuant to this Agreement.
20. ASSIGNMENT.
(a) Employee shall not assign, transfer or convey this
Agreement, or in any way encumber the compensation or
other benefits payable to him hereunder, except with
the prior written consent of Employer or upon
Employee's death.
(b) The covenants, terms and provisions set forth herein
shall be binding upon and shall inure to the benefit
of, and be enforceable by, Employer and its
successors and assigns.
9
<PAGE> 10
21. NOTICES. All notices required herein shall be in writing and
shall be deemed to have been given when delivered personally or when deposited
in the U.S. Mail, certified or registered, postage prepaid, return receipt
requested, addressed as follows, to wit:
If to Employer at:
160 Clairemont Avenue
Suite 510
Decatur, Georgia 30030
With a copy to:
Cohen Pollock Merlin Axelrod & Tanenbaum, P.C.
2100 RiverEdge Parkway
Suite 300
Atlanta, Georgia 30328-4656
Attn: Elliott Cohen, Esquire
If to Employee at:
-----------------------
-----------------------
With a copy to:
------------------------
------------------------
------------------------
or at such other addresses as may, from time to time, be furnished to Employer
by Employee, or by Employer to Employee on the terms of this Paragraph.
22. BINDING EFFECT. This Agreement shall be binding on the
parties hereto and on their respective heirs, administrators, executors,
successors and permitted assigns.
23. ENFORCEABILITY. This Agreement contains the entire
understanding of the parties and may be altered, amended or modified only by a
writing executed by both of the parties hereto. This Agreement supersedes all
prior agreements and understandings by and between Employer and Employee
relating to Employee's employment.
24. APPLICABLE LAW. This Agreement and the rights and
liabilities of the parties hereto shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Georgia.
10
<PAGE> 11
25. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, but all of which
together shall constitute but a single document.
IN WITNESS WHEREOF, Employee has hereunder set his hand and seal, and
Employer has caused this Agreement to be executed and delivered by its duly
authorized officers, all as of the day and year first above written.
____________________________ ____________________ (SEAL)
WITNESS ____________________
ATTEST: ____________________
By:_________________________ By:_______________________
Its ________ Secretary Its___________ President
[CORPORATE SEAL]
11
<PAGE> 1
================================================================================
ALLIED HOLDINGS, INC.
NOTE AGREEMENT
Dated as of January 15, 1996
Re: $40,000,000 12% Senior Subordinated Notes
Due February 1, 2003
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
Section HEADING PAGE
<S> <C> <C>
Parties.......................................................................................................................... 1
Section 1 DESCRIPTION OF NOTES AND COMMITMENT....................................................................... 1
Section 1.1 Description of Notes ............................................................................... 1
Section 1.2 Commitment, Closing Date ........................................................................... 1
Section 1.3 Guaranty of Notes .................................................................................. 2
Section 1.4 Several Commitments ................................................................................ 2
Section 2 PREPAYMENT OF NOTES ...................................................................................... 2
Section 2.1 No Required Prepayments ............................................................................ 2
Section 2.2 Optional Prepayment with Premium ................................................................... 2
Section 2.3 Prepayment upon Change of Control .................................................................. 3
Section 2.4 Notice of Optional Prepayments ..................................................................... 4
Section 2.5 Application of Prepayments ......................................................................... 4
Section 2.6 Direct Payment ..................................................................................... 5
Section 3 REPRESENTATIONS .......................................................................................... 5
Section 3.1 Representations of the Company ..................................................................... 5
Section 3.2 Representations of the Purchasers .................................................................. 5
Section 4 CLOSING CONDITIONS ....................................................................................... 6
Section 4.1 Conditions ......................................................................................... 6
Section 4.2 Waiver of Conditions ............................................................................... 7
Section 5 COMPANY COVENANTS ........................................................................................ 7
Section 5.1 Corporate Existence, Etc ........................................................................... 7
Section 5.2 Insurance .......................................................................................... 7
Section 5.3 Taxes, Claims for Labor and Materials, Compliance with Laws ........................................ 8
Section 5.4 Maintenance, Etc ................................................................................... 8
Section 5.5 Nature of Business ................................................................................. 8
Section 5.6 Consolidated Net Worth ............................................................................. 9
Section 5.7 Limitations on Indebtedness for Borrowed Money ..................................................... 9
Section 5.8 Fixed Charges Coverage Ratio .......................................................................10
Section 5.9 Limitation on Liens ................................................................................10
Section 5.10 Restricted Subsidiaries ............................................................................12
Section 5.11 Restricted Payments ................................................................................12
Section 5.12 Sales of Assets ....................................................................................14
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.13 Merger, Consolidation, Etc .........................................................................14
Section 5.14 Repurchase of Notes ................................................................................15
Section 5.15 Transactions with Affiliates .......................................................................15
Section 5.16 Termination of Pension Plans .......................................................................15
Section 5.17 Restrictions Relating to Prepayment of the Notes ...................................................15
Section 5.18 Reports and Rights of Inspection ...................................................................16
Section 6 SUBORDINATION OF SUBORDINATED INDEBTEDNESS LIABILITIES ...................................................19
Section 7 EVENTS OF DEFAULT AND REMEDIES THEREFOR ..................................................................22
Section 7.1 Events of Default ..................................................................................22
Section 7.2 Notice to Holders ..................................................................................24
Section 7.3 Acceleration of Maturities .........................................................................24
Section 7.4 Rescission of Acceleration .........................................................................25
Section 8 AMENDMENTS, WAIVERS AND CONSENTS .........................................................................25
Section 8.1 Consent Required ...................................................................................25
Section 8.2 Solicitation of Holders ............................................................................25
Section 8.3 Effect of Amendment or Waiver ......................................................................26
Section 9 INTERPRETATION OF AGREEMENT; DEFINITIONS .................................................................26
Section 9.1 Definitions ........................................................................................26
Section 9.2 Accounting Principles ..............................................................................38
Section 9.3 Directly or Indirectly .............................................................................38
Section 10 MISCELLANEOUS ............................................................................................39
Section 10.1 Registered Notes ...................................................................................39
Section 10.2 Exchange of Notes ..................................................................................39
Section 10.3 Loss, Theft, Etc. of Notes .........................................................................39
Section 10.4 Expenses, Stamp Tax Indemnity ......................................................................39
Section 10.5 Powers and Rights Not Waived; Remedies Cumulative ..................................................40
Section 10.6 Notices ............................................................................................40
Section 10.7 Successors and Assigns .............................................................................40
Section 10.8 Survival of Covenants and Representations ..........................................................40
Section 10.9 Severability .......................................................................................41
Section 10.10 Governing Law ......................................................................................41
Section 10.11 Captions ...........................................................................................41
Signature Page...................................................................................................................42
</TABLE>
-ii-
<PAGE> 4
ATTACHMENTS TO NOTE AGREEMENT:
<TABLE>
<S> <C> <C>
Schedule I -- Names of Note Purchasers and Amounts of Commitments
Exhibit A -- Form of 12% Senior Subordinated Note due February 1, 2003
Exhibit B -- Form of Guaranty Agreement
Exhibit C -- Representations and Warranties of the Company and its Restricted
Subsidiaries
Exhibit D -- Description of Special Counsel's Closing Opinion
Exhibit E -- Description of Closing Opinion of Counsel to the Company
Exhibit F -- Form of Compliance Certificate
</TABLE>
-iii-
<PAGE> 5
ALLIED HOLDINGS, INC.
160 CLAIREMONT AVENUE
DECATUR, GEORGIA 30030
NOTE AGREEMENT
Re: $40,000,000 12% Senior Subordinated Notes
Due February 1, 2003
Dated as of
January 15, 1996
To the Purchasers named on Schedule I
to this Agreement
The undersigned, ALLIED HOLDINGS, INC., a Georgia corporation (the
"Company"), agrees with the Purchasers named on Schedule I to this Agreement
(the "Purchasers") as follows:
Section 1. DESCRIPTION OF NOTES AND COMMITMENT.;
Section 1.1. Description of Notes. The Company will authorize the
issue and sale of $40,000,000 aggregate principal amount of its 12% Senior
Subordinated Notes (the "Notes") to be dated the date of issue, to bear
interest from such date at the rate of 12% per annum, payable semiannually on
the first day of each February and August in each year (commencing August
1, 1996) and at maturity and to bear interest on overdue principal (including
any overdue required or optional prepayment of principal) and premium, if any,
and (to the extent legally enforceable) on any overdue installment of interest
at the Default Rate after the date due, whether by acceleration or otherwise,
until paid, to be expressed to mature on February 1, 2003, and to be
substantially in the form attached hereto as Exhibit A. Interest on the Notes
shall be computed on the basis of a 360-day year of twelve 30-day months. The
Notes are not subject to prepayment or redemption at the option of the Company
prior to their expressed maturity dates except on the terms and conditions and
in the amounts and with the premium, if any, set forth in SS.2 of this
Agreement. The term "Notes" as used herein shall include each Note delivered
pursuant to this Agreement.
Section 1.2. Commitment, Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to each Purchaser,
and such Purchaser agrees to purchase from the
<PAGE> 6
Allied Holdings, Inc. Note Agreement
Company, Notes in the principal amount set forth opposite such Purchaser's name
on Schedule I hereto at a price of 100% of the principal amount thereof on the
Closing Date.
Delivery of the Notes will be made at the offices of Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603, against payment
therefor in Federal Reserve or other funds current and immediately available at
the principal office of The First National Bank of Boston in the amount of the
purchase price at 10:00 A.M. Chicago time, on February 1, 1996 or such later
date (not later than February 15, 1996) as shall mutually be agreed upon by the
Company and the Purchasers (the "Closing Date"). The Notes delivered to each
Purchaser on the Closing Date will be delivered to such Purchaser in the form
of a single registered Note in the form attached hereto as Exhibit A for the
full amount of such Purchaser's purchase (unless different denominations are
specified by such Purchaser), registered in such Purchaser's name or in the
name of such Purchaser's nominee, all as such Purchaser may specify at any time
prior to the date fixed for delivery.
Section 1.3. Guaranty of Notes. Pursuant to those certain separate
Subordinated Guaranty Agreements, (individually, a "Guaranty Agreement" and
collectively, the "Guaranty Agreements"), each Restricted Subsidiary, other
than AH Industries, Inc., an Alberta, Canada, corporation, will guarantee
(i)the due and punctual payment of the principal of and interest and Make-Whole
Amount, if any, on the Notes from time to time outstanding, as and when such
payments become due and payable (including interest on overdue payments of
principal, Make-Whole Amount, if any, or interest at the rate set forth in the
Notes) and (ii)the prompt performance and compliance by the Company with each
of its other obligations under this Agreement. The Guaranty Agreements will be
in the form attached hereto as Exhibit B.
Section 1.4. Several Commitments. The obligations of the Purchasers
shall be several and not joint and no Purchaser shall be liable or responsible
for the acts or defaults of any other Purchaser.
Section 2. PREPAYMENT OF NOTES.
Section 2.1. No Required Prepayments. No mandatory prepayments of
principal of the Notes are scheduled to be made prior to their expressed
maturity date, and the Notes are not subject to prepayment or redemption at the
option of the Company prior to their expressed maturity date except on the
terms and conditions and in the amounts and with the premium, if any, set forth
below in this SS.2.
Section 2.2. Optional Prepayment with Premium. Upon compliance with
SS.2.4, the Company shall have the privilege, at any time and from time to
time, of prepaying the outstanding Notes, either in whole or in part (but if in
part then in a minimum principal amount of $100,000) by payment of the
principal amount of the Notes, or portion thereof to be prepaid, and accrued
interest thereon to the date of such prepayment, together with a premium equal
to the Make-Whole Amount, determined as of five business days prior to the date
of such prepayment pursuant to this SS.2.2.
-2-
<PAGE> 7
Allied Holdings, Inc. Note Agreement
Section 2.3. Prepayment upon Change of Control. In the event the
Company has knowledge of a Change of Control or an impending Change of Control,
the Company will give written notice (a "Control Change Notice") of such fact
to all Holders at least 60 days prior to any proposed Change of Control Date;
provided, however, that if the Company shall not then have knowledge of such
fact, such Control Change Notice shall be delivered promptly upon receipt of
such knowledge, but in no event later than three business days after the Change
of Control Date. The Control Change Notice shall (i) describe the facts and
circumstances of such Change of Control (including the Change of Control Date
or proposed Change of Control Date) in reasonable detail, (ii) make reference
to this SS.2.3 and the rights of the Holders to require the Company to prepay
their Notes on the terms and conditions provided for herein, (iii) state that
the Holder must make a declaration of its intent to have the Notes held by it
prepaid, and (iv) specify the date by which the Holder must respond to such
Control Change Notice pursuant to this SS.2.3 in order to make such
declaration.
Upon the receipt of such Control Change Notice or, if no Control Change
Notice is given, upon receipt of actual knowledge of a Change of Control, the
Holder of any Notes shall have the privilege, upon written notice (the
"Declaration Notice") to the Company, of declaring all Notes held by such Holder
serving such Declaration Notice to become due and payable and thereupon such
Notes shall become due and payable on such date (the "Control Change Payment
Date") as the Company shall specify in a written notice delivered to such
Holder, which notice shall be delivered by the Company to such Holder not later
than 20 days prior to the Control Change Payment Date. The Control Change
Payment Date shall be not later than 30 days after the Change of Control Date,
in the event that such Declaration Notice is served on or prior to the Change of
Control Date, or 30 days after the date such Declaration Notice is served, if
such Declaration Notice is not served on or prior to the Change of Control Date.
The Company covenants and agrees to prepay in full on the Control Change Payment
Date all Notes held by such Holder serving such Declaration Notice to the
Company. In the event that a Control Change Notice has in fact been given as
hereinabove required, such Declaration Notice shall be served prior to 60 days
after receipt of such Control Change Notice, and in the event that a Control
Change Notice has not been given as hereinabove required, such Declaration
Notice shall be served prior to 30 days after the Holder serving such
Declaration Notice shall have actual knowledge of such Change of Control. In the
event that a Control Change Notice is given and a Holder fails to provide a
Declaration Notice within the time period set forth above, the Notes held by
such Holder shall not become due and payable as a result of such Change of
Control.
In the event that any Holder shall have declared all of the Notes held
thereby to become due and payable pursuant to this SS.2.3, then the Company
shall promptly, but in any event within 15days after the receipt of the
Declaration Notice, deliver written notice of such declaration to each other
Holder and, notwithstanding the provisions of the immediately preceding
paragraph, the right of each such other Holder to declare all of the Notes held
thereby to become due and payable pursuant to this SS.2.3 shall remain in effect
until the later to occur of (i) 60 days after receipt by such Holders of the
Control Change Notice and (ii) 30 days after receipt by such Holders of the
notice required to be delivered pursuant to this paragraph; provided, however,
that the provisions of this paragraph shall only apply with respect to notices
required to be delivered pursuant to this paragraph to the extent that such
-3-
<PAGE> 8
Allied Holdings, Inc. Note Agreement
notices relate to declarations made by Holders prior to the expiration of the
periods specified in the immediately preceding paragraph.
As used herein, the term "Change of Control" shall mean any of the
following: (i) the sale, lease, transfer, conveyance or other disposition, in
one or a series of related transactions, of all or substantially all of the
assets of the Company and its Restricted Subsidiaries to any Person or group of
Persons acting in concert, other than the Current Control Group, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company, or
(iii) the acquisition by any Person or group of Persons acting in concert, other
than the Current Control Group, of a direct or indirect interest in more than
45% of the voting power of the Voting Stock of the Company, by way of issue,
sale or other disposition of shares of stock of the Company or merger or
consolidation or otherwise.
As used herein, the term "Change of Control Date" shall mean any date
upon which a Change of Control shall occur.
As used herein, the term "Current Control Group" shall mean (i)RobertJ.
Rutland, Guy W.. Rutland III, Bernard O. DeWulf, Guy W.. Rutland IV, A. Mitchell
Poole, Jr. and B.F. Wilson, Jr.; (ii)the spouses, lineal descendants and spouses
of the lineal descendants of the persons named in clause (i); (iii)the estates
or legal representatives of the persons named in clauses (i) and (ii); and
(iv)any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of persons named in clauses (i), (ii) and
(iii).
All prepayments on the Notes pursuant to this SS.2.3 shall be made by
the payment of the aggregate principal amount remaining unpaid on such Notes and
accrued interest thereon to the date of such prepayment, together with a premium
equal to one percent of such unpaid principal amount.
Section 2.4. Notice of Optional Prepayments. The Company will give
notice of any prepayment of the Notes pursuant to SS.2.2 to each Holder thereof
not less than 30 days nor more than 60 days before the date fixed for such
optional prepayment specifying (i)such date, (ii)the principal amount of the
Holder's Notes to be prepaid on such date, (iii)that a premium may be payable,
(iv)the date when such premium will be calculated, (v)the estimated premium,
and (vi)the accrued interest applicable to the prepayment. Notice of prepayment
having been so given, the aggregate principal amount of the Notes specified in
such notice, together with accrued interest thereon and the premium, if any,
payable with respect thereto shall become due and payable on the prepayment
date specified in said notice. Not later than two business days prior to the
prepayment date specified in such notice, the Company shall provide each Holder
written notice of the premium, if any, payable in connection with such
prepayment and, whether or not any premium is payable, a reasonably detailed
computation of the Make-Whole Amount.
Section 2.5. Application of Prepayments. All partial prepayments
pursuant to SS.2.2 shall be applied on all outstanding Notes ratably in
accordance with the unpaid principal amounts thereof. Any prepayment of less
than all of the outstanding Notes made pursuant to
-4-
<PAGE> 9
Allied Holdings, Inc. Note Agreement
SS.2.3 shall be applied to the payment in full of the Notes held by the Holders
providing a Declaration Notice.
Section 2.6. Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any Note owned by any
Holder that is a Purchaser or any other Institutional Holder which has given
written notice to the Company requesting that the provisions of this SS.2.6
shall apply, the Company will punctually pay when due the principal thereof,
interest thereon and premium, if any, due with respect to said principal,
without any presentment thereof, directly to such Holder at its address set
forth herein or such other address as such Holder may from time to time
designate in writing to the Company or, if a bank account with a United States
bank is so designated for such Holder, the Company will make such payments in
immediately available funds to such bank account, marked for attention as
indicated, or in such other manner or to such other account in any United
States bank as such Holder may from time to time direct in writing.
Section 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents and
warrants that all representations and warranties set forth in Exhibit C are
true and correct as of the date hereof and are incorporated herein by reference
with the same force and effect as though herein set forth in full.
Section 3.2. Representations of the Purchasers. Each Purchaser
represents, and in entering into this Agreement the Company understands, that
such Purchaser is acquiring the Notes for the purpose of investment and not
with a view to the distribution thereof, and that such Purchaser has no present
intention of selling, negotiating or otherwise disposing of the Notes; it being
understood, however, that the disposition of such Purchaser's property shall at
all times be and remain within its control. Each Purchaser further represents
that at least one of the following statements is an accurate representation as
to the source of funds to be used by such Purchaser to pay the purchase price
of the Notes purchased by it hereunder:
(a) if such Purchaser is an insurance company, the source of
funds from which its investment is to be made is a general account of
an insurance company, and the amount of the reserves and liabilities
for the general account contracts(s) held by or on behalf of any
Benefit Plan (as defined by the annual statement for life insurance
companies approved by the National Association of Insurance
Commissioners (the "NAIC Annual Statement")) together with the amount
of the reserves and liabilities for the general account contract(s)
held by or on behalf of any other Benefit Plans maintained by the same
employer (or affiliate thereof as defined in PTCE 95-60) or by the same
employee organization (as defined by the NAIC Annual Statement) in the
general account do not exceed 10% of the total reserves and liabilities
of the general account (exclusive of separate account liabilities) plus
surplus as set forth in the NAIC Annual Statement filed with the state
of domicile of the insurance company; or
(b) if such Purchaser is an insurance company, to the extent
that any part of such funds constitutes assets allocated to any
separate account maintained by such
-5-
<PAGE> 10
Allied Holdings, Inc. Note Agreement
Purchaser in which any employee benefit plan (or its related trust) has
any interest, (i)such separate account is a "pooled separate account"
within the meaning of Prohibited Transaction Class Exemption90-1, as
amended, in which case such Purchaser has disclosed to the Company the
name of each employee benefit plan whose assets in such separate
account exceed 10% of the total assets or are expected to exceed 10% of
the total assets of such account as of the date of such purchase (and
for the purposes of this paragraph(b), all employee benefit plans
maintained by the same employer or employee organization are deemed to
be a single plan), or (ii)such separate account contains only the
assets of a specific employee benefit plan, complete and accurate
information as to the identity of which such Purchaser has delivered to
the Company; or
(c) if such Purchaser is other than an insurance company, no
part of such funds constitutes "plan assets".
As used in this SS.3.2, the terms "employee benefit plan" and "separate account"
shall have the respective meanings assigned to such terms in Section 3 of ERISA
and the term "plan assets" shall have the meaning specified in Department of
Labor Regulation Section 2510.3-101.
For purposes of the percentage limitation in clause (a) above, the
amount of reserves and liabilities for the general account contract(s) held by
or on behalf of a plan shall be determined before reduction for credits on
account of any reinsurance ceded on a coinsurance basis.
Section 4. CLOSING CONDITIONS.
Section 4.1. Conditions. The obligation of each Purchaser to purchase
the Notes on the Closing Date shall be subject to the performance by the
Company of its agreements hereunder which by the terms hereof are to be
performed at or prior to the time of delivery of the Notes and to the following
further conditions precedent:
(a) Closing Certificate. Such Purchaser shall have received a
certificate dated the Closing Date, signed by the President or a Vice
President of the Company, the truth and accuracy of which shall be a
condition to such Purchaser's obligation to purchase the Notes proposed
to be sold to such Purchaser and to the effect that (i)the
representations and warranties of the Company set forth in Exhibit C
hereto are true and correct on and with respect to the Closing Date,
(ii)the Company and each Restricted Subsidiary has performed all of its
obligations hereunder and under the Guaranty Agreements which are to be
performed on or prior to the Closing Date, (iii)no Default or Event of
Default has occurred and is continuing, (iv)the execution of a Guaranty
Agreement by each Restricted Subsidiary will result in a financial
benefit to such Restricted Subsidiary and (v)the related Guaranty
Agreement has been executed by such Restricted Subsidiary in good
faith.
-6-
<PAGE> 11
Allied Holdings, Inc. Note Agreement
(b) Guaranty Agreements. A Guaranty Agreement shall have been
duly executed and delivered by each Restricted Subsidiary.
(c) Legal Opinions. Such Purchaser shall have received from
Chapman and Cutler, who are acting as special counsel to the Purchasers
in this transaction, and from Peterson Dillard Young Asselin & Powell,
counsel for the Company, their respective opinions dated the Closing
Date, in form and substance satisfactory to such Purchaser, and
covering the matters set forth in Exhibits D and E, respectively,
hereto.
(d) Related Transactions. The Company shall have consummated
the sale of the entire principal amount of the Notes scheduled to be
sold on the Closing Date pursuant to this Agreement.
(e) Satisfactory Proceedings. All proceedings taken in
connection with the transactions contemplated by this Agreement, and
all documents necessary to the consummation thereof, shall be
satisfactory in form and substance to such Purchaser and such
Purchaser's special counsel, and such Purchaser shall have received a
copy (executed or certified as may be appropriate) of all legal
documents or proceedings taken in connection with the consummation of
said transactions.
Section 4.2. Waiver of Conditions. If on the Closing Date the Company
fails to tender to any Purchaser the Notes to be issued to such Purchaser on
such date or if the conditions specified in SS.4.1 have not been fulfilled, such
Purchaser may thereupon elect to be relieved of all further obligations under
this Agreement. Without limiting the foregoing, if the conditions specified in
SS.4.1 have not been fulfilled, such Purchaser may waive compliance by the
Company with any such condition to such extent as such Purchaser may in its sole
discretion determine. Nothing in this SS.4.2 shall operate to relieve the
Company of any of its obligations hereunder or to waive any Purchaser's rights
against the Company.
Section 5. COMPANY COVENANTS.
From and after the date of this Agreement and continuing so long as any
amount remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and
keep in full force and effect, and will cause each Restricted Subsidiary to
preserve and keep in full force and effect, its corporate existence and all
licenses and permits necessary to the proper conduct of its business; provided,
however, that the foregoing shall not prevent any transaction permitted by
SS.5.13.
Section 5.2. Insurance. The Company will maintain, and will cause each
Restricted Subsidiary to maintain, insurance (which may include reasonable
self-insurance for property damage) protecting the Company and its Restricted
Subsidiaries with respect to (a)fire and extended coverage and (b)liability for
bodily injury and property damage resulting from (i)operation of motor vehicle
equipment and (ii) with respect to real property owned or
-7-
<PAGE> 12
Allied Holdings, Inc. Note Agreement
leased by the Company or any of its Restricted Subsidiaries. Such policies of
insurance (to the extent applicable) will be maintained with financially sound
and reputable insurance companies (which shall be deemed to include a Subsidiary
acting as a captive insurer), funds or underwriters and will be of the kinds,
will cover such risks and will be in such amounts, with such deductibles and
exclusions, as are consistent with the general practices of businesses engaged
in similar activities. To the extent the Company or any of its Restricted
Subsidiaries engaged in the auto hauling business self-insures against certain
of its respective properties, such self-insurance will protect against such
casualties and contingencies and will be at such levels as are in accordance
with sound business practices.
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with
Laws. The Company will promptly pay and discharge, and will cause each
Restricted Subsidiary promptly to pay and discharge, all lawful taxes,
assessments and governmental charges or levies imposed upon the Company or such
Restricted Subsidiary, respectively, or upon or in respect of all or any part of
the property or business of the Company or such Restricted Subsidiary, all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor or materials, which if unpaid might become a Lien upon
any property of the Company or such Restricted Subsidiary; provided, however,
that the Company or such Restricted Subsidiary shall not be required to pay any
such tax, assessment, charge, levy, account payable or claim if (i)the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any property
of the Company or such Restricted Subsidiary or any material interference with
the use thereof by the Company or such Restricted Subsidiary, and (ii)the
Company or such Restricted Subsidiary shall set aside on its books, reserves
deemed by it to be adequate with respect thereto. The Company will promptly
comply and will cause each Subsidiary to comply with all laws, ordinances or
governmental rules and regulations to which it is subject including, without
limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA
and all laws, ordinances, governmental rules and regulations relating to
environmental protection in all applicable jurisdictions, the violation of which
could materially and adversely affect the properties, business, prospects,
profits or condition of the Company and its Restricted Subsidiaries or would
result in any Lien not permitted under SS.5.9.
Section 5.4. Maintenance, Etc. The Company and each Restricted
Subsidiary will keep its motor vehicle equipment and other properties material
to the operations of its business in such condition and repair as is customary
in its industry and consistent with its historical practices, and will make all
needful and property repairs, replacements, additions and improvements thereto
as are necessary, in the reasonable business judgment of the officers of the
Company or Restricted Subsidiary, for the conduct of the Company's or Restricted
Subsidiary's business, reasonable wear and tear excepted.
Section 5.5. Nature of Business. Neither the Company nor any Restricted
Subsidiary will engage in any business (i)other than the business in which the
Company and its Restricted Subsidiaries are engaged in presently or which are
reasonable extensions thereof or are incidental to the Company's operations, or
(ii)if as a result, the general nature of the business, taken on a consolidated
basis, which would then be engaged in by the Company and
-8-
<PAGE> 13
Allied Holdings, Inc. Note Agreement
its Restricted Subsidiaries would be substantially changed from the general
nature of the business engaged in by the Company and its Restricted Subsidiaries
on the date of this Agreement.
Section 5.6. Consolidated Net Worth. The Company will at all times
during its fiscal quarter ending March 31, 1996 keep and maintain Consolidated
Net Worth at an amount not less than the sum of $36,500,000 plus 35% of
Consolidated Net Income for the fiscal quarter of the Company ended December
31, 1995 and for each fiscal quarter thereafter shall keep and maintain
Consolidated Net Worth at an amount equal to the sum of the amount thereof
required to be maintained during the immediately preceding fiscal quarter plus
35% of Consolidated Net Income for such immediately preceding fiscal quarter
(but without deduction in the event of a loss).
Section 5.7. Limitations on Indebtedness for Borrowed Money. (a)The
Company will not, and will not permit any Restricted Subsidiary to, create,
assume or incur or in any manner be or become liable in respect of any
Indebtedness for Borrowed Money, except:
(1) Indebtedness for Borrowed Money evidenced by the Notes;
(2) Indebtedness for Borrowed Money of the Company and its
Restricted Subsidiaries outstanding as of the date of this Agreement
and reflected in Annex B to Exhibit C hereto (other than such
Indebtedness for Borrowed Money which is to be repaid out of the
proceeds of the issuance and sale of the Notes);
(3) Indebtedness under the Credit Agreement up to the
Revolving Credit Commitment Amount, provided that for purposes of
clause (5) below, Indebtedness for Borrowed Money in the amount of the
Revolving Credit Commitment Amount shall at all times be deemed to be
outstanding;
(4) Permitted Refinancing Indebtedness;
(5) Indebtedness for Borrowed Money of the Company and its
Restricted Subsidiaries and increases in the Revolving Credit
Commitment Amount, provided that at the time of issuance of such
Indebtedness for Borrowed Money or increase of the Revolving Credit
Commitment Amount and after giving effect thereto and to the
application of the proceeds, if any, thereof from the beginning of the
period of four consecutive quarters then most recently ended the Deemed
Fixed Charge Coverage Ratio for such period shall be at least 2 to 1;
(6) Indebtedness for Borrowed Money of a Restricted Subsidiary
to the Company or to a Wholly-owned Restricted Subsidiary or of the
Company to a Wholly-owned Restricted Subsidiary; and
(7) Indebtedness for Borrowed Money of the Company and its
Restricted Subsidiaries in addition to that permitted by the foregoing
clauses (1) through (6) (which may include Indebtedness for Borrowed
Money under the Credit Agreement in
-9-
<PAGE> 14
Allied Holdings, Inc. Note Agreement
addition to that permitted by clauses (3) and (5) above), provided that
the aggregate principal amount of Indebtedness for Borrowed Money
outstanding at any time which was incurred in reliance on this
paragraph (7) shall not exceed $10,000,000 in the aggregate for the
Company and all Restricted Subsidiaries; and
(b) Any corporation which becomes a Restricted Subsidiary after the
date hereof shall for all purposes of this SS.5.7 be deemed to have created,
assumed or incurred at the time it becomes a Restricted Subsidiary all
Indebtedness for Borrowed Money of such corporation existing immediately after
it becomes a Restricted Subsidiary;
(c) (i)The Company will not create, assume or incur or in any manner be
or become liable in respect of any Indebtedness for Borrowed Money which is
junior or subordinate in right of payment to Senior Indebtedness Liabilities
unless such Indebtedness for Borrowed Money shall contain or have applicable
thereto subordination provisions substantially in the form set forth in SS.6
providing for the subordination thereof to Senior Indebtedness Liabilities or
such other provisions as may be approved in writing by the Holders holding not
less than 66-2/3% in aggregate principal amount of the outstanding Notes; and
(ii)the Company will not permit any Restricted Subsidiary to, create, assume or
incur or in any manner be or become liable in respect of any Indebtedness for
Borrowed Money which is junior or subordinate in right of payment to Senior
Indebtedness Liabilities (as defined in the Guaranty Agreement to which such
Restricted Subsidiary is a party) unless such Indebtedness for Borrowed Money
shall contain or have applicable thereto subordination provisions substantially
in the form set forth in SS.6 providing for the subordination thereof to Senior
Indebtedness Liabilities or such other provisions as may be approved in writing
by the Holders holding not less than 66-2/3% in aggregate principal amount of
the outstanding Notes; and
(d) The Company will not permit Allied Systems, Ltd., to issue any
class of equity interest other than its present general partnership interests
and limited partnership interests, and the Company will not permit any other
Restricted Subsidiary to create or issue any class or series of capital stock or
other equity interest which has any preference or priority over any other class
or series of capital stock or other equity interest of such Restricted
Subsidiary.
Section 5.8. Fixed Charges Coverage Ratio. The Company will keep and
maintain its Fixed Charge Coverage Ratio for each period of four consecutive
fiscal quarters at not less than 1.5 to 1.
Section 5.9. Limitation on Liens. The Company will not, and will not
permit any Restricted Subsidiary to, create or incur, or suffer to be incurred
or to exist, any Lien on its or their property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, or transfer any
property for the purpose of subjecting the same to the payment of obligations
in priority to the payment of its or their general creditors, or acquire or
agree to acquire, or permit any Restricted Subsidiary to acquire, any property
or assets upon conditional sales agreements or other title retention devices,
except:
-10-
<PAGE> 15
Allied Holdings, Inc. Note Agreement
(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided payment thereof is not at the time required by
SS.5.3;
(b) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Restricted Subsidiary
shall at any time in good faith be prosecuting an appeal or proceeding
for a review and in respect of which a stay of execution pending such
appeal or proceeding for review shall have been secured;
(c) Liens incidental to the conduct of business or the
ownership of properties and assets (including Liens in connection with
worker's compensation, unemployment insurance and other like laws,
warehousemen's and attorneys' liens and statutory landlords' liens) and
Liens to secure the performance of bids, tenders or trade contracts, or
to secure statutory obligations, surety or appeal bonds or other Liens
of like general nature incurred in the ordinary course of business and
not in connection with the borrowing of money; provided in each case,
the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary for the conduct of the
activities of the Company and its Restricted Subsidiaries or which
customarily exist on properties of corporations engaged in similar
activities and similarly situated and which do not in any event
materially impair their use in the operation of the business of the
Company and its Restricted Subsidiaries;
(e) Liens securing Indebtedness of a Restricted Subsidiary to
the Company or to a Wholly-Owned Restricted Subsidiary;
(f) Liens existing as of December 31, 1995 and reflected in
AnnexB to Exhibit C hereto;
(g) Liens securing Senior Indebtedness Liabilities permitted
under the provisions of SS.5.7(A);
(h) Liens on fixed assets of a business entity at the time of
acquisition by the Company or a Restricted Subsidiary of such business
entity, whether or not such existing Liens were given to secure the
payment of the purchase price of the fixed assets to which they attach
so long as they were not incurred, extended or renewed in contemplation
of such acquisition; and
(i) Liens in addition to those permitted by the foregoing
clauses (a) through (h), both inclusive, securing Indebtedness in an
amount not exceeding $2,000,000 at
-11-
<PAGE> 16
Allied Holdings, Inc. Note Agreement
any time outstanding, provided that (i)such Liens shall not secure
Indebtedness for Borrowed Money and (ii)such Liens do not in any event
materially impair the use of the property subject thereto in the
operation of the business of the Company and its Restricted
Subsidiaries.
Section 5.10. Restricted Subsidiaries.
(a) Limitation on Subsidiaries' Restrictive Covenants. The Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions to the
Company or any of its Restricted Subsidiaries, or pay any Indebtedness
owed to the Company or any of its Restricted Subsidiaries;
(ii) make loans or advances to the Company or any Restricted
Subsidiary; or
(iii) transfer any of its properties or assets to the Company
or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions provided for in (i)agreements
pertaining to Indebtedness for Borrowed Money outstanding on the date hereof and
described in Annex B to Exhibit C hereto, (ii)Acquired Indebtedness of an
acquired Restricted Subsidiary, provided that such encumbrances and restrictions
contained in such Acquired Indebtedness shall constrain only such acquired
Restricted Subsidiary and its Subsidiaries, (iii)Permitted Refinancing
Indebtedness that continues existing restrictions contained in agreements
described in clauses (i) and (ii), and (iii)this Agreement, applicable law,
non-assignment provisions of leases and purchase money obligations.
(b) Guarantors. The Company shall cause each Person, other than AH
Industries, Inc., an Alberta, Canada, corporation, that now is or hereafter
becomes a Restricted Subsidiary to execute and deliver to each Holder a Guaranty
Agreement.
Section 5.11. Restricted Payments. The Company will not except as
hereinafter provided:
(a) Declare any dividends, either in cash or property, on any
shares of its capital stock of any class (except dividends or other
distributions payable solely in shares of capital stock of the
Company);
(b) Directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of its capital stock of any class
or any warrants, rights or options to purchase or acquire any shares of
its capital stock (other than in exchange for or out of the net cash
proceeds to the Company from the substantially concurrent issue or sale
of other shares of capital stock other than Sinking Fund Stock of the
Company or
-12-
<PAGE> 17
Allied Holdings, Inc. Note Agreement
warrants, rights or options to purchase or acquire any shares of its
capital stock other than Sinking Fund Stock);
(c) Make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock;
or
(d) Make, or permit any Restricted Subsidiary to make, any
Restricted Investment;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options and all such other
payments or distributions and such Restricted Investments being herein
collectively called "Restricted Payments"), if after giving effect thereto:
(i) Any Event of Default shall have occurred and be
continuing;
(ii) The Company could not incur at least $1.00 of
Indebtedness for Borrowed Money pursuant to SS.5.7(A)(5);
(iii) The sum of the aggregate amount of Restricted Payments
made during the period from and after December 31, 1995 to and
including the date of the making of the Restricted Payment in question,
would exceed the sum of (x)$5,000,000 plus (y)50% of Consolidated Net
Income for the period from and after January 1, 1996 to and including
the end of the fiscal quarter of the Company then most recently ended,
computed on a cumulative basis for said entire period (or if such
Consolidated Net Income is a deficit figure, then minus 100% of such
deficit) plus (z)the net cash proceeds (other than proceeds applied to
purchases, redemptions or retirements in accordance with the provisions
of paragraph (b) of this Section and the proceeds of the issuance of
capital stock of the Company to members of management pursuant to
incentive programs referred to below) to the Company from the sale of
other shares of capital stock (other than Sinking Fund Stock) of the
Company or warrants, rights or options to purchase or acquire any
shares of its capital stock (other than Sinking Fund Stock) during the
period from and after January 1, 1996 to and including the date of the
making of the Restricted Payment in question.
The Company will not declare any dividend which constitutes a
Restricted Payment payable more than 60 days after the date of declaration
thereof. Any dividend declared in accordance with the provisions of this Section
may be paid within 60 days after the date of declaration.
Notwithstanding the foregoing provisions of this Section , the Company
may, so long as no Default or Event of Default shall have occurred and be
continuing after giving effect thereto, repurchase, redeem, retire or otherwise
acquire for fair market value any capital stock of the Company held by any
member of the Company's management pursuant to any management equity
subscription agreement or stock option agreement in effect, provided that (i)the
aggregate price paid for such capital stock shall not exceed (x)in any twelve
-13-
<PAGE> 18
Allied Holdings, Inc. Note Agreement
month period, $500,000 or (y)during the period from January 1, 1996 to and
including the date of the proposed acquisition the sum of $1,500,000 plus the
aggregate net cash proceeds received by the Company during such period from the
issuance of capital stock of the Company to members of management pursuant to
incentive programs, and (ii) amounts so paid by the Company shall be charged
against the amount otherwise available for the making of Restricted Payments.
For purposes of this SS.5.11, (i)at any time when a corporation becomes
a Restricted Subsidiary, all Investments of such corporation at such time shall
be deemed to have been made by such corporation, as a Restricted Subsidiary, at
such time, and (ii)the amount of any Restricted Payment declared, paid or
distributed in property shall be deemed to be the greater of the book value or
fair market value (as determined in good faith by the Board of Directors of the
Company) of such property at the time of the making of the Restricted Payment in
question.
Section 5.12. Sales of Assets. The Company will not, and will not
permit any Restricted Subsidiary to, engage in any Asset Disposition unless,
(x)after giving effect to such Asset Disposition, no Default or Event of Default
shall have occurred and be continuing and (y)such Asset Disposition does not
involve any substantial part of the assets of the Company and its Restricted
Subsidiaries. An Asset Disposition shall be deemed to involve a "substantial
part" of the assets of the Company and its Restricted Subsidiaries (i)if the
book value of the assets subject to such Asset Disposition, when added to the
book value of all other assets subject to other Asset Dispositions during the
same fiscal year exceeds 10% of Consolidated Total Assets determined as of the
end of the immediately preceding fiscal year, or (ii)if the book value of the
assets subject to such Asset Disposition, when added to the book value of all
other assets subject to other Asset Dispositions since December 31, 1994 exceeds
25% of Consolidated Total Assets determined as of the end of the fiscal quarter
immediately preceding the proposed Asset Disposition; provided, however, that in
any computation of "substantial part" there shall be excluded any Asset
Disposition to the extent that the proceeds thereof are applied within one year
after the receipt of the proceeds of such Asset Disposition to either (i)the
voluntary prepayment of Senior Debt or the voluntary prepayment of the Notes on
a pro rata basis pursuant to SS.2.3, or (ii)the purchase of other similar assets
for use in the business of the Company and its Restricted Subsidiaries.
Section 5.13. Merger, Consolidation, Etc. The Company will not
consolidate with or be a party to a merger with any other corporation or sell
all or substantially all of its assets directly or indirectly in one or a series
of transactions; provided, however, that the Company may consolidate or merge
with any other corporation if:
(a) either (i)the Company shall be the surviving or
continuing corporation, or (ii)the surviving or continuing corporation,
if not the Company, shall (x)be a corporation incorporated and existing
under the laws of any State of the United States of America,
(y)expressly and unconditionally assume, by written agreement delivered
to each holder, all of the obligations of the Company under this
Agreement and the Notes, and (z)furnish to the holders an opinion of
Peterson Dillard Young Asselin & Powell or another independent counsel
designated by the Company and not
-14-
<PAGE> 19
Allied Holdings, Inc. Note Agreement
reasonably objected to by Holders holding 33-1/3% or more in principal
amount of the Notes to the effect that the instrument of assumption has
been duly authorized, executed and delivered by the surviving
corporation and constitutes the legal, valid and binding contract and
agreement of the surviving corporation enforceable in accordance with
its terms and that the obligations of the Company under the Notes and
this Agreement have become unconditional obligations of the surviving
or continuing corporation, and
(b) at the time of such consolidation or merger and after
giving effect thereto (x) no Default or Event of Default shall have
occurred and be continuing and (y)the surviving or continuing
corporation would be permitted to incur at least $1.00 of additional
Indebtedness for Borrowed Money pursuant to SS.5.7(A)(4).
Section 5.14. Repurchase of Notes. Except as permitted by SS.2.2 and
SS.2.3, neither the Company nor any Restricted Subsidiary or Affiliate, directly
or indirectly, may repurchase or make any offer to repurchase any Notes.
Section 5.15. Transactions with Affiliates. (a) The Company will not,
and will not permit any Restricted Subsidiary to, enter into or be a party to
any transaction or arrangement with any Affiliate (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of the Company's or such
Restricted Subsidiary's business and either (i)the payments required by the
Company and its Restricted Subsidiaries do not exceed $60,000 in the aggregate
or (ii)if the payments required by the Company and its Restricted Subsidiaries
exceed $60,000 in the aggregate, the transaction has been approved by the
directors of the Company who are not employees of the Company.
(b) Employment Agreements entered into in the ordinary course of
business and Restricted Payments made in accordance with the provisions of
SS.5.11 shall not be deemed to be transactions with Affiliates for purposes of
this Section.
Section 5.16. Termination of Pension Plans. The Company will not and
will not permit any Subsidiary to withdraw from any Multiemployer Plan or permit
any employee benefit plan maintained by it to be terminated if such withdrawal
or termination could result in withdrawal liability (as described in Part1 of
Subtitle E of Title IV of ERISA) or the imposition of a Lien on any property of
the Company or any Subsidiary pursuant to Section 4068 of ERISA.
Section 5.17. Restrictions Relating to Prepayment of the Notes. (a)The
Company will not, directly or indirectly, enter into any restriction or
limitation on its ability to prepay or repay the Notes other than SS.6 and
Section 11.15 of the Credit Agreement as presently in effect but not any
amendment (including any extension) thereof that would prohibit the payment of
the Notes at maturity, subject only to SS.6.
-15-
<PAGE> 20
Allied Holdings, Inc. Note Agreement
(b) The Company will not enter into any agreement containing any
provision which would be violated or breached by the performance of its
obligations hereunder or under any other instrument or document delivered or to
be delivered by it hereunder or in connection herewith or which would violate or
breach any provision hereof or thereof.
Section 5.18. Reports and Rights of Inspection. The Company will keep,
and will cause each Restricted Subsidiary to keep, proper books of record and
account in which full and correct entries will be made of all dealings or
transactions of, or in relation to, the business and affairs of the Company or
such Restricted Subsidiary, in accordance with GAAP consistently applied (except
for changes disclosed in the financial statements furnished to the Holders
pursuant to this SS.5.18 and concurred in by the independent public accountants
referred to in SS.5.18(B) hereof), and will furnish to each Institutional Holder
(in duplicate if so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any
event within 45days after the end of each quarterly fiscal period
(except the last) of each fiscal year, copies of:
(1) a consolidated balance sheet of the Company and
its Restricted Subsidiaries as of the close of such quarterly
fiscal period, setting forth in comparative form the
consolidated figures for the fiscal year then most recently
ended,
(2) consolidated statements of operations of the
Company and its Restricted Subsidiaries for such quarterly
fiscal period and for the portion of the fiscal year ending
with such quarterly fiscal period, in each case setting forth
in comparative form the consolidated figures for the
corresponding periods of the preceding fiscal year, and
(3) consolidated statements of cash flows of the
Company and its Restricted Subsidiaries for the portion of the
fiscal year ending with such quarterly fiscal period, setting
forth in comparative form the consolidated figures for the
corresponding period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct by an
authorized financial officer of the Company; provided, however, that so
long as the Unrestricted Subsidiaries of the Company do not, on a
combined basis, constitute a Significant Subsidiary, as at the end of
such fiscal period, the Company may supply consolidated financial
statements of the Company and its Subsidiaries in satisfaction of the
requirements of this paragraph;
(b) Annual Statements. As soon as available and in any event
within 120 days after the close of each fiscal year of the Company,
copies of:
(1) a consolidated balance sheet of the Company and
its Restricted Subsidiaries as of the close of such fiscal
year, and
-16-
<PAGE> 21
Allied Holdings, Inc. Note Agreement
(2) consolidated statements of operations, changes in
stockholders' equity and cash flows of the Company and its
Restricted Subsidiaries for such fiscal year,
in each case accompanied by the consolidating worksheets used in the
preparation of such consolidated statements and setting forth in
comparative form the consolidated figures for the preceding fiscal
year, all in reasonable detail and accompanied by a report thereon of a
firm of independent public accountants of recognized national standing
selected by the Company to the effect that the consolidated financial
statements present fairly, in all material respects, the consolidated
financial position of the Company and its Restricted Subsidiaries as of
the end of the fiscal year being reported on and the consolidated
results of the operations and cash flows for said year in conformity
with GAAP and that the examination of such accountants in connection
with such financial statements has been conducted in accordance with
generally accepted auditing standards and included such tests of the
accounting records and such other auditing procedures as said
accountants deemed necessary in the circumstances; provided, however,
that so long as the Unrestricted Subsidiaries of the Company do not, on
a combined basis, constitute a Significant Subsidiary, as at the end of
such fiscal period, the Company may supply consolidated financial
statements of the Company and its Subsidiaries, the report thereon of
said firm of independent public accountants and the consolidating
worksheets used in the preparation of such consolidated statements
relating to the Company and its Subsidiaries in satisfaction of the
requirements of this paragraph;
(c) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of the Company or any Restricted Subsidiary and any management
letter received from such accountants;
(d) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by the Company to stockholders generally and of
each regular or periodic report, and any registration statement or
prospectus filed by the Company or any Subsidiary with any Securities
exchange or the Securities and Exchange Commission or any successor
agency, and copies of any orders in any proceedings to which the
Company or any of its Subsidiaries is a party, issued by any
governmental agency, Federal or state, having jurisdiction over the
Company or any of its Subsidiaries;
(e) ERISA Reports. Promptly upon the occurrence thereof,
written notice of (i)a Reportable Event with respect to any Plan;
(ii)the institution of any steps by the Company, any ERISA Affiliate,
the PBGC or any other Person to terminate any Plan; (iii)the
institution of any steps by the Company or any ERISA Affiliate to
withdraw from any Plan; (iv)a non-exempt "prohibited transaction"
within the meaning of Section 406 of ERISA in connection with any Plan;
(v)any material increase in the contingent liability of the Company or
any Restricted Subsidiary with respect to any post-retirement welfare
liability; or (vi)the taking of any action by, or the
-17-
<PAGE> 22
Allied Holdings, Inc. Note Agreement
threatening of the taking of any action by, the Internal Revenue
Service, the Department of Labor or the PBGC with respect to any of the
foregoing;
(f) Officer's Certificates. Within the periods provided in
paragraphs(a) and (b) above, a certificate, substantially in the form,
appropriately completed, of Exhibit F, of an authorized financial
officer of the Company stating that such officer has reviewed the
provisions of this Agreement and setting forth: (i)the information and
computations (in sufficient detail) required in order to establish
whether the Company was in compliance with the requirements of SS.5.6
through SS.5.12 at the end of the period covered by the financial
statements then being furnished, and (ii)whether there existed as of
the date of such financial statements and whether, to the best of such
officer's knowledge, there exists on the date of the certificate or
existed at any time during the period covered by such financial
statements any Default or Event of Default and, if any such condition
or event exists on the date of the certificate, specifying the nature
and period of existence thereof and the action the Company is taking
and proposes to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in
paragraph(b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Agreement and stating further whether, in making
their audit, such accountants have become aware of any Default or Event
of Default under any of the terms or provisions of this Agreement
insofar as any such terms or provisions pertain to or involve
accounting matters or determinations, and if any such condition or
event then exists, specifying the nature and period of existence
thereof;
(h) Unrestricted Subsidiaries. Within the respective periods
provided in paragraphs(a) and (b) above, if the Unrestricted
Subsidiaries of the Company on a combined basis constitute a
Significant Subsidiary, financial statements of the character and for
the dates and periods as in said paragraphs(a) and (b) provided
covering each Unrestricted Subsidiary (or groups of Unrestricted
Subsidiaries on a consolidated basis);
(i) Litigation and Judgments. Promptly upon the occurrence
thereof, notice of the institution of any litigation, arbitration
proceeding or governmental proceeding affecting the Company or any
Restricted Subsidiary, whether or not considered to be covered by
insurance or the entry of any judgment or decree against the Company or
any Restricted Subsidiary, if the amount of any such judgment or decree
exceeds $1,000,000;
(j) Environmental and Safety and Health Matters. Promptly upon
the receipt thereof, copies of any notice from any federal, state or
local government or agency with respect to any actual or alleged
violation of any Environmental Law or any Occupational Safety and
Health Law by the Company or any Subsidiary, if such violation or
alleged violation, if determined to be a violation, could have a
material
-18-
<PAGE> 23
Allied Holdings, Inc. Note Agreement
and adverse effect on condition, financial or otherwise, of the Company
and its Restricted Subsidiaries taken as a whole;
(k) Material Adverse Change. Promptly upon the occurrence
thereof, notice of any material adverse change in the business,
operations or financial condition of the Company or any Restricted
Subsidiary (it being understood that the Company's obligations under
this paragraph may be satisfied by supplying the Holders with copies of
any report on Form 8-K under the Securities and Exchange Act of 1934 so
long as the Company is subject to the reporting requirements of said
Act);
(l) Credit Agreement Amendments. Promptly upon the making of a
material change, modification, amendment, revision, waiver or consent
to the Credit Agreement, the Company shall provide written notice to
the Holders, along with such other information as may be necessary to
explain the reason for such alteration, consent or waiver; and
(m) Requested Information. With reasonable promptness, such
other data and information as such Institutional Holder may reasonably
request.
Without limiting the foregoing, the Company will permit each Institutional
Holder (or such Persons as such Institutional Holder may designate), to visit
and inspect, under the Company's guidance, any of the properties of the Company
or any Restricted Subsidiary, to examine all of their books of account, to make
copies and extracts therefrom and to discuss their respective affairs, finances
and accounts with their respective officers, and, if a Default or Event of
Default shall have occurred and be continuing or is, in the judgment of an
Institutional Holder, threatened, to examine all of their records, reports and
other papers, to make copies and extracts therefrom and to discuss their
respective affairs, finances and accounts with their respective employees, and
independent public accountants (and by this provision the Company authorizes
said accountants to discuss with any Institutional Holder the finances and
affairs of the Company and its Restricted Subsidiaries) all at such reasonable
times and as often as may be reasonably requested. The Company shall not be
required to pay or reimburse any Holder for expenses which such Holder may incur
in connection with any such visitation or inspection, except that if such
visitation or inspection is made during any period when a Default or an Event of
Default shall have occurred and be continuing, the Company agrees to reimburse
such Holder for all such expenses promptly upon demand.
Section 6. SUBORDINATION OF SUBORDINATED INDEBTEDNESS LIABILITIES.
The Subordinated Indebtedness Liabilities shall be subordinate and
junior in right of payment, to the extent and in the manner hereinafter set
forth, to all Senior Indebtedness Liabilities, whether now outstanding or
hereafter incurred:
(a) In the event of any insolvency or bankruptcy proceedings,
and any receivership, liquidation, reorganization, arrangement or other
similar proceedings in connection therewith, relative to the Company or
to its creditors, as such, or to its property, and in the event of any
proceedings, for voluntary liquidation, dissolution
-19-
<PAGE> 24
Allied Holdings, Inc. Note Agreement
or other winding-up of the Company, whether or not involving insolvency
or bankruptcy, then the holders of Senior Indebtedness Liabilities
shall be entitled to receive from the Company irrevocable payment in
full of all Senior Indebtedness Liabilities owed thereby in cash or
other property acceptable to the holders of the Senior Indebtedness
Liabilities (or to have such payment duly provided for in a manner
satisfactory to the holders of said Senior Indebtedness Liabilities)
before the holders of the Subordinated Indebtedness Liabilities are
entitled to receive any payment from the Company in respect of the
Subordinated Indebtedness Liabilities owed thereby, and to that end the
holders of Senior Indebtedness Liabilities shall be entitled to receive
for application in payment thereof any payment or distribution of any
kind or character, whether in cash or property or Securities, which may
be payable or deliverable in any such proceedings in respect of the
Subordinated Indebtedness Liabilities, excepting only Securities which
are in all respects subordinate and junior in right of payment to the
payment in full of all Senior Indebtedness Liabilities then due and
owing upon terms substantially similar to those contained in this
Agreement and (unless different maturities and repayment terms are
provided for in a plan approved in a reorganization proceeding) having
maturities and terms of repayment similar to those applicable to the
Notes.
(b) Upon the happening of any Senior Indebtedness Payment
Default, the holders of the Subordinated Indebtedness Liabilities shall
not be entitled to receive any payment on account thereof during the
period beginning on the date such Senior Indebtedness Payment Default
shall occur and ending upon the earlier of (1)the date such Senior
Indebtedness Payment Default has been waived in writing by the holders
of the related Senior Indebtedness Liabilities, (2)the date on which
notice that such Senior Indebtedness Payment Default shall have ceased
to exist is given by the holder of the related Senior Indebtedness
Liabilities or, in the case of Senior Indebtedness Liabilities under
the Credit Agreement, the Agent to the Company and the holders of the
Subordinated Indebtedness Liabilities, and (3)the date on which such
Senior Indebtedness Payment Default has been cured or shall have ceased
to exist; provided, however, that blockage periods under this
paragraph(b) shall not be in effect for more than 179 days unless all
of the related Senior Indebtedness Liabilities shall have been declared
by the holder thereof to be immediately due and payable as the result
of such Senior Indebtedness Payment Default.
(c) Upon the happening of any Senior Indebtedness Covenant
Event of Default, the holders of the Subordinated Indebtedness
Liabilities shall not be entitled to receive any payment on account
thereof during the period beginning on a Payment Blockage Commencement
Date, as defined below, and ending upon the earlier of (1)the date on
which notice that such Senior Indebtedness Covenant Event of Default
has been waived is given by the Agent to the Company and the holders of
the Subordinated Indebtedness Liabilities, (2)the date on which notice
that such Senior Indebtedness Covenant Event of Default shall have
ceased to exist is given by the Agent to the Company and the holders of
the Subordinated Indebtedness Liabilities, and (3)the date on which
such Senior Indebtedness Covenant Event of Default has been cured;
provided, however, that (i) no blockage period under this paragraph(c)
-20-
<PAGE> 25
Allied Holdings, Inc. Note Agreement
may begin within 360 days after the beginning of a previous such
blockage period, (ii)no more than four blockage periods under this
paragraph(c) may occur while the Notes remain outstanding,
(iii)blockage periods with respect to any Senior Indebtedness Covenant
Event of Default under this paragraph(c) shall not be in effect for
more than 179 days, and (iv)no facts or circumstances constituting a
Senior Indebtedness Covenant Event of Default existing on any Payment
Blockage Commencement Date may be used as a basis for any subsequent
blockage period. As used herein, the term "Payment Blockage
Commencement Date" shall mean the date on which written notice of a
Senior Indebtedness Covenant Event of Default has been sent by the
Agent to the Holders, and "Agent" shall mean The First National Bank of
Boston and its successors as agent for the holders of Senior
Indebtedness Liabilities designated by the Company and the predecessor
Agent by written notice to the Holders.
(d) In the event that any holder of Subordinated Indebtedness
Liabilities shall obtain any cash or other assets of the Company,
whether by voluntary action of the Company, as a result of any
administrative, legal or equitable action, or otherwise, in violation
of the provisions of this Agreement, such holder of Subordinated
Indebtedness Liabilities shall, if it obtains knowledge of such fact
within one year of receipt of such cash or other assets by such holder,
pay, deliver and assign to, the holders of the Senior Indebtedness
Liabilities such cash or assets for application to the Senior
Indebtedness Liabilities upon obtaining such knowledge.
No right of any present or future holder of any Senior Indebtedness
Liabilities of the Company to enforce subordination as herein provided shall at
any time or in any way be prejudiced or impaired by any failure to act on the
part of the Company, or by any noncompliance by the Company with the terms,
provisions and covenants of the Credit Agreement, regardless of any knowledge
thereof that any such holder of Senior Indebtedness Liabilities may have or be
otherwise charged with. The provisions hereof are solely for the purpose of
defining the relative rights of the holders of Senior Indebtedness Liabilities
on the one hand, and the holders of the Subordinated Indebtedness Liabilities on
the other hand, and nothing herein shall impair, as between the Company and the
holders of the Subordinated Indebtedness Liabilities, the obligation of the
Company, which is unconditional and absolute, to pay to the holders of the
Subordinated Indebtedness Liabilities the entire amount thereof in accordance
with the terms of the Notes and this Agreement, nor shall anything herein
prevent the holder of any Subordinated Indebtedness Liabilities from exercising
all remedies otherwise permitted by applicable law or under this Agreement or
the Notes upon default under this Agreement or the Notes, subject to the rights,
if any, of holders of Senior Indebtedness Liabilities as herein provided.
Upon irrevocable payment in full of the Senior Indebtedness Liabilities
in cash or other property acceptable to the holders of the Senior Indebtedness
Liabilities, the holders of the Subordinated Indebtedness Liabilities shall be
subrogated to the rights of the holders of the Senior Indebtedness Liabilities
to receive payments or distributions of assets of the Company made on or in
respect of Senior Indebtedness Liabilities until all amounts constituting
Subordinated Indebtedness Liabilities and all other amounts payable to the
-21-
<PAGE> 26
Allied Holdings, Inc. Note Agreement
holders of the Subordinated Indebtedness Liabilities shall be paid in full, and,
for the purposes of such subrogation, no payments to the holders of Senior
Indebtedness Liabilities of any cash, property, stock or obligations to which
the holders of the Subordinated Indebtedness Liabilities would be entitled
shall, as between the Company, its creditors (other than the holders of Senior
Indebtedness Liabilities) and the holders of the Subordinated Indebtedness
Liabilities, be deemed to be a payment by the Company to or on account of Senior
Indebtedness Liabilities.
In the event of any of the proceedings referred to in subparagraph
(a)above, if any holder of Subordinated Indebtedness Liabilities has not filed
any claim, proof of claim or other instrument of similar character necessary to
enforce the obligations of the Company in respect of the Subordinated
Indebtedness Liabilities held by such holder at least 30 days before the
expiration of the time to file the same, then and in such event, but only in
such event, any holder of the Senior Indebtedness Liabilities may notify such
holder in the manner provided in SS.10.6 of such fact and that such holder of
the Senior Indebtedness Liabilities shall, if such claim, proof of claim or
other instrument of similar character is not so filed by such holder of
Subordinated Indebtedness Liabilities at least ten days before the expiration of
the time to file the same, as an attorney-in-fact for such holder of
Subordinated Indebtedness Liabilities, file any claim, proof of claim or such
other instrument of similar character. At any time within ten days prior to the
expiration of the time to file such claim, proof of claim or other instrument,
if such holder of Subordinated Indebtedness Liabilities has not so filed the
same, the holder of the Senior Indebtedness Liabilities which has complied with
the notice provisions in the immediately preceding sentence may, as
attorney-in-fact for such holder of Subordinated Indebtedness Liabilities and at
its sole expense, file such claim, proof of claim or other instrument and such
holder of Subordinated Indebtedness Liabilities, by such holder's acceptance of
such holder's Notes, appoints such holder of the Senior Indebtedness Liabilities
as an attorney-in-fact for such holder of Subordinated Indebtedness Liabilities,
to so file any claim, proof of claim or such other instrument of similar
character. Notwithstanding the foregoing, the holder of Subordinated
Indebtedness Liabilities which has not filed such claim, proof of claim or other
instruments may then and thereupon pursue and enforce the obligations of the
Company in respect of the Subordinated Indebtedness Liabilities held thereby.
Section 7. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 7.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due and such default shall continue for
more than five days; or
(b) Default shall occur in the making of any required
prepayment on any of the Notes as provided in SS.2.3; or
-22-
<PAGE> 27
Allied Holdings, Inc. Note Agreement
(c) Default shall occur in the making of any other payment of
the principal of any Note or Make-Whole Amount, if any, thereon at the
expressed or any accelerated maturity date or at any date fixed for
prepayment; or
(d) Default by the Company or any Restricted Subsidiary (as
principal or as guarantor or other surety) shall occur in the payment
of any principal of or premium or make-whole amount or interest on, or
in the performance of or compliance with any term of, any evidence of
any Indebtedness for Borrowed Money in an aggregate outstanding
principal amount of at least $5,000,000 or of any mortgage, indenture
or other agreement relating thereto or any other condition exists, and
as a consequence of such default or condition such Indebtedness for
Borrowed Money has become, or has been declared to be, due and payable
before its stated maturity or before its regularly scheduled dates of
payment; or
(e) Default shall occur in the observance or performance of
any covenant or agreement contained in SS. 2.3, 5.6, 5.7, 5.8, 5.11
OR 5.13; or
(f) Default shall occur in the observance or performance by
the Company of any other provision of this Agreement which is not
remedied within 30 days after the earlier of (i)the day on which the
Company first obtains knowledge of such default, or (ii)the day on
which written notice thereof is given to the Company by any Holder; or
(g) (i)Any Guaranty Agreement shall prove to be unenforceable
or invalid or any Guarantor shall deny or disaffirm its obligations
under the Guaranty Agreement to which it is purported to be a party, or
(ii)Default shall occur in the observance or performance by any
Guarantor of any provision of a Guaranty Agreement which is not
remedied within 30 days after the earlier of (x)the day on which such
Guarantor first obtains knowledge of such default, or (y)the day on
which written notice thereof is given to such Guarantor by any Holder;
or
(h) Any representation or warranty made by the Company or any
Guarantor herein, or made by the Company or any Guarantor in any
statement or certificate furnished by the Company or any Guarantor in
connection with the consummation of the issuance and delivery of the
Notes or furnished by the Company or any Guarantor pursuant hereto, is
untrue in any material respect as of the date of the issuance or making
thereof; or
(i) Final judgment or judgments for the payment of money
aggregating in excess of $3,000,000 is or are outstanding against the
Company or any Restricted Subsidiary or against any property or assets
of either and any one of such judgments has remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of 90 days
from the date of its entry or such lesser period within which, under
applicable law or rules of court, a judgment must be paid, vacated,
bonded or stayed in order to prevent the judgment creditor from levying
upon property of the judgment debtor; or
-23-
<PAGE> 28
Allied Holdings, Inc. Note Agreement
(j) A custodian, liquidator, trustee or receiver is appointed
for the Company or any Restricted Subsidiary or for the major part of
the property of either and is not discharged within 60 days after such
appointment; or
(k) The Company or any Restricted Subsidiary becomes insolvent
or bankrupt, is generally not paying its debts as they become due or
makes an assignment for the benefit of creditors, or the Company or any
Restricted Subsidiary applies for or consents to the appointment of a
custodian, liquidator, trustee or receiver for the Company or such
Restricted Subsidiary or for the major part of the property of either;
or
(l) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Restricted Subsidiary and, if instituted
against the Company or any Restricted Subsidiary, are consented to or
are not dismissed within 60 days after such institution.
Section 7.2. Notice to Holders. When any Event of Default described in
the foregoing SS.7.1 has occurred, or if any Holder or the holder of any other
evidence of Indebtedness for Borrowed Money of the Company or any Restricted
Subsidiary gives any notice or takes any other action with respect to a claimed
default, the Company agrees to give notice within three business days of such
event to all Holders.
Section 7.3. Acceleration of Maturities. When any Event of Default
described in paragraph(a), (b) or (c) of SS.7.1 has happened and is continuing,
any Holder may, and when any Event of Default described in paragraphs(d) through
(j), inclusive, of said SS.7.1 has happened and is continuing, any Holder or
Holders holding 25% or more of the principal amount of Notes at the time
outstanding may, by notice to the Company, declare the entire principal and all
interest accrued on all Notes to be, and all Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event of
Default described in paragraph(k) or (l) of SS.7.1 has occurred, then all
outstanding Notes shall immediately become due and payable without presentment,
demand or notice of any kind. Upon the Notes becoming due and payable as a
result of any Event of Default as aforesaid, the Company will forthwith pay to
the Holders, the entire principal and interest accrued on the Notes and, to the
extent not prohibited by applicable law, an amount as liquidated damages for the
loss of the bargain evidenced hereby (and not as a penalty) equal to the
Make-Whole Amount, determined as of the date on which the Notes shall so become
due and payable. No course of dealing on the part of the Holder or Holders nor
any delay or failure on the part of any Holder to exercise any right shall
operate as a waiver of such right or otherwise prejudice such Holder's rights,
powers and remedies. The Company further agrees, to the extent permitted by law,
to pay to the Holder or Holders all costs and expenses incurred by them in the
collection of any Notes upon any default hereunder or thereon, including
reasonable compensation to such Holder's or Holders' attorneys for all services
rendered in connection therewith.
-24-
<PAGE> 29
Allied Holdings, Inc. Note Agreement
Section 7.4. Rescission of Acceleration. The provisions of SS.7.3 are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs(a) through
(j), inclusive, of SS.7.1, the Holders holding 66-2/3% in aggregate principal
amount of the Notes then outstanding may, by written instrument filed with the
Company, rescind and annul such declaration and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under SS.7.3) shall have
been duly paid; and
(c) each and every other Default and Event of Default shall
have been made good, cured or waived pursuant to SS.8.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
Section 8. AMENDMENTS, WAIVERS AND CONSENTS.
Section 8.1. Consent Required. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of the Holders holding at least 66-2/3% in aggregate
principal amount of outstanding Notes; provided, however, that without the
written consent of all of the Holders, no such amendment or waiver shall be
effective (i)which will change the time of payment of the principal of or the
interest on any Note or change the principal amount thereof or change the rate
of interest thereon, or (ii)which will change any of the provisions with respect
to optional prepayments, or (iii)which will change the percentage of Holders
required to consent to any such amendment or waiver of any of the provisions of
this SS.8 or SS.7.
Section 8.2. Solicitation of Holders. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each Holder (irrespective of the amount of Notes
then owned by it) shall be informed thereof by the Company and shall be afforded
the opportunity of considering the same and shall be supplied by the Company
with sufficient information to enable it to make an informed decision with
respect thereto. The Company will not, directly or indirectly, pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, to any Holder as consideration for or as an inducement to
entering into by any Holder of any
-25-
<PAGE> 30
Allied Holdings, Inc. Note Agreement
waiver or amendment of any of the terms and provisions of this Agreement or the
Notes unless such remuneration is concurrently offered, on the same terms,
ratably to all Holders.
Section 8.3. Effect of Amendment or Waiver. Any such amendment or
waiver shall apply equally to all of the Holders and shall be binding upon them,
upon each future Holder and upon the Company, whether or not any Note shall have
been marked to indicate such amendment or waiver. No such amendment or waiver
shall extend to or affect any obligation not expressly amended or waived or
impair any right consequent thereon.
Section 9. INTERPRETATION OF AGREEMENT; DEFINITIONS'.
Section 9.1. Definitions. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Restricted Subsidiary)
(i)which directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, the Company, (ii)which
beneficially owns or holds 10% or more of any class of the Voting Stock of the
Company or (iii)10% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 10% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Agreement" shall mean this Note Agreement.
"Asset Disposition" means and includes (i)a sale, lease or other
disposition of assets (other than in the ordinary course of business) by the
Company or any Restricted Subsidiary (except by a Restricted Subsidiary to the
Company or to a Wholly-Owned Restricted Subsidiary), (ii)the issuance or sale by
any Restricted Subsidiary of any shares of stock of any class (including as
"stock" for the purpose of this definition, any warrants, rights or options to
purchase or otherwise acquire stock or other Securities exchangeable for or
convertible into stock) of such Restricted Subsidiary to any Person other than
the Company or a Wholly-Owned Restricted Subsidiary (except for the purpose of
qualifying directors, or except in satisfaction of the validly pre-existing
preemptive rights of minority shareholders in connection with the simultaneous
issuance of stock to the Company and its Restricted Subsidiaries whereby the
Company and its Restricted Subsidiaries maintain their same proportionate
interest in such Restricted Subsidiary) and (iii)the sale, transfer or other
disposition by the Company of any shares of stock of any Restricted Subsidiary
(except to qualify directors) and the sale, transfer or other disposition
(except to the Company or a Wholly-Owned Restricted Subsidiary) by any
Restricted Subsidiary of any shares of stock of any other Restricted Subsidiary.
"Capital Lease Obligations" shall mean the amount of the liability in
respect of a capital lease that would at such time be required to be capitalized
on a balance sheet of the lessee in accordance with GAAP.
"Capitalized Lease" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a consolidated balance
sheet of the lessee and its subsidiaries in accordance with GAAP.
-26-
<PAGE> 31
Allied Holdings, Inc. Note Agreement
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Allied Holdings, Inc., a Georgia corporation, and any
Person who succeeds to all, or substantially all, of the assets and business of
Allied Holdings, Inc.
"Consolidated Cash Flow" for any period shall mean the Consolidated Net
Income of the Company and its Restricted Subsidiaries for such period plus, to
the extent deducted in determining Consolidated Net Income, (i)an amount equal
to any extraordinary loss plus any net loss realized in connection with an asset
sale, (ii)provision for taxes based on income or profits of the Company and its
Restricted Subsidiaries for such period, (iii)consolidated interest expense of
the Company and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings and net payments (if any) pursuant to Hedging
Obligations), (iv)depreciation and amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) of the Company and its Restricted
Subsidiaries for such period and (v)one-third of all operating lease payments of
such Person and its Restricted Subsidiaries paid or accrued during such period.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization of, a Restricted Subsidiary shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in same proportion) that the Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination of the dividend to the Company by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
"Consolidated Net Income" shall mean the consolidated net income of the
Company and its Restricted Subsidiaries for any period as determined in
accordance with GAAP.
"Consolidated Net Worth" shall mean with respect to the Company and its
Restricted Subsidiaries, the result of (a)all assets of the Company and its
Restricted Subsidiaries on a consolidated basis
-27-
<PAGE> 32
Allied Holdings, Inc. Note Agreement
which are properly classified as assets in accordance with GAAP, minus (b)all
liabilities of the Company and its Restricted Subsidiaries on a consolidated
basis which are properly classified as liabilities in accordance with GAAP. For
purposes of the calculation of Consolidated Net Worth hereunder there shall be
disregarded the foreign translation adjustment component of shareholders' equity
made in accordance with Financial Accounting Standards Board Statement No. 52.
"Consolidated Total Assets" means as of any date of determination,
consolidated total assets of the Company and its Restricted Subsidiaries, after
eliminating all offsetting debits and credits between the Company and its
Restricted Subsidiaries and all other items required to be eliminated in the
course of the preparation of consolidated financial statements of the Company
and its Restricted Subsidiaries in accordance with GAAP.
"Credit Agreement" shall mean the Second Amended and Restated Revolving
Credit and Term Loan Agreement, dated as of February 9, 1994, as amended and
restated as of October 31, 1994 and further amended and restated as of December
31, 1995, by and among the Company, The First National Bank of Boston, the other
banks parties thereto, such other banks as may become parties thereto from time
to time and The First National Bank of Boston, as Agent, as the same may be
amended, restated, supplemented or otherwise modified and in effect from time to
time.
"Deemed Fixed Charge Coverage Ratio" shall mean the Fixed Charge
Coverage Ratio calculated on the basis that Indebtedness for Borrowed Money in
an amount equal to the Revolving Credit Commitment Amount on the date of
determination were outstanding during the entire period for which the Deemed
Fixed Charge Coverage Ratio is being determined.
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"Default Rate" shall mean a rate of interest per annum equal to the
higher at the time of (i)14% and (ii)the rate announced by The First National
Bank of Boston (or a successor thereto) as its "Base Rate".
"Environmental Law" means any international, federal, state or local
statute, law, regulation, order, consent decree, judgment, permit, license,
code, covenant, deed restriction, common law, treaty, convention, ordinance or
other requirement relating to public health, safety or the environment,
including, without limitation, those relating to releases, discharges or
emissions to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use and handling of polychlorinated biphenyls or asbestos,
to the disposal, treatment, storage or management of hazardous or solid waste,
or Hazardous Substances or crude oil, or any fraction thereof, or to exposure to
toxic or hazardous materials, to the handling, transportation, discharge or
release of gaseous or liquid Hazardous Substances and any regulation, order,
notice or demand issued pursuant to such law, statute or ordinance, in each case
applicable to the property of the Company and its Subsidiaries or the operation,
construction or modification of any thereof, including without limitation, the
following: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act
-28-
<PAGE> 33
Allied Holdings, Inc. Note Agreement
of 1986, the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984,
the Hazardous Materials Transportation Act, as amended, the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1976, the Safe
Drinking Water Control Act, the Clean Air Act of 1966, as amended, the Toxic
Substances Control Act of 1976, the Emergency Planning and Community
Right-to-Know Act of 1986, the National Environmental Policy Act of 1975, the
Oil Pollution Act of 1990 and any similar or implementing state law, and any
state statute and any further amendments to these laws providing for financial
responsibility for cleanup or other actions with respect to the release or
threatened release of Hazardous Substances or crude oil, or any fraction
thereof, and all rules, regulations, guidance documents and publications
promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to Section s of ERISA shall be construed to also refer to any successor
Sections.
"ERISA Affiliate" shall mean any corporation, trade or business that
is, along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in SS.7.1.
"Fixed Charge Coverage Ratio" for any period shall mean the ratio of
the Consolidated Cash Flow of the Company and its Restricted Subsidiaries for
such period to the Fixed Charges of the Company and its Restricted Subsidiaries
for such period. In the event that the Company or any of its Restricted
Subsidiaries incurs, assumes, Guarantees, or redeems any Indebtedness for
Borrowed Money (other than revolving credit borrowings) or issues preferred
stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving effect to such incurrence, assumption, Guarantee or redemption of
Indebtedness for Borrowed Money, or such issuance or redemption of preferred
stock, and the application of the proceeds of the incurrence of such
Indebtedness for Borrowed Money or the issuance of such preferred stock, as if
the same had occurred at the beginning of such period. For purposes of making
the computation referred to above, (i)acquisitions that have been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, at any time on
or after the beginning of such period and on or before to the Calculation Date
shall be deemed to have occurred on the first day of such period, (ii)the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or business disposed of prior to the
Calculation Date, shall be excluded and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations
-29-
<PAGE> 34
Allied Holdings, Inc. Note Agreement
giving rise to such Fixed Charges will not be obligations of the Company or any
of its Restricted Subsidiaries following the Calculation Date.
"Fixed Charges" for any period shall mean the sum of:
(i) the consolidated interest expense for such period, whether
paid or accrued, to the extent that such expense was deducted in
computing Consolidated Net Income (including, without limitation,
amortization of original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred
in respect of letter of credit or bankers' acceptance financings and
net payments (if any) pursuant to Hedging Obligations);
(ii) in the case of a computation of the Deemed Fixed Charge
Coverage Ratio, an amount equal to the remainder of (x)the interest
expense that would have been incurred during such period in respect of
the Credit Agreement if (A)Indebtedness for Borrowed Money in an amount
equal to the Revolving Credit Commitment Amount thereunder as at the
date of determination (giving effect to the application of any
Indebtedness for Borrowed Money then being incurred and to any increase
in the Revolving Credit Commitment Amount then being made) had been
outstanding during such entire period and (B)the interest rate
applicable to Revolving Credit Loans on such date of determination had
been in effect during such entire period minus (y)the amount of
interest included in respect of the Credit Agreement for such period
under clause (i) above;
(iii) the product of (x)all cash dividend payments (and
non-cash dividend payments in the case of a Person that is a Restricted
Subsidiary) on any series of preferred stock of the Company or any of
its Restricted Subsidiaries, times (y)a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of the Company or
such Restricted Subsidiary, expressed as a decimal; and
(iv) one-third of all operating lease payments paid or accrued
during such period,
in each case determined on a consolidated basis for the Company and its
Restricted Subsidiaries.
"GAAP" shall mean generally accepted accounting principles at the time
in the United States.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or
-30-
<PAGE> 35
Allied Holdings, Inc. Note Agreement
indirectly, including, without limitation, all obligations incurred through an
agreement, contingent or otherwise, by such Person: (i)to purchase such
Indebtedness or obligation or any property or assets constituting security
therefor, (ii)to advance or supply funds (x)for the purchase or payment of such
Indebtedness or obligation, (y)to maintain working capital or other balance
sheet condition or otherwise to advance or make available funds for the purchase
or payment of such Indebtedness or obligation, (iii)to lease property or to
purchase Securities or other property or services primarily for the purpose of
assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation, or
(iv)otherwise to assure the owner of the Indebtedness or obligation of the
primary obligor against loss in respect thereof. For the purposes of all
computations made under this Agreement, a Guaranty in respect of any
Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the
principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
"Hedging Obligations" of any Person shall mean any Indebtedness of such
Person under (i)interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements and (ii)other agreements or arrangements
designed to protect such Person against fluctuations in interest rates.
"Holder" shall mean any Person which is, at the time of reference, the
registered Holder of any Note.
"Indebtedness" shall mean all obligations, contingent and otherwise,
which in accordance with GAAP should be classified upon the obligor's balance
sheet as liabilities, or to which reference should be made by footnotes thereto,
including, without limitation, in any event and whether or not so classified:
(a)all debt and similar monetary obligations, whether direct or indirect; (b)all
liabilities secured by any mortgage, pledge, security interest, lien, charge, or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been assumed; and (c)
all guarantees, endorsements and other contingent obligations, whether direct or
indirect, in respect of Indebtedness of others, including any obligation to
supply funds to or in any manner to invest in, directly or indirectly, the
debtor, to purchase Indebtedness, or to assure the owner of Indebtedness against
loss, through an agreement to purchase goods, supplies, or services for the
purpose of enabling the debtor to make payment of the Indebtedness held by such
owner or otherwise, and the obligations to reimburse the issuer in respect of
any letters of credit.
"Indebtedness for Borrowed Money" of any Person shall mean without
duplication (i)all Indebtedness of such Person for borrowed money, (ii)all
Indebtedness of such Person having a final maturity of one or more than one year
from the date of origin thereof which has been incurred in connection with the
acquisition of assets, (iii)all Capital Lease Obligations of such Person,
(iv)Hedging Obligations and letters of credit (or reimbursement agreements in
respect thereof), (v)Indebtedness of others secured by a Lien
-31-
<PAGE> 36
Allied Holdings, Inc. Note Agreement
on property of such Person, and (vi)all Guaranties by such Person of
Indebtedness of others of the character described in this paragraph.
"Institutional Holder" shall mean any Holder which is a Purchaser or an
insurance company, bank, savings and loan association, trust company, investment
company, charitable foundation, employee benefit plan (as defined in ERISA) or
other institutional investor or financial institution and, for purposes of the
direct payment provisions of this Agreement, shall include any nominee of any
such Holder.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise; provided, however, that
"Investments" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Restricted Subsidiary shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement, Capitalized Lease or other arrangement pursuant to which title
to the property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"Long-Term Lease" shall mean any lease of real or personal property
(other than a Capitalized Lease) having an original term, including any period
for which the lease may be renewed or extended at the option of the lessor, of
more than three years.
"Make-Whole Amount" shall mean in connection with any prepayment or
acceleration of the Notes the excess, if any, of (i)the aggregate present value
as of the date of such prepayment of each dollar of principal being prepaid and
the amount of interest (exclusive of interest accrued to the date of prepayment)
that would have been payable in respect of such dollar if such prepayment had
not been made, determined by discounting such amounts at the Reinvestment Rate
from the respective dates on which they would have been payable, over (ii)100%
of the principal amount of the outstanding Notes being prepaid. If the
Reinvestment Rate is equal to or higher than 12%, the Make-Whole Amount shall be
zero. For purposes of any determination of the Make-Whole Amount:
"Reinvestment Rate" shall mean 1.0%, plus the arithmetic mean
of the yields for the two columns under the heading "Week Ending"
published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the
-32-
<PAGE> 37
Allied Holdings, Inc. Note Agreement
nearest month) corresponding to the Weighted Average Life to Maturity
of the principal being prepaid. If no maturity exactly corresponds to
such Weighted Average Life to Maturity, yields for the published
maturity next longer than the Weighted Average Life to Maturity and for
the published maturity next shorter than the Weighted Average Life to
Maturity shall be calculated pursuant to the immediately preceding
sentence and the Reinvestment Rate shall be interpolated from such
yields on a straight-line basis, rounding in each of such relevant
periods to the nearest month. For the purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published prior
to the date of determination of the Make-Whole Amount shall be used.
"Statistical Release" shall mean the then most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Federal Reserve System and which
establishes yields on actively traded U.S.Government Securities
adjusted to constant maturities or, if such statistical release is not
published at the time of any determination hereunder, then such other
reasonably comparable index which shall be designated by the Holders
holding 66-2/3% in aggregate principal amount of the outstanding Notes.
"Weighted Average Life to Maturity" of the principal amount of
any Indebtedness for Borrowed Money shall mean, as of the time of any
determination thereof, the number of years obtained by dividing the
then Remaining Dollar-Years of such principal by the aggregate amount
of such principal. The term "Remaining Dollar-Years" of such principal
shall mean the amount obtained by (i)multiplying (x)the remainder of
(1)the amount of principal that would have become due on each scheduled
payment date if such prepayment had not been made, less (2)the amount
of principal on the Notes scheduled to become due on such date after
giving effect to such prepayment and the application thereof, by (y)the
number of years (calculated to the nearest one-twelfth) which will
elapse between the date of determination and such scheduled payment
date, and (ii)totalling the products obtained in(i).
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Net Income" of any Person for any period shall mean the net income
(loss) of such Person, determined for such period in accordance with GAAP and
before any reduction in respect of preferred stock dividends, excluding,
however, (a)any gain (but not loss), together with any related provision for
taxes on such gain, realized in connection with (i)any sale or other disposition
of assets (including, without limitation, dispositions pursuant to sale and
leaseback transactions but excluding sales and dispositions in the ordinary
course of business), (ii)the disposition of any Securities by such Person or any
of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries or (iii)currency exchange
transactions not in the ordinary course of business and (b)any extraordinary
gain (but not loss), together with any related provision for taxes on such
extraordinary gain.
"Occupational Safety and Health Law" means the Occupational Safety and
Health Act of 1970, as amended, and any other federal, state or local statute,
law, ordinance, code, rule,
-33-
<PAGE> 38
Allied Holdings, Inc. Note Agreement
regulation, order or decree regulating, relating to or imposing liability or
standards of conduct concerning employee health and/or safety.
"Payment Blockage Commencement Date" shall have the meaning assigned
thereto in SS.6(C).
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Refinancing Indebtedness" shall mean any Indebtedness for
Borrowed Money of the Company or any of its Restricted Subsidiaries issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace, or refund, other Indebtedness for Borrowed Money of the Company or any
of its Restricted Subsidiaries; provided that: (i)the principal amount of such
Permitted Refinancing Indebtedness does not exceed the principal amount of the
Indebtedness for Borrowed Money so extended, refinanced, renewed, replaced, or
refunded (plus the amount of reasonable expenses incurred in connection
therewith); and (ii)if the Indebtedness for Borrowed Money being extended,
refinanced, renewed, replaced, or refunded is subordinate in right of payment to
the Notes, such Permitted Refinancing Indebtedness is subordinate in right of
payment to the Notes on terms at least as favorable to the Holders of the Notes
as those contained in the documentation governing the Indebtedness for Borrowed
Money being extended, refinanced, renewed, replaced, or refunded.
"Person" shall mean any individual, corporation, partnership, trust,
unincorporated association, joint stock company, limited liability company or
other legal entity or organization and any government or agency or political
subdivision thereof.
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Purchasers" shall have the meaning set forth in SS.1.1.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Restricted Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Company or a Restricted Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
-34-
<PAGE> 39
Allied Holdings, Inc. Note Agreement
"Restricted Investments" shall mean all Investments, other than:
(a) Investments by the Company and its Restricted Subsidiaries
in and to Restricted Subsidiaries that are Guarantors, including any
Investment in a corporation which, after giving effect to such
Investment, will (i)become a Restricted Subsidiary and a Guarantor or
(ii)be merged, consolidated or amalgamated with or into, or transfer or
convey substantially all of its assets to, or be liquidated into, the
Company or a Wholly-Owned Restricted Subsidiary that is a Guarantor;
(b) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition by the
Company or any Restricted Subsidiary, is accorded the highest rating by
Standard& Poor's Ratings Group, Moody's Investors Service, Inc. or
other nationally recognized credit rating agency of similar standing;
(c) Investments in direct obligations of the United States of
America or any agency or instrumentality of the United States of
America, the payment or guarantee of which constitutes a full faith and
credit obligation of the United States of America, in either case,
maturing in twelve months or less from the date of acquisition thereof;
(d) Investments in certificates of deposit maturing within one
year from the date of issuance thereof, issued by a bank or trust
company organized under the laws of the United States or any state
thereof, having capital, surplus and undivided profits aggregating at
least $100,000,000 and whose long-term certificates of deposit are, at
the time of acquisition thereof by the Company or a Restricted
Subsidiary, rated AA or better by Standard& Poor's Ratings Group or Aa
or better by Moody's Investors Service, Inc.;
(e) loans or advances in the usual and ordinary course of
business to officers, directors and employees for expenses (including
moving expenses related to a transfer) incidental to carrying on the
business of the Company or any Restricted Subsidiary;
(f) receivables arising from the sale of goods and services in
the ordinary course of business of the Company and its Restricted
Subsidiaries;
(g) Investments not exceeding $5,000,000 in the aggregate in
an Unrestricted Subsidiary acting as a captive insurance company; and
(h) Investments in the capital stock of any Person, not
otherwise permitted by the provisions of paragraphs (a) through (g)
above, both inclusive, provided that (i)the aggregate amount of such
Investments shall not exceed (x) $5,000,000 in the aggregate in any
12-month period or (y) $15,000,000 in the aggregate at any time
outstanding; and (ii) at the time of making each such Investment and
after giving effect thereto (x) no Default or Event of Default shall
have occurred and be
-35-
<PAGE> 40
Allied Holdings, Inc. Note Agreement
continuing, and (y) the Company could incur at least $1.00 of
Indebtedness for Borrowed Money pursuant to SS.5.7(A)(4).
In valuing any Investments for the purpose of applying the limitations
set forth in this definition, such Investments shall be taken at the original
cost thereof, without allowance for any subsequent write-offs or appreciation or
depreciation therein, but less any amount repaid or recovered on account of
capital or principal.
"Restricted Subsidiary" shall mean any Subsidiary (i) which is
organized under the laws of the United States or any state thereof or Canada or
any province thereof; (ii) which conducts substantially all of its business and
has substantially all of its assets within the United States and Canada, and
(iii) which is identified as a Restricted Subsidiary in AnnexA to Exhibit C or
in a written notice from the Company to the Holders.
"Revolving Credit Commitment Amount" shall mean $130,000,000; provided,
however, that the Revolving Credit Commitment amount:
(a) may be increased from time to time in accordance with the
provisions of SS.5.7(A)(5),
(b) shall be reduced from time to time in accordance with any
permanent reductions of the "Revolving Credit Commitment Amount" prior
to the "Term Out Date" (as such terms are defined in the Credit
Agreement), and
(c) from and after such Term Out Date shall mean the unpaid
principal amount of the Indebtedness for Borrowed money outstanding
under the Credit Agreement.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Senior Indebtedness Covenant Event of Default" means any failure by
the Company to comply with any covenants from time to time applicable to Senior
Indebtedness Liabilities that gives a holder of Senior Indebtedness Liabilities
the immediate right to accelerate such Senior Indebtedness Liabilities, provided
that any requirements for the giving of notice or passage of time as conditions
to such acceleration shall have been satisfied.
"Senior Indebtedness Liabilities" means (a) the principal amount of all
Indebtedness for Borrowed Money of the Company outstanding from time to time
which is permitted under the provisions of SS.5.7(A), provided that such
Indebtedness for Borrowed Money is not expressed to be junior or subordinate in
right of payment to any other Indebtedness for Borrowed Money of the Company;
(b) premium, if any, and all other amounts due and owing from time to time in
respect of said Indebtedness described in clause (a); and (c) interest due and
owing from time to time in respect of said Indebtedness described in clause (a)
or (b) (including, without limitation, any such interest accruing subsequent to
the filing by or against the Company of any proceeding brought under the
Bankruptcy Act of
-36-
<PAGE> 41
Allied Holdings, Inc. Note Agreement
1978, as amended, but only to the extent that such interest is allowed as a
claim pursuant to the provisions of said Act).
"Senior Indebtedness Payment Default" means any default by the Company
in the making of any payment or mandatory prepayment of principal or interest
with respect to any Senior Indebtedness Liabilities.
"Significant Subsidiary" shall mean a Subsidiary, including its
Subsidiaries, which meets any of the following conditions:
(a) The investments of the Company and its other Subsidiaries
in and advances to the Subsidiary exceed 10 percent of the total assets
of the Company and its Subsidiaries consolidated as of the end of the
most recently completed fiscal year (for a proposed business
combination to be accounted for as a pooling of interests, this
condition is also met when the number of common shares exchanged by the
Company exceeds 10 percent of its total common shares outstanding at
the date the combination is initiated); or
(b) The Company's and its other Subsidiaries' proportionate
share of the total assets (after intercompany eliminations) of the
Subsidiary exceeds 10 percent of the total assets of the Company and
its Subsidiaries consolidated as of the end of the most recently
completed fiscal year; or
(c) The Company's and its other Subsidiaries' equity in the
income from continuing operations before income taxes, extraordinary
items and cumulative effect of a change in accounting principle of the
Subsidiary exceeds 10 percent of such income of the Company and its
Subsidiaries consolidated for the most recently completed fiscal year.
For purposes of applying the test described in paragraph (c) above:
(i) When a loss has been incurred by either the Company and
its Subsidiaries consolidated or the tested Subsidiary, but not both,
the equity in the income or loss of the tested Subsidiary shall be
excluded from the income of the Company and its Subsidiaries
consolidated for purposes of the computation.
(ii) If income of the Company and its Subsidiaries
consolidated for the most recent fiscal year is at least 10 percent
lower than the average of the income for the last five fiscal years,
such average income shall be substituted for purposes of the
computation. Any loss years shall be omitted for purposes of computing
average income.
(iii) Where the test involves combined entities, entities
reporting losses shall not be aggregated with entities reporting
income.
-37-
<PAGE> 42
Allied Holdings, Inc. Note Agreement
"Sinking Fund Stock" shall mean any capital stock that, by its terms
(or by the terms of any Security into which it is convertible for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the Notes mature.
"Subordinated Indebtedness Liabilities" means (a) the principal amount
of all Indebtedness of the Company owing in respect of the Notes, (b) premium,
if any, and any other amounts from time to time due and owing in respect of
said Indebtedness, and (c) interest from time to time due and owing in respect
of said Indebtedness.
The term "subsidiary" shall mean as to any particular parent
corporation any corporation, partnership, limited liability company or other
business entity of which more than 50% (by number of votes) of the Voting Stock
(and, in the case of a limited partnership, of the general partner interests)
shall be beneficially owned, directly or indirectly, by such parent corporation.
The term "Subsidiary" shall mean a subsidiary of the Company.
"Trade Accounts Payable" of any Person means trade accounts payable of
such Person with a maturity of not greater than 90 days incurred in the ordinary
course of such Person's business.
"Unrestricted Subsidiary" shall mean any Subsidiary that is not a
Restricted Subsidiary.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Indebtedness for
Borrowed Money shall be owned by the Company and/or one or more of its
Wholly-owned Subsidiaries.
Section 9.2. Accounting Principles. Where the character or amount of
any asset or liability or item of income or expense is required to be determined
or any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, the same shall be done in accordance with GAAP,
to the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 9.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
-38-
<PAGE> 43
Allied Holdings, Inc. Note Agreement
Section 10. MISCELLANEOUS.
Section 10.1. Registered Notes. The Company shall cause to be kept at
its principal office a register for the registration and transfer of the Notes
(hereinafter called the "Note Register"), and the Company will register or
transfer or cause to be registered or transferred as hereinafter provided any
Note issued pursuant to this Agreement.
At any time and from time to time any Holder of a Note which has been
duly registered as hereinabove provided may transfer such Note upon surrender
thereof at the principal office of the Company duly endorsed or accompanied by a
written instrument of transfer duly executed by the Holder or its attorney duly
authorized in writing.
The Person in whose name any registered Note shall be registered shall
be deemed and treated as the owner and holder thereof and a Holder for all
purposes of this Agreement. Payment of or on account of the principal, premium,
if any, and interest on any registered Note shall be made to or upon the written
order of such Holder.
Section 10.2. Exchange of Notes. At any time and from time to time,
upon not less than ten days' notice to that effect given by the Holder of any
Note initially delivered or of any Note substituted therefor pursuant to
SS.10.1, this SS.10.2 or SS.10.3, and, upon surrender of such Note at its
office, the Company will deliver in exchange therefor, without expense to such
Holder, except as set forth below, a Note for the same aggregate principal
amount as the then unpaid principal amount of the Note so surrendered, or Notes
in the denomination of $100,000 or any amount in excess thereof as such Holder
shall specify, dated as of the date to which interest has been paid on the Note
so surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, registered in the name of such
Person or Persons as may be designated by such Holder, and otherwise of the same
form and tenor as the Notes so surrendered for exchange. The Company may require
the payment of a sum sufficient to cover any stamp tax or governmental charge
imposed upon such exchange or transfer.
Section 10.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the Holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If an Institutional Holder is the owner of any such lost, stolen
or destroyed Note, then the affidavit of an authorized officer of such owner,
setting forth the fact of loss, theft or destruction and of its ownership of
such Note at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Note other than the written
agreement of such owner to indemnify the Company.
Section 10.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of the
-39-
<PAGE> 44
Allied Holdings, Inc. Note Agreement
Purchasers' out-of-pocket expenses in connection with the preparation, execution
and delivery of this Agreement and the transactions contemplated hereby,
including but not limited to the reasonable charges and disbursements of Chapman
and Cutler, special counsel to the Purchasers, duplicating and printing costs
and charges for shipping the Notes, adequately insured to each Purchaser's home
office or at such other place as such Purchaser may designate, and all such
expenses of the Holders relating to any amendment, waivers or consents pursuant
to the provisions hereof, including, without limitation, any amendments,
waivers, or consents resulting from any work-out, renegotiation or restructuring
relating to the performance by the Company of its obligations under this
Agreement and the Notes. The Company also agrees that it will pay and save each
Purchaser harmless against any and all liability with respect to stamp and other
taxes, if any, which may be payable or which may be determined to be payable in
connection with the execution and delivery of this Agreement or the Notes,
whether or not any Notes are then outstanding. The Company agrees to protect and
indemnify each Purchaser against any liability for any and all brokerage fees
and commissions payable or claimed to be payable to any Person in connection
with the transactions contemplated by this Agreement.
Section 10.5. Powers and Rights Not Waived; Remedies Cumulative'. No
delay or failure on the part of any Holder in the exercise of any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
the same preclude any other or further exercise thereof, or the exercise of any
other power or right, and the rights and remedies of each Holder are cumulative
to, and are not exclusive of, any rights or remedies any such Holder would
otherwise have.
Section 10.6. Notices. All communications provided for hereunder shall
be in writing and, if to a Holder, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to such Holder at its address appearing beneath its signature at
the foot of this Agreement or such other address as any Holder may designate to
the Company in writing, and if to the Company, delivered or mailed by registered
or certified mail or overnight air courier, or by facsimile communication, to
the Company at the address beneath its signature at the foot of this Agreement
or to such other address as the Company may in writing designate to the Holders;
provided, however, that a notice to a Holder by overnight air courier shall only
be effective if delivered to such Holder at a street address designated for such
purpose in accordance with this SS.10.6, and a notice to such Holder by
facsimile communication shall only be effective if made by confirmed
transmission to such Holder at a telephone number designated for such purpose in
accordance with this SS.10.6 and promptly followed by the delivery of such
notice by registered or certified mail or overnight air courier, as set forth
above.
Section 10.7. Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to the benefit
of each Purchaser and its successor and assigns, including each successive
Holder.
Section 10.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered
-40-
<PAGE> 45
Allied Holdings, Inc. Note Agreement
pursuant hereto, whether or not in connection with the Closing Date, shall
survive the closing and the delivery of this Agreement and the Notes.
Section 10.9. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 10.10. Governing Law. This Agreement and the Notes issued and
sold hereunder shall be governed by and construed in accordance with Illinois
law.
Section 10.11. Captions. The descriptive headings of the various
Section s or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
-41-
<PAGE> 46
Allied Holdings, Inc. Note Agreement
The execution hereof by the Purchasers shall constitute a contract
among the Company and the Purchasers for the uses and purposes hereinabove set
forth. This Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one
agreement.
ALLIED HOLDINGS, INC.
By /s/ David S. Forbes
---------------------
Its Vice President
ALLIED HOLDINGS, INC.
160 Clairemont Avenue
Decatur, Georgia 30030
Attention: A. Mitchell Poole, Jr.
Telefacsimile: (404) 370-4206
Confirmation: (404) 370-4208
-42-
<PAGE> 47
Allied Holdings, Inc. Note Agreement
Accepted as of January 15, 1996:
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By /s/ Anthony C. Urick
----------------------
Its Second Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
(For the General Account and the Guaranteed Benefit Sub-Account)
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department T-57
Payments
All payments on or in respect of the Notes shall be made by bank wire transfer
of immediately available funds for credit, not later than 12:00 Noon, Boston
time (which shall identify each payment as "Allied Holdings, Inc., 12% Senior
Subordinated Notes due 2003, PPN019223 A* 7, principal or interest or other
payments"), to:
The First National Bank of Boston (ABA #011000390)
100 Federal Street
Boston, Massachusetts 02110
Attention: Insurance Division
for the account of: John Hancock Mutual Life Insurance Company
Private Placement Collection Account Number 541-55417
On Order of: Allied Holdings, Inc., PPN 019223 A* 7
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and address of Bank (or Trustee) from which wire transfer was sent,
shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
-43-
<PAGE> 48
Allied Holdings, Inc. Note Agreement
All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall also be delivered or mailed to
the address set forth immediately above.
All other communications shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place, 200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, T-57
Telefacsimile Number: (617) 572-1606
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1414660
-44-
<PAGE> 49
Allied Holdings, Inc. Note Agreement
Accepted as of January 15, 1996:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ A. Kipp Koester
---------------------------
Its Vice President
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Securities Department
Telecopier Number: (414) 299-7124
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Allied Holdings, Inc., 12% Senior Subordinated Notes due 2003, PPN019223 A* 7,
principal or interest") to:
Bankers Trust Company (ABA #0210-01033)
16 Wall Street
Insurance Unit, 4th Floor
New York, New York 10015
for credit to: The Northwestern Mutual Life Insurance Company
Account Number 00-000-027
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment
to be addressed, Attention:
Treasurer's Department/Securities Operations.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 39-0509570
-45-
<PAGE> 1
EXHIBIT 21.1
The subsidiaries of Allied Holdings, Inc. and the place of incorporation
or organization are as follows:
<TABLE>
<S> <C>
1. Allied Automotive Group, Inc. - Georgia corporation
2. Allied Systems, Ltd. - Georgia limited partnership
3. Auto Haulaway, Inc. - Ontario corporation
4. Auto Haulaway Releasing Services (1981) Limited - Ontario Corporation
5. Inter Mobile, Inc. - Georgia corporation
6. Legion Transportation, Inc. - Georgia corporation
7. Allied Industries Incorporated - Georgia corporation
8. HAUL Insurance Limited - Cayman Islands entity
9. Axis Group, Inc. - Georgia corporation
10. Link Information Systems, Inc. - Georgia corporation
11. AH Industries, Inc. - Alberta Corporation
12. Allied, Inc. - Texas Corporation
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated February 4, 1997, appearing on pages F-1 and S-1 of this Form
10-K, into the Company's previously filed Registration Statement File Nos.
33-76108, 33-90892 and 333-3020.
Atlanta, Georgia
March 26, 1997
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert J. Rutland and A. Mitchell Poole,
Jr., jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/Robert J. Rutland
------------------------- Chairman of the Board of Directors
Robert J. Rutland and Chief Executive Officer March 26, 1997
/s/Guy W. Rutland, III
------------------------- Chairman Emeritus and Director March 26, 1997
Guy W. Rutland, III
/s/A. Mitchell Poole, Jr.
------------------------- President, Chief Operating Officer
A. Mitchell Poole, Jr. and Director March 26, 1997
/s/Bernard O. De Wulf
------------------------- Vice Chairman, Executive Vice
Bernard O. De Wulf President, and Director March 26, 1997
/s/Berner F. Wilson, Jr.
------------------------- Vice Chairman, Secretary and
Berner F. Wilson, Jr. Director March 26, 1997
/s/Guy W. Rutland, IV
------------------------- Vice President and Director March 26, 1997
Guy W. Rutland, IV
/s/Joseph W. Collier
------------------------- Director, President - Allied
Joseph W. Collier Automotive Group March 26, 1997
/s/David G. Bannister
------------------------- Director March 26, 1997
David G. Bannister
/s/Robert R. Woodson
------------------------- Director March 26, 1997
Robert R. Woodson
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ALLIED HOLDINGS, INC. FOR THE YEAR ENDED DECEMBER 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,973
<SECURITIES> 8,520
<RECEIVABLES> 22,673
<ALLOWANCES> 0
<INVENTORY> 4,096
<CURRENT-ASSETS> 49,202
<PP&E> 132,552
<DEPRECIATION> 0
<TOTAL-ASSETS> 211,083
<CURRENT-LIABILITIES> 48,494
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 56,709
<TOTAL-LIABILITY-AND-EQUITY> 211,083
<SALES> 392,547
<TOTAL-REVENUES> 392,547
<CGS> 373,952
<TOTAL-COSTS> 373,952
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,720
<INCOME-PRETAX> 8,478
<INCOME-TAX> 3,557
<INCOME-CONTINUING> 4,921
<DISCONTINUED> 0
<EXTRAORDINARY> (935)
<CHANGES> 0
<NET-INCOME> 3,986
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
</TABLE>
