10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2006

o 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 (State or other jurisdiction of incorporation or organization)	58-0360550 (I.R.S. Employer ID Number)
160 Clairemont Avenue, Suite 200, Decatur, Georgia 30030 (Address of principal executive office)	(404) 373-4285 (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None
(Title of Class) No par value Common Stock
(Title of Class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o     No þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o     No þ

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 þ No o

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 reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the Registrant is a large accelerated filer, accelerated filer or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer o     Accelerated Filer o     Non-Accelerated Filer þ

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2).Yes o     No þ

The number of shares outstanding of the Registrant’s common stock as of May 3, 2007 was 8,980,329.

The aggregate market value of the common stock held by non-affiliates of the Registrant, based upon the closing stock price of the common stock as of June 30, 2006 as reported on the Pink Sheets, was approximately $5.6 million. Shares of the Registrant’s common stock owned by its directors and executive officers were excluded from this aggregate market value calculation; however, shares owned by the Registrant’s institutional stockholders were included.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ALLIED HOLDINGS, INC.

TABLE OF CONTENTS

		Page
	Caption	Number
PART I
Item 1.	Business		2
Item 1A.	Risk Factors		14
Item 1B.	Unresolved Staff Comments		20
Item 2.	Properties		20
Item 3.	Legal Proceedings		20
Item 4.	Submission of Matters to a Vote of Security Holders		21
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		21
Item 6.	Selected Financial Data		23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		46
Item 8.	Financial Statements and Supplementary Data		46
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		46
Item 9A.	Controls and Procedures		46
Item 9B.	Other Information		47
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		48
Item 11.	Director and Executive Compensation		51
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		62
Item 13.	Certain Relationships, Related Transactions and Director Independence		64
Item 14.	Principal Accountant Fees and Services		64
PART IV
Item 15.	Exhibits and Financial Statement Schedules		66
EX-4.3 SECURED SUPER-PRIORITY DEBTOR IN POSESSION AND EXIT GUARANTEE AGREEMENT
EX-4.3(A) FIRST AMENDMENT TO EXIT CREDIT AND GUARANTEE AGREEMENT
EX-4.4 LOAN AND SECURITY AGREEMENT AND GUARANTEE
EX-10.13 SEVERANCE AGREEMENT AND FULL RELASE/ HUGH E. SAWYER
EX-10.24 SETTLEMENT AGREEMENT
EX-21.1 SUBSIDIARIES OF ALLIED HOLDINGS, INC.
EX-23.1 CONSENT OF KPMG LLP
EX-31.1 CERTIFICATION BY HUGH E. SAWYER
EX-31.2 CERTIFICATION BY THOMAS H. KING
EX-32.1 CERTIFICATION BY HUGH E. SAWYER
EX-32.2 CERTIFICATION BY THOMAS H. KING

PART I

Item 1. Business

When we use the terms “Allied,” “we,” “us,” and “our,” we mean Allied Holdings, Inc. and its subsidiaries on a consolidated basis, and as the context requires, Allied Holdings, Inc. and its subsidiaries that filed for Chapter 11 protection pursuant to the U.S. Bankruptcy Code.

Our Company

We are a vehicle-hauling company providing a range of logistics and other support services to the automotive industry. Our principal operating subsidiaries are Allied Automotive Group, Inc. (collectively with its subsidiaries referred to as “Allied Automotive” or the/our “Automotive Group”) and Axis Group, Inc. (“Axis” or the “Axis Group”). Allied Automotive is our largest subsidiary comprising 97% of our 2006 revenues.

Voluntary Reorganization under Chapter 11

On July 31, 2005 (the “Petition Date”), Allied Holdings, Inc. and substantially all of its subsidiaries (the “Debtors”) filed voluntary petitions with the U.S. Bankruptcy Court for the Northern District of Georgia (the “Bankruptcy Court”) seeking protection under Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”). Our captive insurance company, Haul Insurance Limited, as well as our subsidiaries in Mexico and Bermuda (the “Non-debtors”) were not included in the Chapter 11 filings. Our Canadian subsidiaries obtained approval for creditor protection under the Companies Creditors’ Arrangement Act in Canada and are included among the subsidiaries that filed voluntary petitions seeking bankruptcy protection. Like Chapter 11, the Companies Creditors Arrangement Act in Canada allows for reorganization under the protection of the court system.

The Chapter 11 filings were precipitated by various factors, including the decline in new vehicle production at certain of our major customers, rising fuel costs, historically high levels of debt, increasing wage and benefit obligations for our bargaining employees in the U.S. and the increase in non-union vehicle-hauling competition. The majority of our bargaining employees in the U.S. are covered by the National Master Automobile Transporters Agreement (“Master Agreement’) with the International Brotherhood of Teamsters (the “Teamsters” or “IBT”). We are currently operating our business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and cannot engage in transactions considered to be outside of the ordinary course of business without obtaining Bankruptcy Court approval. We will refer to the proceedings between the Petition Date and the date that a plan of reorganization is effective as the Cha pter 11 Proceedings.

On April 6, 2007, the Bankruptcy Court approved the Disclosure Statement (“Disclosure Statement”) for the Second Amended Joint Plan of Reorganization (as amended, the “Joint Plan”) filed by the Debtors, the Teamsters National Automobile Transportation Industry Negotiating Committee, on behalf of the Teamsters and Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP (collectively “Yucaipa”) and authorized its use in connection with the solicitation of votes from those creditors and other parties in interest that were entitled to vote on a plan of reorganization. We subsequently received the votes needed and the Bankruptcy Court approved the Joint Plan on May 18, 2007. The Joint Plan includes several conditions precedent to the effective date, including the closing and funding of exit financing.

The Disclosure Statement for the Joint Plan contemplates that we will continue to operate in substantially our current form, and contemplates the resolution of the outstanding claims against and interests in the Debtors pursuant to the Bankruptcy Code. Upon the effective date of the Joint Plan, the Debtors would be reorganized through, among other things, the consummation of the following transactions:

i)	Payment of the Original DIP Facility and funding of the exit financing, both of which have been facilitated by the New DIP Facility, subject to certain conditions;
ii)	Payment in cash, reinstatement, return of collateral or other treatment of other secured claims agreed between the holder of each such claim and Yucaipa;

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iii)	Distribution of new common stock on a pro rata basis to the holders of allowed general unsecured claims;
iv)	Cancellation of the existing common stock interests in the Debtors (holders of equity interests will receive nothing under the Disclosure Statement for the Joint Plan); and
v)	Assumption of assumed contracts.

On March 30, 2007, we obtained financing arranged by an affiliate of Goldman Sachs & Co., (the “New DIP Facility”) which provides debtor-in-possession financing of up to $315 million. The New DIP Facility, which was amended in April 2007, replaces the financing obtained on August 1, 2005 in connection with our Chapter 11 filing (the “Original DIP Facility”) and subject to the satisfaction of certain conditions, the New DIP Facility may convert, at our option, to a senior secured credit facility upon our emergence from Chapter 11. See Note 14 of our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for additional discussion on the New DIP Facility.

As more fully discussed in “Equipment, Maintenance and Fuel” below, subsequent to December 31, 2006, we entered into an agreement with Yucaipa pursuant to which Yucaipa will purchase approximately 150 specialized tractors and car-haul trailers (“Rigs”) from the bankruptcy auction of Blue Thunder Auto Transport, Inc. (the “Blue Thunder Rigs”). The Blue Thunder Rigs will then be sold by Yucaipa to us at cost. We are financing the purchase of these Rigs with purchase money financing provided to us by Yucaipa (the “Rig Financing”), which Rig Financing was approved by the Bankruptcy Court on April 6, 2007. The maximum amount financed under the Rig Financing will not exceed $15 million. At the option of Yucaipa, upon our successful emergence from Chapter 11, Yucaipa may convert the Rig Financing into additional equity of our company. As of May 3, 2007, we had purchased 117 of these Rigs from Yucaipa at a cost of $8.9 million.

In connection with the Chapter 11 Proceedings, the Bankruptcy Court granted several “first day” orders that enable us generally to operate in the ordinary course of business. In addition, the Office of the United States Trustee appointed a committee of unsecured creditors (“Creditors Committee”). The Creditors Committee and its legal representatives had the right to be heard on all matters that came before the Bankruptcy Court, including the Joint Plan.

During the Chapter 11 Proceedings, actions by creditors to collect pre-petition indebtedness are stayed and other contractual obligations generally may not be enforced against us. As debtors-in-possession, we have the right, subject to Bankruptcy Court approval and certain other limitations, to assume or reject executory contracts and unexpired leases. The term executory contracts refer to contracts in which the obligations of both parties are unperformed. In this context “rejection” means that we are relieved from our obligations to perform further under the contract or lease but are subject to a claim for damages for the related breach. Any damages resulting from rejection are treated as general unsecured pre-petition claims during the Chapter 11 Proceedings. Parties affected by these rejections may file claims with the Bankruptcy Court in accordance with bankruptcy procedures. We had until the confirmation of the Joint Plan to assum e or reject contracts and leases.

Pre-petition claims that were contingent or unliquidated at the commencement of the Chapter 11 Proceedings are generally allowable against the debtor-in-possession in amounts fixed by the Bankruptcy Court. A contingent claim is one which is dependent on the occurrence of a certain event whereas an unliquidated claim is one in which the amount is uncertain. The bar date for creditors to file claims with the Bankruptcy Court was February 17, 2006 and we are in the process of reconciling these claims to our records. The rights of and ultimate payment of pre-petition obligations are subject to resolution under the Joint Plan.

At this time, it is not possible to accurately predict the effect of the Chapter 11 Proceedings on our business. Our future results of operations will depend on the timely and successful implementation of the Joint Plan and we can provide no assurance that the Joint Plan will be consummated. The rights and claims of various creditors and security holders are determined by the Joint Plan under the priority plan established by the Bankruptcy Code.

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The Securities and Exchange Commission (“SEC”) has informed the Debtors of its intention to monitor the Chapter 11 Proceedings.

See Note 3 of our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for other Chapter 11 related disclosures. The discussion concerning our Chapter 11 filings that we include in this Annual Report on Form 10-K provides general background information and is not intended to be an exhaustive summary. Detailed information pertaining to our Chapter 11 filings may be viewed at www.administar.net or on our website at www.alliedholdings.com.

Principal Operating Subsidiaries

Allied Automotive Group

With its specialized tractors and car-haul trailers, the Automotive Group serves and supports substantially all of the major domestic and foreign automotive manufacturers offering a range of vehicle delivery services, including the transportation of new, pre-owned and off-lease vehicles to dealers from plants, rail ramps, inland distribution centers, ports and auctions, while also providing yard management services including vehicle rail-car loading and unloading services. Though there is limited public information available about our competitors, most of whom are privately-owned companies, we believe that our Automotive Group is the largest transporter of new automobiles, sport-utility vehicles (“SUVs”) and light trucks via specialized Rigs in North America. We base this on the number of vehicles our Automotive Group delivers annually versus total vehicles produced and on revenues generated from vehicle deliveries. Allied Automotive’s largest customers are General Motors, Ford, DaimlerChrysler, Toyota and Honda. During 2006, these customers accounted for approximately 88% of the Automotive Group’s revenues. Other customers include the other major foreign manufacturers, namely Mazda, Nissan, Isuzu, Volkswagen, Hyundai, and KIA. Allied Automotive operates primarily in the “short-haul” segment of the automotive transportation industry. When we use the term “short-haul,” we mean average hauled distances of less than 200 miles from the point of origin.

Axis Group

The Axis Group complements the services provided by our Automotive Group, providing vehicle distribution and transportation support services to both the pre-owned and new vehicle markets as well as to other segments of the automotive and car rental industries. Axis provides the following services:

• vehicle inspection services for the pre-owned and off-lease markets;

• carrier management and brokerage services for various automotive clients;

• a variety of related support services to the pre-owned and off-lease vehicle markets, title storage, marshalling and rail yard management (offered through its subsidiaries CT Services, Inc. and Axis Canada);

• a computerized vehicle tracking service for Toyota;

• vehicle processing services at ports and inland distribution centers; and

• logistics and distribution services to the Mexican automobile industry (offered through its subsidiary, Axis Logistica).

Information regarding our revenues, operating income (loss) and total assets for each of our operating segments and the revenues and total assets for each major geographic area for 2006, 2005 and 2004 is included in Note 19 of our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

Our Operations

Our operations team is responsible for the management of our terminals in the U.S. and Canada. Our Automotive Group operates a total of 73 terminals and 40 garages while our Axis Group operates 41 terminals. Our day-to-day operations are directed from these terminals. Our Rigs are primarily maintained at the 40 garages. Our Automotive Group’s terminals rely upon one customer service center in Decatur, Georgia to design optimal loads for each Rig and to coordinate our line-haul dispatch function. Our Axis Group’s carrier management services relies upon a

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separate customer dispatch center in Decatur, Georgia to coordinate pickup and delivery of customer vehicles. Terminal staffing varies based on a number of factors including complexity, size, delivery profile and number of customers served but may include a terminal manager, an assistant terminal manager, an operations manager, a shop manager, a quality or safety manager (these two positions are sometimes combined), yard supervisors and other yard employees, mechanics, dispatchers, drivers, an office supervisor and administrative associates. Our corporate office is located in Decatur, Georgia. Some centralized management services for our Automotive Group and our Axis Group are provided by our corporate office and include logistics and load planning, information technology, sales and marketing, purchasing, finance and accounting, human resources, legal services, planning, insurance and risk management.

Corporate History

We were founded as “Motor Convoy” in 1934. Following industry deregulation in the early 1980s, we expanded geographically through acquisitions. In 1986, Motor Convoy and Auto Convoy, a carhaul company based in Dallas, Texas, formed a joint venture, which allowed us to enter new markets in Texas, Missouri, Louisiana, and Kentucky. The two firms merged in 1988 to create Allied Systems. In 1993, we went public as Allied Holdings, Inc., a company incorporated under the laws of the state of Georgia.

In 1994, we obtained approximately 90% of the Canadian motor carrier market when we acquired Auto Haulaway. In 1997, we became the major auto transporter in North America by acquiring certain subsidiaries of Ryder System, Inc. known as “Ryder Automotive Group”, a transaction that expanded our operations in the western section of the U.S. and substantially increased the volume of our business with certain customers, particularly General Motors.

As part of the decision to expand internationally, in 1988, through our Axis Group, we formed a Brazilian joint venture to provide logistics services to the auto transport market in the Mercosur region of South America. A year later, we set up an Axis business unit in Mexico. In 1999, the Axis Group created a joint venture with AutoLogic Holdings (a logistics firm serving the car industry in Belgium, France, the Netherlands, and the UK) to manage Ford’s distribution of vehicles in the United Kingdom. We sold our interest in this joint venture and the Brazilian joint venture in 2001.

In 2000, our Axis Group purchased CT Group, Inc., a provider of vehicle inspection services to the pre-owned and off-lease vehicle market. In 2001, the Axis Group established a deal with Toyota Motor Sales to provide vehicle tracking of more than 1.5 million vehicles per year.

Since 2000, we have made no significant acquisitions. Instead, we have focused on the restructuring and streamlining of our operations including closing terminals deemed to be unprofitable and focusing on cost reduction initiatives. Positive developments in these areas were, however, hampered by our historically high debt level as well as by certain automotive industry dynamics including, but not limited to, the rising cost of fuel, the decline in new vehicle production at certain of our major customers, the increase in non-union vehicle-hauling competition and increasing wages and benefits under our collective bargaining agreements with the Teamsters. These challenges and other factors culminated in our Chapter 11 filings on July 31, 2005.

Customer Relationships

Allied Automotive has one-year or multi-year contracts in place with substantially all of its customers. However, most of these contracts can be terminated by either party upon a specified period of notice. These contracts establish rates for the transportation of vehicles and are generally based upon a fixed rate per vehicle transported, a variable rate for each mile that a vehicle is transported and in certain cases an administrative processing fee. Certain contracts provide for rate variation per vehicle depending on the size and weight of the vehicle. During 2005 and 2006, substantially all of our customers paid us a fuel surcharge that allowed us to recover at least a portion of the fuel price increases that occurred during these years. Except in cases where we are able to obtain the customer’s agreement, these contracts do not permit the recovery of increases in fuel taxes or labor costs.

Our Automotive Group has developed and maintained long-term relationships with its significant customers and has historically been substantially successful in negotiating the renewal of contracts with these customers. Under written contracts, the Automotive Group has served Ford since 1934, DaimlerChrysler since 1979 and General Motors since 1997. Current customer contracts include the following:

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• a contract with DaimlerChrysler, which was renewed in December 2005, expires on September 30, 2007, and grants the Automotive Group primary carrier rights for 24 locations in the U.S. and 13 in Canada. The contract may be terminated by location on 150 days notice by either party. This contract, as renewed, provided for an increase in underlying base rates as of October 1, 2005 and again on October 1, 2006. This renewed agreement was approved by the Bankruptcy Court in March 2006;

• a contract with General Motors, which expires in December 2008, grants the Automotive Group primary carrier rights for 36 locations in the U.S. and Canada. This contract was renewed in December 2005 with rate increases effective January 1, 2006 and January 1, 2007. General Motors does not have the right to contract with other vehicle-hauling service providers at a location under the terms of the contract unless the Automotive Group fails to comply with service or quality standards at such location. Should an event of non-compliance occur, the Automotive Group has 30 days in which to cure. If Allied Automotive does not cure, General Motors may give 60 days notice of termination with respect to the applicable location. This renewed agreement was approved by the Bankruptcy Court in January 2006;

• a contract with American Honda Motor Company for vehicles delivered in the United States which extends the Automotive Group’s current contract with Honda in the United States through March 31, 2009. Pursuant to the terms of the agreement which was renewed in March 2006, the Automotive Group will continue performing vehicle delivery services at all of the locations in the United States that it currently serves for Honda. The contract renewal includes increases in the underlying rates paid by Honda to the Automotive Group for vehicle delivery services effective April 1, 2006, and again on April 1, 2007 and April 1, 2008;

• an executed agreement with Toyota regarding a contract commencing on April 1, 2007, which will expire on March 31, 2008. This agreement was approved by the Bankruptcy Court on May 10, 2007 and provides for an increase in the base rates effective as of May 10, 2007; and

• an agreement in principle with Ford Motor Company through Autogistics, a service relationship between Ford and UPS Logistics, that oversees Ford’s vehicle delivery network. This agreement in principle grants the Automotive Group primary rights to 22 locations in the U.S. and Canada, provided that Ford will have the right to resource certain business from Allied at locations which are mutually acceptable to both Ford and Allied. The agreement in principle provides for increased rates on all business served by Allied for Ford beginning when we emerge from Chapter 11. This agreement in principle remains subject to the execution of a definitive agreement between the parties and the approval of the agreement by the Bankruptcy Court.

We anticipate that the Automotive Group will be able to continue these relationships with its customers without interruption of service, but we can provide no assurance that we will be able to successfully renew these contracts on terms satisfactory to us on or prior to their expiration dates or without a loss of market share or a reduction in pricing or without a change in service conditions or that we will be able to continue to serve these customers without service interruption.

Proprietary Management Information Systems

We are committed to using our technology to serve our customers. Our Automotive Group’s management information system is a centralized, fully integrated information system that serves as a company-wide database, which allows the Automotive Group to quickly respond to customer information requests without having to combine data files from several sources. Updates with respect to vehicle load, dispatch and delivery are immediately available for reporting to our customers and with our information system, we are able to control and track customer vehicle inventories. Through electronic data interchange (“EDI”), our Automotive Group communicates directly with manufacturers in the process of delivering vehicles and electronically bills and collects from these manufacturers. Allied Automotive Group also utilizes EDI to communicate with inspection companies, railroads, port processors, and other carriers.

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The information system of Allied Automotive is a tool used by its personnel to design certain loads to be delivered by the Automotive Group and takes into account factors such as the capacity of the Rig, the size of the vehicles, the route, the drop points, applicable weight and height restrictions and the formula for paying drivers. The system also determines the most economical and efficient load sequence and drop sequence for certain vehicles to be transported. Load sequence is defined as the order or arrangement of vehicles (each of which may vary in weight) on a trailer, whereas the drop sequence is defined as the order in which vehicles will be delivered. Loads are also designed manually by our Automotive Group’s personnel, taking into account the same factors described above and customer service requirements. Additionally, Axis has developed both a yard management system, which maintains the vehicle inventory in a storage facility, as well as a vehicle tracking system, which estimates the dates and times of vehicle arrivals at the dealerships from multiple origination points and channels of distribution. Axis operates the vehicle tracking system for Toyota whereby Axis manages dealer transit and delivery data on behalf of Toyota for all of their vehicles sold in the U.S.

Management Strategy

We utilize a performance management strategy, which we believe contributes to driver productivity, customer cargo claim prevention, enhanced efficiency, safety, and consistency of operations. This management strategy and culture is results-driven and is designed to enhance employee performance through high standards, accountability, precise measurement matrices, careful employee selection, new hire training and continuous training.

Risk Management and Insurance

As part of our risk management strategy, we identify the potential risks that we face and secure appropriate insurance coverage. Through a combination of deductibles, self-insurance retentions and third-party insurance coverage, we insure the following risks: workers’ compensation; business automobile liability; commercial general liability; property, including business interruption; cargo damage and automobile physical damage; fuel storage tank liability; directors’ and officers’ liability; fiduciary liability; employment practices liability; employee fidelity; and chaplain’s professional liability.

We retain losses within certain limits through high deductibles or self-insured retentions. For certain risks, coverage for losses is provided by primary and reinsurance companies unrelated to our company (“third-party insurance carriers”). Haul Insurance Limited, our captive insurance subsidiary, provides reinsurance coverage to certain of our third-party insurance carriers for certain types of losses for certain years within our insurance program, primarily insured workers’ compensation, automobile and general liability risks.

Effective January 1, 2006 and continuing into 2007, we retain liability for U.S. automobile liability claims for the first $1 million per occurrence with no aggregate limit. For claim amounts in excess of $1 million per occurrence, we are covered by excess insurance. In Canada, we retain liability up to CDN $500,000 for each auto liability claim, with no aggregate limit. For claim amounts in excess of CDN $500,000, we are covered by excess insurance.

For the claim year ended December 31, 2005, we utilize three layers of coverage for automobile claims in the U.S. as follows:

• The first layer includes the first $1 million of every claim. We retain liability for this layer, with no aggregate limit.

• The second layer includes the amount by which individual claims exceed $1 million up to $5 million per occurrence. For this second layer, we retain liability up to an aggregate deductible of $7 million. Aggregate claim amounts in the second layer in excess of $7 million are covered by excess insurance.

• The third layer includes the amount by which individual claims exceed $5 million per occurrence. Individual claim amounts greater than $5 million are covered by excess insurance to a limit of $150 million per occurrence.

For the claim year ended December 31, 2005, we also utilize three layers of coverage for automobile claims in Canada as follows:

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• The first layer includes the first CDN $500,000 of every claim. We retain liability for this layer, with no aggregate limit.

• The second layer includes the amount by which individual claims exceed CDN $500,000 up to CDN $1 million, per occurrence. For this second layer, we retain liability up to an aggregate deductible of CDN $500,000. Aggregate claim amounts in the second layer in excess of CDN $500,000 are covered by excess insurance.

• The third layer includes the amount by which individual claims exceed CDN $1 million, per occurrence. Individual claim amounts that are greater than CDN $1 million are covered by excess insurance to a limit of $150 million per occurrence.

For the claim years 2007, 2006 and 2005, we retain liability of up to $250,000 for each cargo damage claim in the U.S. and up to CDN $250,000 for each cargo damage claim in Canada. There is no aggregate limit. Claim amounts in excess of these amounts are covered by excess insurance.

For certain of our operating subsidiaries, we are qualified to self-insure against losses relating to workers’ compensation claims in the states of Florida, Georgia, Missouri and Ohio. For these states, we retain respective liabilities of $400,000, $500,000, $500,000 and $350,000, per occurrence. Claim amounts in excess of these amounts are covered by excess insurance.

In those states where we are insured for workers’ compensation claims, the majority of our risk in 2007 and 2006 is covered by a fully insured program with no deductible. For 2007, the premium paid is adjustable upward or downward proportionally based on any variance between actual and estimated payroll. For 2005, our captive insurance subsidiary provided insurance coverage for the majority of our workers’ compensation losses and the deductible was $650,000 per claim. Claims in excess of that amount are covered by excess insurance.

Workers’ compensation losses in Canada are covered by government insurance programs to which we make premium payments. In certain provinces, we are also subject to retrospective premium adjustments based on actual claims losses compared to expected losses.

We are also required to provide collateral to our third-party insurance carriers and various states for losses in respect of worker injuries, accident, theft, and other loss claims. For this purpose, we utilize cash and/or letters of credit. To reduce our risks in these areas as well as the letter of credit or underlying collateral requirements, we have implemented various risk management programs. However, we can provide no assurance that the current letter of credit requirements will be reduced nor can we provide assurance that these letter of credit requirements will not increase.

Equipment, Maintenance and Fuel

As of December 31, 2006, Allied Automotive owned approximately 2,600 Rigs that it operated along with approximately 315 leased Rigs and approximately 500 Rigs owned and operated by owner-operators represented by the Teamsters. Allied Automotive’s fleet of Rigs serves and supports all of the major domestic and foreign automotive manufacturers. Included in our fleet of Rigs are some that we have remanufactured.

A new 75-foot Rig currently costs approximately $185,000 and has an approximate useful life of 15 years, on average, if it is properly maintained, it is remanufactured near the midpoint of its useful life and it has a replacement engine installed at the appropriate mileage interval. Remanufacturing of a Rig typically involves major structural restoration of the tractor head-rack and the trailer. This structural restoration of the tractor and trailer varies depending on the age and condition of the equipment to be remanufactured.

At December 31, 2006, the average age of the Rigs that we own was approximately 12.6 years and the average remaining useful life was approximately 2.4 years. The average age is generally calculated based on the tractor manufacture dates. Certain equipment in our fleet is kept in service past the 15 year useful life.

We utilize primarily one company to remanufacture and supply certain parts needed to maintain a significant portion of our fleet of Rigs. While we believe that a limited number of other companies could provide comparable remanufacturing services and parts, a change in this service provider could cause a delay in and increase the cost of the remanufacturing process and the maintenance of our Rigs. Such delays and additional costs could adversely

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affect our operating results as well as our Rig remanufacturing and maintenance programs. In addition, we purchase our specialized tractors primarily through one manufacturing company. While this and other manufacturers also produce non-specialized tractors, we have not determined the impact on our equipment and operating costs should the specialized tractors not be available in the future.

In addition, we manage equipment parts through a centralized parts vendor. All of our Automotive Group’s terminals have access to this warehouse through our management information system. Based upon usage, this management information system calculates maximum and minimum inventory quantities and automatically generates an order for parts, as supplies are needed. Minor modifications of equipment are generally performed at our terminal locations while major modifications are generally performed by the trailer manufacturers.

Capital expenditures for 2006 were $35.8 million, most of which was spent on our fleet of Rigs. During 2006, we purchased 53 new tractors, 53 new trailers and 124 Rigs previously leased. We also remanufactured 191 tractors and 261 trailers and replaced approximately 320 engines usually with overhauled, used engines. During 2005, we purchased one new and two used Rigs, remanufactured 164 tractors and 165 trailers, and replaced approximately 380 engines.

In recent years, as a result of our financial condition, we have operated under a reduced capital expenditure plan with respect to our fleet of Rigs. As a result, we have been unable to replace or remanufacture the number of Rigs or engines we normally would have if we had not been forced to significantly reduce our capital expenditures. We believe that approximately 67% of our active fleet of Rigs will reach the end of their useful lives and must be replaced in 2007 through 2010, which will require a significant increase in our capital spending, from approximately $35.8 million in 2006 to approximately $66.8 million in 2007 (excluding the Blue Thunder Rigs) and $70 million in each of the years 2008, 2009 and 2010. No assurances can be provided that we will have the necessary capital from our operations or that we will be able to obtain financing on terms acceptable to us, or at all, to support this necessary increase in capital investment.

Of the $66.8 million for capital expenditures in 2007 (excluding the Blue Thunder Rigs), we expect to spend $61.4 million on our fleet of Rigs. Of the $61.4 million, Allied Automotive expects to spend approximately $27.0 million to purchase over 125 new Rigs, approximately $16.3 million to remanufacture approximately 200 existing Rigs and an additional 55 trailers, approximately $8.0 million to replace approximately 346 engines, $7.1 million to purchase certain used Rigs and approximately $2.9 million to purchase certain Rigs which we currently lease. Our Axis Group expects to spend about $3.6 million of capital in 2007.

Even if we are able to invest the amounts indicated above each year, we will be operating a substantial number of Rigs beyond their scheduled replacement or remanufacturing due dates. Accordingly, Rigs may have to be taken out of service sooner than planned as a result of equipment failures or the Rigs otherwise reaching the end of their useful lives. We presently have no excess Rigs to service our existing business or to seek additional business. A large number of Rig failures could result in our inability to meet our service requirements under existing customer contracts, which could result in the termination of such agreements by our customers and would likely have a material adverse effect on our operations and financial results. Additionally, we may be forced to increase repair and maintenance spending in an effort to maintain the number of Rigs in service. If we are unable to make planned reinvestments in the fleet because of liquidity or other constraints, or if there is inadequate manufacturing or remanufacturing capacity when we require it, repairs and maintenance expense will be adversely impacted.

Subsequent to December 31, 2006, we entered into an agreement with Yucaipa pursuant to which Yucaipa will purchase the Blue Thunder Rigs, which will then be sold to us at cost. The Blue Thunder Rigs range between three to five years in age. The Rig Financing, which was provided by Yucaipa, was approved by the Bankruptcy Court on April 6, 2007. The maximum amount financed under the Rig Financing will not exceed $15 million and includes additional funds to retrofit and make any necessary repairs to the Blue Thunder Rigs, and to pay certain costs and expenses associated with the purchase, such as registration expenses. The notes under the Rig Financing bear interest at LIBOR plus 4%, payable quarterly by addition to principal. In addition, at the option of Yucaipa, upon our successful emergence from Chapter 11, Yucaipa may convert the Rig Financing into additional equity of our company. As of May 3, 2007, we had purchased 117 of these Rigs from Yucaipa at a cost of $8.9 million.

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In order to reduce fuel costs, our Automotive Group utilizes bulk fuel purchasing. In addition, while on delivery routes, its drivers may purchase fuel from several suppliers with whom we have negotiated competitive discounts and central billing arrangements. During 2006, Allied Automotive purchased approximately 39% of its fuel in bulk.

Competition and Market Share

In 1997, after we acquired Ryder Automotive Group, our Automotive Group became the largest transporter of new vehicles in the U.S. and Canada. However, between 1997 and 2001, our Automotive Group lost market share primarily as a result of decisions by our Automotive Group to close certain unprofitable terminals, return certain unprofitable business or lanes of traffic to our customers and customers’ decisions to remove certain business from our portfolio, primarily as a result of pricing actions by Allied Automotive. In addition, during 2002, we decided to terminate our services to substantially all Nissan locations in the U.S.

We believe that our Automotive Group continues to be the largest motor carrier in North America specializing in the transportation of new automobiles, SUVs and light trucks via specialized Rigs for substantially all the major domestic and foreign automotive manufacturers.

We attempt to differentiate our service based on our extensive capacity, the flexibility of our distribution network and reliability of execution. We also hope to prevent further deterioration to our market share on the basis of reliability through our experienced drivers, effective management, productive and service-driven operations, extensive and flexible distribution network, and management of risk, particularly with respect to cargo claims, worker injuries and traffic accidents. However, we can provide no assurance that we will be able to prevent further loss of our market share through these initiatives.

Our Automotive Group’s major competitor is Performance Transportation Services, Inc. (“PTS”), which is the parent company for E & L Transport Company, Hadley Auto Transport and Leaseway Auto Carrier. PTS is the second largest vehicle-hauling company in North America. In January 2006, PTS and certain of its subsidiaries filed for Chapter 11 protection under the U.S. Bankruptcy Code and, in January 2007, emerged from Chapter 11. Yucaipa currently has a majority ownership interest in PTS. Allied Automotive’s other competitors include:

• The Waggoners Trucking (“Waggoners”);

• Cassens Transport Company (“Cassens”);

• Jack Cooper Transport Co., Inc. (“Jack Cooper”);

• United Road Service (“United Road”);

• Fleet Car-lease, Inc. (“Fleet”); and

• Active Transportation (“Active”);

We believe the Rig capacity and market share represented by the non-union sector of the vehicle-hauling industry has been increasing but is less than the capacity of the union companies. The labor force of E & L Transport Company, Hadley Auto Transport, Leaseway Auto Carrier, Jack Cooper, Cassens and Active are unionized while those of Waggoner, United Road and Fleet are non-unionized. These companies provide services similar to those we provide and some, particularly those that are non-union, may be able to provide these services to Allied Automotive’s customers at lower prices or in a more flexible manner.

Employees and Owner-Operators

At December 31, 2006, we had approximately 5,600 employees, including approximately 2,900 drivers employed by our Automotive Group. These drivers, along with shop mechanics and yard personnel employed by our Automotive Group, are primarily represented by the IBT. The Master Agreement with the Teamsters covering employees of certain of our subsidiaries in the U.S. expires on May 31, 2008. This Master Agreement was negotiated and executed by subsidiaries of our Automotive Group and we believe that it is identical to the agreement that the National Automobile Transporters Labor Division (the “NATLD”) negotiated with the IBT. The NATLD is a voluntary labor association of union companies, not including our Automotive Group, which are involved in the transportation of new vehicles. The Master Agreement covers all of our terminal operations in the U.S. and provides for wage and benefit increases in each of the remaining years of the contract.

On March 8, 2006, certain of our subsidiaries including Allied Systems, made a proposal to the IBT for a new collective bargaining agreement regarding their employees in the U.S. represented by the Teamsters to modify the

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existing collective bargaining agreement. This agreement covers certain drivers as well as certain yard and shop personnel employed by our Automotive Group. The proposal sought to eliminate future increases to wages, health, welfare benefits and pension contributions as contemplated by the Master Agreement, sought to reduce existing wages and contribution levels regarding wages, health, welfare benefits and pension contributions and sought to modify certain operational procedures.

On February 2, 2007, the Debtors filed a motion, with the Bankruptcy Court, seeking approval to reject the Master Agreement with the Teamsters. We filed a consent order staying the motion on February 20, 2007 as a result of ongoing negotiations with the Teamsters. The Disclosure Statement for the Joint Plan incorporates modifications to our collective bargaining agreement with the Teamsters in the U.S. The proposed amendment, which was subsequently ratified by the affected employees, is scheduled to take effect upon the effective date of the Joint Plan and our emergence from Chapter 11 and would be renewable three years from that date. On April 16, 2007, we were informed by the IBT that our employees covered by the Master Agreement had ratified the modification to the Master Agreement as set forth in the Joint Plan. These modifications remain subject to certain conditions, including our emergence from Chapter 11 under the Joint Plan. Other significant terms of the proposed agreement include:

• Total U.S. wage concessions of 15%, limited to $35 million per year during the three-year duration of the agreement;

• The elimination of future Teamster wage increases;

• A wage freeze relating to the salaries of management and other nonbargaining employees during the three-year duration of the agreement (with a few exceptions); and

• Entitlement of the U.S. Teamsters to a portion of earnings before interest, taxes, depreciation and amortization (“EBITDA”) in excess of the projections included in the Disclosure Statement for the Joint Plan.

The modifications to the Master Agreement remain subject to various conditions, including our emergence from Chapter 11 under the Disclosure Statement for the Joint Plan and the appointment of a new Chief Executive Officer (“CEO”) reasonably acceptable to the IBT prior to our emergence from Chapter 11. In connection with these conditions, on April 30, 2007, we reached a decision to terminate Mr. Sawyer’s employment effective upon our emergence date from Chapter 11 or on such earlier date after June 1, 2007 as we may determine at our sole discretion. See “Item 11. Director and Executive Compensation” for further discussion of the terms of Mr. Sawyer’s termination.

As a result of a projected liquidity shortfall that was projected to occur during 2006 and pursuant to the conditions of an amendment to the Original DIP Facility, during 2006, we requested and the Bankruptcy Court approved a 10% reduction in wages earned under the Master Agreement in May and June 2006. The order granted by the Bankruptcy Court also allowed us to delay, to July 1, 2006, wage and cost of living increases that were previously scheduled under the Master Agreement to go into effect on June 1, 2006.

We had also begun negotiations with the Teamsters Union in Eastern Canada regarding our collective bargaining agreement that expired on October 31, 2006. This agreement covers those drivers, mechanics and yard personnel that are represented by the Teamsters Union in the provinces of Ontario and Quebec, which represent approximately 70% of our Canadian bargaining employees. These negotiations have been postponed and are scheduled to recommence on our emergence from Chapter 11. No assurance can be provided that we will be able to negotiate a new union contract with the Teamsters union regarding our employees in the Provinces of Ontario and Quebec, or that such contract, if negotiated, will be on terms acceptable to us or that the contract will not result in increased labor costs or work stoppages, or lost customer market share which could, in turn, have a material adverse effect on our operations. No work stoppage may be commenced in regard to this contract in Eastern Canada until a minimum of 60 days after the parties have bargained to impasse.

We can provide no assurance that our union contracts which are negotiated as current contracts expire will not result in increased labor costs, labor disruptions and/or work stoppages, increased employee turnover or higher risk management costs, which could in turn materially and adversely affect our financial condition, results of operations or customer relationships.

In addition to our drivers, the employee total above also includes approximately 560 owner-operators that our Automotive Group utilizes for vehicle deliveries along with our drivers. These owner-operators utilize their Rigs to deliver vehicles on our behalf and are either paid a percentage of the revenues that they generate or a set fee plus a

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truck allowance. Of the estimated 560 owner-operators that we utilize, approximately 95 drive exclusively from terminals in Canada for our subsidiary, Allied Systems (Canada) Company, while approximately 465 drive exclusively from terminals in the U.S. for our subsidiary Allied Systems. There can be no assurance that subsidiaries of our Automotive Group will continue to utilize owner-operators under the terms or the scale our company has historically experienced.

Regulation

Certain of our subsidiaries domiciled in the U.S. are regulated by the U.S. Department of Transportation (“DOT”) along with various state agencies. Our Canadian subsidiary is regulated by the National Transportation Agency of Canada along with various provincial transport boards. Regulations by these agencies include restrictions on truck and trailer length, height, width, maximum weight capacity and other specifications.

In addition, our interstate motor carrier operations are subject to safety requirements prescribed by the DOT. These regulations were amended effective January 1, 2004 to require shorter hours of service for drivers of commercial motor vehicles. Because some of our business consists of relatively short hauls, not all of our drivers were affected by these regulations. We estimate that approximately 60% of our drivers were affected by these regulations, which served to increase or decrease their flexibility and hours of service. The reduced flexibility and hours of service had no material impact on our operating costs due to Allied’s relatively short length of haul.

Other regulations include safety regulations by the DOT in the design of our Rigs as well as environmental laws and regulations enforced by federal, state, provincial, and local agencies. Environmental laws and regulations affect the regulatory environment in which our Automotive Group’s terminals operate. Areas regulated include the treatment, storage and disposal of waste, and the storage and handling of fuel and lubricants. In an effort to ensure compliance with environmental laws and regulations, our Automotive Group maintains regular ongoing testing programs for underground fuel storage tanks located at its terminals.

Future regulatory and legislative changes within the motor carrier transportation industry may affect the economics of the vehicle-hauling industry by requiring changes in operating policies or by influencing the demand for, and the cost of providing services to shippers. While we believe that we are in compliance, in all material respects, with the various regulations, any failure to so comply, as well as any changes in the regulation of the industry through legislative, judicial, administrative or other action, could materially and adversely affect us.

Revenue Variability

Our revenues are variable and can be impacted by changes in original equipment manufacturer (“OEM”) production levels, especially sudden unexpected or unanticipated changes in production schedules, changes in distribution patterns, product type, product mix, product design or the weight or configuration of vehicles transported by our Automotive Group. As an example, our revenue will be adversely affected by recent decisions announced by General Motors and Ford to close certain manufacturing plants in the future.

In addition, our revenues are seasonal, with the second and fourth quarters generally experiencing higher revenues than the first and third quarters as a result of the higher volume of vehicles delivered. The volume of vehicles delivered is generally higher during the second quarter as North American light vehicle production has historically been at its highest level during this quarter due to higher consumer sales of automobiles, light trucks and SUVs in the spring and early summer. The introduction of new models in the fall of each year, combined with the manufacturers’ motivation to ship vehicles before calendar year end, increase shipments to dealers through the fourth quarter. During the first and third quarters, vehicle deliveries typically decline due to lower production volume during those periods. The third quarter volume does benefit from the introduction of new models, but the net volume for the quarter is typically lower than the second and fourth quarters due to the scheduled OEM plant shutdowns, which generally occur early in the third quarter. The first quarter volume is negatively impacted by the holiday shutdown in December of each year and the relatively low inventory of vehicles to ship as a result of maximizing shipments at the end of the year. However, given the unpredictable nature of consumer sentiment and our customers’ emphasis on more effective use of plant capacity, particularly at the Big Three, there can be no assurance that historical revenue patterns or manufacturer production levels will be an accurate indicator of future OEM shipment activity. Delivery activity at our Automotive Group and the Axis Group can also be impacted by the availability of rail cars, rail transportation schedules or changes in customer service demands.

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Industry Overview

The following table summarizes historic new vehicle production in North America and sales in the U.S. and Canada, the primary source of our revenues:

					2006					2005
					vs.					vs.
					2005					2004
	2006		2005		Change			2004		Change
New Vehicle Production (in millions of units)
United States:
Big Three(1)		7.3		8.0		(8.8	)%		8.4		(4.8	)%
Other		3.5		3.5		—	%		3.2		9.4	%
Total		10.8		11.5		(6.1	)%		11.6		(0.9	)%
Canada:
Big Three(1)		1.6		1.8		(11.1	)%		1.9		(5.3	)%
Other		0.9		0.9		—	%		0.8		12.5	%
Total		2.5		2.7		(7.4	)%		2.7		—	%
Mexico:
Big Three(1)		1.2		0.9		33.3	%		0.9		—	%
Other		0.8		0.7		14.3	%		0.6		16.7	%
Total		2.0		1.6		25.0	%		1.5		6.7	%
New Vehicle Sales (in millions of units)
United States:
Big Three(1)		9.6		10.2		(5.9	)%		10.6		(3.8	)%
Import		3.0		2.7		11.1	%		2.7		—	%
Transplant(2)		3.9		3.8		2.6	%		3.4		11.8	%
Total		16.5		16.7		(1.2	)%		16.7		—	%
Canada:
Big Three(1)		1.0		1.0		—	%		0.9		11.1	%
Other		0.6		0.6		—	%		0.6		—	%
Total		1.6		1.6		—	%		1.5		6.7	%

(1)	Represents General Motors Corporation, Ford Motor Company and DaimlerChrysler Corporation.
(2)	Represents foreign vehicles made in the U.S.

Source: December 2006 Edition of North American Light Vehicle Industry Forecast Report (a production of Global Insight Automotive).

Domestic automotive manufacturing plants are typically dedicated to manufacturing a particular model or models. Vehicles destined for dealers within a radius of approximately 250 miles from the plant are usually transported via Rigs. The remaining vehicles are shipped by rail to various rail-ramps located throughout the U.S. and Canada where trucking companies, utilizing Rigs, handle final delivery to dealers. 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 carriers’ custody. Automobiles manufactured in Europe and Asia are transported by ship into the U.S. and Canada and are usually delivered directly to dealers from seaports by truck or shipped by rail to the rail-ramps and then delivered by Rigs to dealers. Vehicles transported by ship are normally prepared for final dealer delivery at port processing centers, where cleaning and sometimes accessory installation takes place. The port processor then releases the vehicles to the carrier who is responsible for loading and delivery to a rail ramp or delivery directly to the dealers.

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this Annual Report on Form 10-K and in other materials we file with the SEC or otherwise make public. In this Annual Report on Form 10-K, both “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contain forward-looking statements. In addition, our senior management might make forward-looking statements orally to analysts, investors, the media and others. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including our ability to emerge from Chapter 11) and demand for our services, and other statements of our plans, beliefs or expectations, are forward-looking statements. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” and similar expressions.

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You are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. These factors include, among others, those set forth in Item 1A. “Risk Factors,” in this Annual Report on Form 10-K and in the other documents that we file with the SEC. There also are other factors that we may not describe, generally because we currently do not perceive them to be material, which could cause actual results to differ materially from our expectations.

We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

SEC Filings

This Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports, as well as other documents that we file with the SEC, are available free of charge on our website (www.alliedholdings.com) as soon as practicable after they have been filed with the SEC.

You may also read and copy any of the materials that we file with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, DC 20549. You may also obtain information about the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website (http://www.sec.gov) that contains our filings, proxy and other information about us.

Item 1A. Risk Factors

Our business is subject to certain risks, including the risks described below. This Item 1A does not describe all risks applicable to our business and is intended only as a summary of certain material factors that affect our operations and the car-haul industry in which we operate. More detailed information concerning these and other risks is contained in other sections of this Annual Report on Form 10-K. The risks described below, as well as the other risks that are generally set forth in this Annual Report on Form 10-K, could materially and adversely affect our business, results of operations and financial condition. Readers of this Annual Report on Form 10-K should take such risks into account in evaluating any investment decision involving our common stock or debt securities.

We may not be able to successfully reorganize under Chapter 11, which would likely terminate our future business prospects and our ability to continue as a going concern and result in a liquidation of our assets.

On July 31, 2005, Allied Holdings, Inc. and substantially all its subsidiaries filed for voluntary reorganization under Chapter 11. On May 18, 2007, the Bankruptcy Court approved the Joint Plan filed by the Debtors, the Teamsters and Yucaipa. Our ability to successfully reorganize could be hampered by a number of factors including our ability to consummate the Joint Plan, our ability to comply with the covenants contained within the New DIP Facility, our ability to motivate and retain key employees and suppliers and the extent to which the reorganization process serves to divert management’s attention away from the daily running of the business. In addition, the adverse publicity regarding our Chapter 11 filing and performance could affect our results going forward. Any adverse effect on our credit standing with our lenders and suppliers could affect the costs of doing business and our negotiating power with lenders and creditors. We can provide no assurance that the reorganization process will be successful. If it is not successful, it is likely that we would be forced to cease operations and liquidate our assets.

Investors in our common stock and debt securities will suffer a loss since, under the Disclosure Statement for the Joint Plan, equity shareholders will receive nothing and debt holders will receive less than the amount of their initial investment.

The Joint Plan provides that our currently outstanding common stock will have no value and will be canceled and that the holders thereof will not receive a distribution of any type. Further, the value of our various pre-petition liabilities

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and other securities is highly speculative. Accordingly, caution should be exercised with respect to existing and future investments in any of these liabilities and securities.

We have a significant amount of debt and substantially all our assets are pledged as collateral for debt obligations, which could limit our operational flexibility and customer relationships or otherwise adversely affect our financial condition.

As of December 31, 2006, we had consolidated term debt and borrowings under the Original DIP Facility of approximately $161.4 million and Senior Notes outstanding of $150 million. As more fully discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” on March 30, 2007, the Original DIP Facility was replaced by the New DIP Facility, which provides financing of up to $315 million. However, we are still exposed to the risks normally associated with substantial amounts of debt such as:

• We may not be able to repay, refinance or extend our debt as it matures. The New DIP Facility matures on September 30, 2007 if we do not emerge from Chapter 11 on or prior to that date;

• If we are not able to refinance or extend our debt when it matures, we may not be able to repay the debt;

• Substantially all our assets are pledged as collateral for our debt and as a result we are limited in our ability to sell assets to generate additional cash;

• Our flexibility in responding to changes in the business and industry may be reduced;

• We may be more vulnerable to economic downturns;

• We may be unable to invest in our fleet of Rigs;

• We may be unable to meet customer demands; and

• We may be limited in our ability to withstand competitive pressures.

The terms of the New DIP Facility place restrictions on us, which create risks of default and limits our flexibility.

The New DIP Facility contains a number of affirmative, negative, and financial covenants, which limit our ability to, among other things, incur or repay debt (with the exception of payment of interest or principal at stated maturity), incur liens, make investments, purchase or redeem stock, make dividend or other distributions or enter into a merger or consolidation transaction.

If we fail to comply with the covenants contained in the New DIP Facility, and these are not waived, or we do not adequately service this debt, our lenders could declare a default under the New DIP Facility. If a default occurs under the New DIP Facility, our lenders may elect to declare all borrowings outstanding, together with interest and other fees, to be immediately due and payable. Borrowings under the New DIP Facility are collateralized with substantially all of our assets. If we were unable to repay any borrowings under the New DIP Facility when due, our lenders would have the right to proceed against the collateral granted to them to secure the debt. Any default under the New DIP Facility, particularly any default that results in acceleration of indebtedness or foreclosure on collateral, would have a material and adverse affect on us.

We will be required to make significant capital expenditures on our Rigs in the coming years and we may not be able to maintain our current level of terminal operations or customer relationships.

In recent years, as a result of our financial condition, we have operated under a reduced capital expenditure plan with respect to our fleet of Rigs. As a result, we have been unable to replace or remanufacture the number of Rigs or engines we normally would have if we had not been forced to significantly reduce our capital expenditures. We believe that approximately 67% of our active fleet of Rigs will reach the end of their useful lives and must be replaced in 2007 through 2010, which will require a significant increase in our capital spending, from approximately $35.8 million in 2006 to approximately $66.8 million in 2007 (excluding the Blue Thunder Rigs) and $70 million in each of the years 2008, 2009 and 2010. No assurances can be provided that we will have the

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necessary capital from our operations or that we will be able to obtain financing on terms acceptable to us, or at all, to support this necessary increase in capital investment.

Even if we are able to invest the amounts indicated above each year, we will be operating a substantial number of Rigs beyond their scheduled replacement or remanufacturing due dates. Accordingly, Rigs may have to be taken out of service sooner than planned as a result of equipment failures or the Rigs otherwise reaching the end of their useful lives. We presently have no excess Rigs to service our existing business or to seek additional business. A large number of Rig failures could result in our inability to meet our service requirements under existing customer contracts, which could result in the termination of such agreements by our customers and would likely have a material adverse effect on our operations and financial results. Additionally, we may be forced to increase repair and maintenance spending in an effort to maintain the number of Rigs in service. If we are unable to make planned reinvestments in the fleet because of liquidity or other constraints, or if there is inadequate manufacturing or remanufacturing capacity when we require it, repairs and maintenance expense will be adversely impacted.

If we are not able to renegotiate our union contracts on terms favorable to us as they expire, or if work stoppages or other labor disruptions occur during such negotiations, it could have a material adverse effect on our operations.

The Disclosure Statement for the Joint Plan incorporates modifications to our collective bargaining agreement with the Teamsters in the U.S. The proposed amendment, which has been ratified by the affected employees, is scheduled to take effect upon the effective date of the Disclosure Statement for the Joint Plan and would be renewable three years from that date. The modifications to the Master Agreement remain subject to various conditions, including our emergence from Chapter 11 under the Disclosure Statement for the Joint Plan and the appointment of a new CEO reasonably acceptable to the IBT prior to our emergence from Chapter 11. We can provide no assurance that these conditions will be met or that we will emerge from Chapter 11.

In addition, we can provide no assurance that we will be able to negotiate new union contracts as the current contracts expire, or that such contracts will be on terms acceptable to us or that these contracts will not result in increased labor costs, labor disruptions, increased employee turnover, higher risk management costs, work stoppages, or lost customer market share which could in turn, have a material adverse effect on our financial condition, results of operations or customer relationships.

Rising interest rates could adversely affect our cash flow and interest expense.

A portion of our indebtedness is subject to variable rates of interest. In addition, we may also incur additional debt obligations attracting interest at variable rates and/or may refinance our current debt at higher interest rates.

Therefore, our interest expense could increase which in turn would reduce the amounts available for servicing our debt, funding our operations and capital expenditure program, meeting customer demands and pursuing new business opportunities.

A shortage of fuel or higher fuel prices resulting from fuel shortages or other factors could have a detrimental effect on the automotive industry or the automotive transportation industry and could materially and adversely affect our operations.

Higher fuel prices or a shortage of fuel could impact the sale of SUVs or light trucks at our major customers which could impair our revenues and negatively impact our earnings. Further, fuel is a major expense in the transportation of automobiles, and the cost and availability of fuel are subject to economic and political factors and events, which we can neither control nor accurately predict. We attempt to minimize the effect of fuel price fluctuations by periodically purchasing a portion of our fuel in advance, but we can provide no assurance that such activity will effectively mitigate our exposure. In addition, we have negotiated fuel surcharges with substantially all of our customers, which now enables us to pass on a portion of any increase in fuel costs to these customers. Customer fuel surcharges reset at varying intervals which do not exceed one quarter, based on the fuel prices from the applicable previous period. Therefore, there is a lag between the time fuel prices change and the time that the fuel surcharge is adjusted. Nevertheless, we can provide no assurance that we will be able to continue to obtain fuel surcharges from these customers. Furthermore, in periods of rising fuel prices and declining vehicle deliveries, we may not recover all of the fuel price increase through our fuel surcharge programs since fuel surcharge rates in any quarter reset at the beginning of the quarter based on fuel prices in the preceding quarter and are also influenced by our customers’ production levels.

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Higher fuel prices resulting from fuel shortages or other factors could materially and adversely affect us if we are unable to pass on the full amount of fuel price increases to our customers through fuel surcharges or higher shipment rates. In addition, higher fuel prices, even if passed on to customers, or a shortage of fuel supply, or the timing of fuel surcharge recoveries could have an adverse effect on the automotive transportation industry and our business in general.

A further decline in the automotive industry could have a material adverse effect on our operations.

The automotive transportation industry in which we operate is dependent upon the volume of new automobiles, SUVs, and light trucks manufactured, imported and sold in North America. The automotive industry is highly cyclical, and the demand for new automobiles, SUVs, and light trucks is directly affected by such external factors as general economic conditions in the U.S and Canada, unemployment, consumer confidence, fuel prices, government policies, continuing activities of war, terrorist activities, and the availability of affordable new car financing. As a result, our results of operations could be adversely affected by downturns in the general economy and in the automotive industry and by consumer preferences in purchasing new automobiles, SUVs, and light trucks or the overall financial condition of our major customers. A significant decline in the volume of automobiles, SUVs, and light trucks manufactured, distributed, and sold in North America could have a material adverse effect on our operations.

The internal strategies of our largest customers could have a material effect on our performance.

Allied Automotive’s business is highly dependent on its largest customers, General Motors, Ford, DaimlerChrysler, Toyota and Honda. General Motors and Ford have publicly announced plans to reduce production levels and eliminate excess manufacturing capacity including plans to eliminate jobs and reduce costs for certain employees. The efforts underway by our customers to improve their overall financial condition could result in numerous changes that are beyond our control including additional unannounced customer plant closings, changes in products or distribution patterns, further volume reductions, labor disruptions, changes or disruptions in our accounts receivable, mandatory reductions in our pricing, terms or service conditions or market share losses. We cannot accurately anticipate some of the risks associated with the financial condition of our largest customers.

Losses may exceed our insurance coverage or reserves.

Because we retain liability for a significant portion of our risks, an increase in the number or severity of accidents, on the job injuries, other loss events over those anticipated, or adverse developments in existing claims including wage and medical cost inflation could have a material adverse effect on our profitability. While we currently have insurance coverage for claims above our retention levels, there can be no assurance that we will be able to obtain insurance coverage in the future.

We establish liabilities for our self-insured obligations based on actuarial valuations, our historical claims experience and management’s evaluation of the nature and severity of claims made against us. If the cost of these claims exceeds our estimates, as could occur if there were unfavorable developments in existing claims, we would be required to record additional expenses in subsequent years.

We are also required to provide collateral to our third-party insurance carriers and various states for losses in respect of worker injuries, accident, theft, and other loss claims. For this purpose, we utilize cash and/or letters of credit. We can provide no assurance that the current letter of credit requirements will be reduced nor can we provide assurance that these letter of credit requirements will not increase.

We have a history of losses and may not be able to improve our performance to achieve profitability.

We reported net losses of $12.3 million, $125.7 million, $53.9 million, $8.6 million and $7.5 million for the years ended December 31, 2006, 2005, 2004, 2003 and 2002, respectively. In addition, our accumulated deficit at December 31, 2006 was $228.4 million. Our ability to improve our performance and profitability is dependent upon several factors including the timely and successful implementation of a plan of reorganization, the economy, the dynamics of the automotive transportation industry including actions by our major customers, our ability to develop and implement successful business strategies, our ability to maintain effective relationships with our employees including those represented by the Teamsters, our ability to maintain effective relationships with our suppliers, the price and availability of fuel and our ability to successfully manage other operational challenges. If we fail to improve our performance, it could continue to have an adverse effect on

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our financial condition, cash flow, liquidity and business prospects and our operations would not likely be profitable in the ensuing years.

Our restricted cash, cash equivalents and other time deposits are not available for use in our operations even if they were needed to fund our operations.

As of December 31, 2006, our restricted cash, cash equivalents and other time deposits were approximately $98.3 million. We use these restricted cash and investments to collateralize letters of credit required by third-party insurance carriers for the settlement of insurance claims. These assets are not available for use in our operations even if needed for our continued operations or to service our debt obligations.

If we do not maintain our relationships with major customers or these relationships are terminated, reduced or redesigned, our operations could be materially and adversely affected.

Allied Automotive’s business is highly dependent on its largest customers, General Motors, Ford, DaimlerChrysler, Toyota and Honda. Approximately 88% of our Automotive Group’s 2006 revenues were generated through the services provided to these customers. We can provide no assurance that we will be able to successfully renew these contracts on or prior to their expiration on terms satisfactory to us or that we will be able to continue to serve these customers without service interruption. In addition, the Automotive Group faces the risk of losing market share in connection with its negotiations to renew its customer contracts. For instance, in 2004, the Automotive Group renewed its agreement with DaimlerChrysler and though the agreement resulted in increased billing rates, the Automotive Group lost DaimlerChrysler’s business at six locations in connection with the contract renewal. Also, in 2005, in connection with the renewal of its contract with Toyota, the Automotive Group lost business at locations that generated approximately 32% of the 2005 revenues associated with the Toyota account. The Automotive Group recently reached an agreement in principle with Ford which would give Ford the right to resource certain of our business at locations mutually acceptable to Allied and Ford. A continued loss in market share without an increase in revenues or pricing or an adequate reduction in costs would likely have an adverse effect on our operations.

A significant reduction in vehicle production levels, plant closings, or the imposition of vendor price reductions by these manufacturers, or the loss of General Motors, Ford, DaimlerChrysler, Toyota or Honda as customers, or a significant reduction or a change in the design, definition, frequency or terms of the services provided for any of these customers by our Automotive Group would have a material adverse effect on our operations. General Motors, DaimlerChrysler, and Ford, in particular, have publicly announced plans to significantly reduce vendor costs including those costs associated with logistics services.

Competition in the automotive transportation industry could result in a loss of our market share or a reduction in our rates, which could have a material adverse effect on our operations.

The automotive transportation industry is highly competitive. Our Automotive Group currently competes with other motor carriers of varying sizes, as well as with railroads and independent owner-operators. Allied Automotive also competes with non-union motor carriers that may be able to provide services to their customers at lower prices and in a more flexible manner than we can. The development of new methods for hauling vehicles could also lead to increased competition. For example, some customers occasionally utilize local drive-away services to facilitate local delivery of products. There has also been an increase in the number of vehicle-hauling companies that utilize non-union labor, and we believe that the market share and Rig capacity represented by such companies is increasing. Vehicle-hauling companies that utilize non-union labor operate at a significant cost advantage as compared to our Automotive Group and other unionized vehicle-hauling companies. Non-union vehicle-hauling competitors also operate without restrictive work rules that apply to our Automotive Group and other unionized companies. Railroads, which specialize in long-haul transportation, may be able to provide delivery services at costs to customers that are less than the long-haul delivery cost of Allied Automotive’s services. Further, the railroads could form alliances for local delivery of customer products. If we lose market share to these competitors or have to reduce our rates in order to retain our market share, our financial condition and results of operations could be materially and adversely affected. We hope to prevent further deterioration to our market share on the basis of reliability through our experienced drivers, effective management, productive and service-driven operations, extensive and flexible distribution network, and management of risk, particularly with respect to cargo claims, worker injuries and traffic accidents. However, we can provide no assurance that we will be able to prevent further loss of our market share through these initiatives.

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Our common stock is not currently listed on a national securities exchange, which could make it more difficult for investors to liquidate their shares, result in a decline in the stock price and make it difficult for us to raise additional capital.

We voluntarily requested that our common stock be delisted from the American Stock Exchange (“AMEX”) during 2005 since we did not believe that we would be able to comply with the continuing listing requirements of the AMEX. The stock was subsequently delisted in August 2005 and is currently traded on the Pink Sheets, which are a daily listing of bid and ask prices for over-the-counter stocks not included on the daily over-the-counter bulletin boards. We can provide no assurance that we will be able to re-list our common stock on a national securities exchange or that the stock will continue being traded on the Pink Sheets.

Adverse changes in the foreign business climate, primarily in Canada, could adversely affect our operations.

Although the majority of our operational activity takes place in the U.S., we derive a portion of our revenues and earnings from operations in foreign countries, primarily Canada. The risks of doing business in foreign countries include the potential for adverse changes in the local political climate, adverse changes in diplomatic relations between foreign countries and the U.S., hostility from local populations, terrorist activity, the potential adverse effects of currency exchange controls, increased security at U.S. border crossings which could slow the movement of freight and increase our operating costs, deterioration of foreign economic conditions, currency rate fluctuations, foreign exchange restrictions and potential changes in local taxation policies. Due to the foregoing risks, any of which, if realized, could have a material adverse effect on our operations, we believe that our business activities outside of the U.S. involve a higher degree of risk than our domestic activities.

Major changes in key personnel on whom we depend could adversely affect our operations.

Our success is dependent upon our senior management team, as well as our ability to attract and retain qualified personnel. On April 30, 2007, the Board of Directors notified Mr. Sawyer that his employment would be terminated on or about May 31, 2007. We are currently conducting a search for a new CEO to replace Mr. Sawyer. If our management team is unable to develop successful strategies, achieve company objectives or maintain satisfactory relationships with our customers, employees, suppliers and creditors, our ability to grow our business and meet business challenges could be impaired. We can provide no assurance that we will be able to retain our existing senior management team or that we will be able to attract qualified replacement personnel, including a new CEO who is reasonably acceptable to the Teamsters.

The loss of our Teamster drivers and mechanics could adversely affect our operations.

Our ability to perform daily operations on behalf of our customers is dependent upon our ability to attract and retain qualified drivers and mechanics to staff our Automotive Group’s terminals and garages. Should we experience higher than historical Teamster employee retirements or resignations which could occur as a result of our efforts to seek interim wage relief and modifications to the Master Agreement, our ability to grow our business, maintain our current business levels and meet customer service requirements could be adversely impacted. We can provide no assurance that we will be able to retain existing Teamster personnel at existing staffing levels or attract new Teamster employees to replenish our work force, when necessary.

We have previously had material weaknesses in our internal control over financial reporting, and any unidentified material weaknesses could cause us to fail to meet our SEC and other reporting requirements.

In connection with its audits of our consolidated financial statements for the years ended December 31, 2005, 2004 and 2003, including reviews of the quarterly periods for those years, KPMG LLP (“KPMG”) advised the Audit Committee and management that KPMG had identified deficiencies in our analysis, evaluation and review process for financial reporting. KPMG informed the Audit Committee and management that it believed such deficiencies were a “material weakness” in our internal control over financial reporting, with respect to our analysis, evaluation and review of financial information included in our financial reporting.

In connection with the audit of our consolidated financial statements for the year ended December 31, 2006, KPMG indicated that they did not identify a material weakness as of December 31, 2006. Since we are not an accelerated filer (as defined in Exchange Act Rule 12b-2), we have not conducted the initial assessment of our internal control over financial reporting mandated by Section 404 of the Sarbanes-Oxley Act of 2002 nor has KPMG audited the effectiveness of our internal control over financial reporting. We will report on our annual assessment of internal control over financial reporting in our Annual Report on Form 10-K, when required, which will be no earlier than for the year ending December 31, 2007. That process could identify significant deficiencies or material weaknesses not previously reported.

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We can provide no assurances that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be discovered in the future. If we fail to remediate any such material weakness, our operating results or customer relationships could be adversely affected or we may fail to meet our SEC reporting requirements or our financial statements may contain a material misstatement.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives or of preventing fraud due to its inherent limitations, regardless of how well designed or implemented. Internal control over financial reporting is a process that involves human diligence and compliance and as a result is subject to lapses in judgment and breakdowns resulting from human failures. Because of these and other limitations, there is a risk that material misstatements or instances of fraud may not be prevented or detected on a timely basis by our internal control over financial reporting.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our executive offices are located in Decatur, Georgia, a suburb of Atlanta. We lease approximately 113,000 square feet of space for our executive offices, which we believe is sufficient to permit us to conduct our corporate business. This lease expires on December 31, 2007 and we are considering alternatives regarding the lease requirements for our corporate offices. We have subleased approximately 28,000 square feet of this space for varying terms. Our Automotive Group also operates from 73 terminals throughout the U.S. and Canada, which are located at or close to manufacturing plants, ports, and railway terminals. Allied Automotive currently owns 15 of these terminals and leases the remainder. Most of the leased facilities are leased on a year-to-year basis from railroads at amounts that are not individually material to us. In addition, the Axis Group operates from 41 terminals, one of which is owned.

As more fully disclosed in Note 14 of the notes to our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K, borrowings under the New DIP Facility are secured by a first priority security interest in certain of our assets. If we were unable to repay any borrowings under the New DIP Facility as they are due, our lenders would have the right to proceed against the collateral.

Our Automotive Group’s Rigs are substantially maintained at 40 garages (also referred to as shops) located throughout the U.S. and Canada. Approximately 510 maintenance personnel, including managers and supervisors, staff these garages. Of the 40 shops, our Automotive Group owns 16 and leases the remaining 24. We schedule our Rigs for regular preventative maintenance inspections. Each shop is equipped to handle repairs resulting from regular preventative maintenance inspections and daily post-trip vehicle inspections documented by our drivers, including repairs to electrical systems, air conditioning systems, suspension, hydraulic systems, cooling systems, and minor engine repairs. Major engine overhaul and engine replacement and services relating to our remanufacturing program are generally performed by outside vendors.

Item 3. Legal Proceedings

We are involved in various litigation and environmental matters relating to workers’ compensation, products liability, auto liability, employment practices, and other matters arising from operations in the ordinary course of business. We believe that the ultimate disposition of these matters will not have a material adverse effect on our financial position or results of operations. As previously discussed, on July 31, 2005, Allied Holdings, Inc. and substantially all of its subsidiaries filed voluntary petitions seeking protection under Chapter 11. These petitions and other legal proceedings are discussed more fully in Note 18 to our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

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Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of 2006.

PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

From April 2002 until August 2005, our common stock was traded on the AMEX under the symbol “AHI.” Between March 3, 1998 and the date the stock began trading on the AMEX, it was listed on the New York Stock Exchange and between September 29, 1993 and March 3, 1998 it was traded on the NASDAQ Stock Market. Prior to that, there was no established public trading of our common stock.

In August 2005, we voluntarily delisted our common stock from the AMEX. Since the voluntary delisting, our common stock has been and is currently quoted on the Pink Sheets under the symbol “AHIZQ.PK.” The following table sets forth for the periods indicated (i) the high and low sales prices on the AMEX and (ii) the high and low bid prices on the Pink Sheets. The Pink Sheets bid prices reflect inter-dealer prices without retail mark-up, mark-down or commission and may not represent actual transactions.

	Year Ended December 31,
	2006				2005
Period:	High		Low		High		Low
First Quarter	$	1.01	$	0.55	$	4.50	$	2.10
Second Quarter	$	0.95	$	0.81	$	2.30	$	0.41
Third Quarter	$	0.94	$	0.54	$	0.81	$	0.06
Fourth Quarter	$	1.42	$	0.45	$	0.65	$	0.18

As of May 4, 2007, common stock holders of record totaled approximately 2,700 in number.

We have paid no cash dividends since our stock became publicly traded in 1993. Furthermore, the New DIP Facility contains covenants restricting our ability to pay dividends on our common stock. In addition, under the Bankruptcy Code, certain pre-petition and post-petition liabilities must be satisfied before we can make any distributions to our stockholders. See also “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 14 in the notes to our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

Performance Graph

The following graph compares the cumulative total stockholder returns (stock price appreciation plus dividends) on our common stock with the cumulative total return of the NASDAQ Composite Index (U.S. Companies) and of the NASDAQ Transportation Index for the period beginning December 31, 2001 through December 31, 2006. We believe that the NASDAQ Composite Index and the NASDAQ Transportation Index are the appropriate indices for purposes of this Performance Graph.

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Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act of 1933, or the Securities Act of 1934 that might incorporate future filings, including this Annual Report on Form 10-K, in whole or in part, the performance graph presented above shall not be incorporated by reference into any such filings.

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Item 6. Selected Financial Data

You should read the following selected consolidated financial data in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto, which are included in Item 15 of this Annual Report on Form 10-K. Factors affecting comparability of the information reflected in the years ended December 31, 2006, 2005 and 2004 are included in those Items. Factors affecting the years ended December 31, 2003 and 2002 are included in footnotes to the table.

	Year Ended December 31,
	(In thousands, except per share amounts)
	2006			2005			2004			2003			2002
Selected Statement of Operations Data:
Revenues	$	893,837		$	892,934		$	895,213		$	865,463		$	898,060
Income (loss) before income taxes,
reorganization items and cumulative
effect of change in accounting principle		836			(129,425	)		(41,522	)		(2,338	)		(4,563	)
Reorganization items		(12,772	)		(7,131	)		—			—			—
Loss before income taxes and cumulative
effect of change in accounting principle		(11,936	)		(136,556	)		(41,522	)		(2,338	)		(4,563	)
Income tax (expense) benefit		(389	)		10,832			(12,361	)		(6,266	)		1,129
Loss before cumulative effect of change
in accounting principle		(12,325	)		(125,724	)		(53,883	)		(8,604	)		(3,434	)
Cumulative effect of change in accounting
principle, net of tax		—			—			—			—			(4,092	)
Net loss	$	(12,325	)	$	(125,724	)	$	(53,883	)	$	(8,604	)	$	(7,526	)
Net loss per share — basic and diluted	$	(1.37	)	$	(14.02	)	$	(6.15	)	$	(1.02	)	$	(0.91	)
Weighted-average common shares
outstanding — basic and diluted		8,980			8,970			8,757			8,475			8,301
Selected Balance Sheet Data (period end):
Total assets	$	338,768		$	383,116		$	421,532		$	460,063		$	468,387
Debtor-in-possession credit facility		(161,357	)		(151,997	)		—			—			—
Pre-petition long-term debt, including
current portion and revolving credit
facilities		—			—			(251,238	)		(246,500	)		(248,475	)
Long-term liabilities — other		(81,422	)		(78,887	)		(91,690	)		(86,013	)		(82,884	)
Liabilities subject to compromise		(199,212	)		(199,322	)		—			—			—
Stockholders’ (deficit) equity		(204,132	)		(187,367	)		(41,549	)		8,814			10,314

1	Income tax expense for the year ended December 31, 2003 included a charge of $6.8 million to record a valuation allowance against our deferred tax assets.
2	Effective January 1, 2002, we adopted the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, and recorded a charge related to the impairment of goodwill of the Axis Group.

We may be required, as part of our emergence from bankruptcy protection, to adopt fresh-start reporting in a future period. If fresh-start reporting is applicable, our assets and liabilities will be recorded at fair value as of the fresh-start reporting date. The fair value of our assets and liabilities may differ materially from the recorded amounts of assets and liabilities on our consolidated balance sheets and, if fresh-start reporting is required, our financial results after the application of fresh-start reporting could differ materially from historical results. In addition, the Joint Plan could substantially change the amounts currently recorded. Asset and liability carrying amounts do not purport to represent the realizable or settlement values that will be reflected in the Joint Plan and, at this time, it is not possible to estimate the impact on our financial statements.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the discussion and analysis in this section in conjunction with the consolidated financial statements and accompanying notes included in Item 15 of this Annual Report on Form 10-K.

Executive Overview

We are a vehicle-hauling company with annual revenues of approximately $900 million. We offer a range of vehicle delivery services to dealers including the transportation of new, pre-owned and off-lease vehicles from plants, rail ramps, ports and auctions, while also providing vehicle rail-car loading and unloading services. Our principal operating subsidiaries are the Allied Automotive Group and the Axis Group. Allied Automotive Group is our largest subsidiary comprising 97% of our 2006 revenues. Using its Rigs, the Automotive Group serves and supports all the major domestic and foreign automobile manufacturers. Though there is limited public information available about our competitors, most of whom are privately-owned companies, we believe that our Automotive Group is the largest motor carrier in North America, based on the number of vehicles it delivers annually versus

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total vehicles produced as well as revenues generated from vehicle deliveries. As more fully discussed in “Item 1. Business,” Allied Automotive’s largest customers are General Motors, Ford, DaimlerChrysler, Toyota and Honda. Our Axis Group complements the services provided by our Automotive Group, providing vehicle distribution and transportation support services to the pre-owned, off-lease and new vehicle markets as well as to other segments of the automotive industry. Other services provided by Axis to the automotive industry include automobile inspections, auction and yard management services, vehicle tracking, vehicle accessorization and dealer preparatory services.

Since July 31, 2005, Allied Holdings, Inc. and substantially all of its subsidiaries have been operating under Chapter 11 of the Bankruptcy Code. On April 6, 2007, the Bankruptcy Court approved the Disclosure Statement and authorized its use in connection with the solicitation of votes from those creditors and other parties in interest that were entitled to vote on a plan of reorganization. We received the votes needed and the Bankruptcy Court approved the Joint Plan on May 18, 2007.

The Disclosure Statement for the Joint Plan contemplates that we will continue to operate in substantially our current form, and contemplates the resolution of the outstanding claims against and interests in the Debtors pursuant to the Bankruptcy Code. Upon the effective date of the Joint Plan, the Debtors would be reorganized through, among other things, the consummation of the following transactions:

i)	Payment of the Original DIP Facility and funding of the exit financing, both of which have been facilitated by the New DIP Facility, subject to certain conditions;
ii)	Payment in cash, reinstatement, return of collateral or other treatment of other secured claims agreed between the holder of each such claim and Yucaipa;
iii)	Distribution of new common stock on a pro rata basis to the holders of allowed general unsecured claims;
iv)	Cancellation of the existing common stock interests in the Debtors (holders of equity interests would receive nothing under the Disclosure Statement for the Joint Plan); and
v)	Assumption of assumed contracts.

The Chapter 11 Proceedings and the Disclosure Statement for the Joint Plan are more fully discussed in “Item 1. Business.”

On March 30, 2007, we entered into a New DIP Facility arranged by an affiliate of Goldman Sachs & Co., which provides financing of up to $315 million. The New DIP Facility replaces the Original DIP Facility and subject to the satisfaction of certain conditions, the New DIP Facility may convert, at our option, to a senior secured credit facility upon our emergence from Chapter 11. The New DIP Facility is more fully discussed in the Liquidity section below. Also, as more fully discussed in the Liquidity section below, subsequent to December 31, 2006, we entered into an agreement with Yucaipa pursuant to which Yucaipa will purchase the Blue Thunder Rigs, which will then be sold to us at cost. The Rig Financing, which was provided by Yucaipa, was approved by the Bankruptcy Court on April 6, 2007. It is expected that the maximum amount financed under the Rig Financing will not exceed $15 million, including up to $450,000 that may be used for the repair of these Rigs. At the option of Yucaipa, upon our successful emergence from Chapter 11, Yucaipa may convert the Rig Financing into additional equity of our company.

On February 2, 2007, the Debtors filed a motion with the Bankruptcy Court seeking approval to reject the Master Agreement with the Teamsters. We filed a consent order staying the motion on February 20, 2007 as a result of ongoing negotiations with the Teamsters. The Disclosure Statement for the Joint Plan incorporates modifications to our collective bargaining agreement with the Teamsters in the U.S. The proposed amendment, which was subsequently ratified by the affected employees, is scheduled to take effect upon the effective date of the Joint Plan and our emergence from Chapter 11 and would be renewable three years from that date. Other significant terms of the proposed agreement include:

• Total U.S. wage concessions of 15%, limited to $35 million per year during the three-year duration of the agreement;

• The elimination of future Teamster wage increases;

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• A wage freeze relating to the salaries of management and other nonbargaining employees during the three-year duration of the agreement (with certain exceptions); and

• Entitlement of the U.S. Teamsters to a portion of EBITDA in excess of the projections included in the Disclosure Statement for the Joint Plan.

The modifications to the Master Agreement remain subject to various conditions, including our emergence from Chapter 11 under the Disclosure Statement for the Joint Plan and the appointment of a new CEO reasonably acceptable to the IBT prior to our emergence from Chapter 11. In connection with these conditions, on April 30, 2007, we reached a decision to terminate Mr. Sawyer’s employment effective upon our emergence date from Chapter 11 or on such earlier date after June 1, 2007 as we may determine at our sole discreption. See “Item 11. Director and Executive Compensation” for further discussion of the terms of Mr. Sawyer’s termination and “Item 1. Business” for additional discussion on our collective bargaining agreements.

Continuation of our company as a going concern is predicated upon, among other things: (i) our ability to fund our cash requirements through the effective date the Joint Plan; (ii) our ability to consummate the Joint Plan, which depends on a number of factors, including our ability to satisfy the conditions under the New DIP Facility necessary for exit financing, (iii) our ability to operate under the terms of the New DIP Facility; (iv) the availability of sufficient cash to meet our working capital needs; (v) our ability to resolve labor disputes involving us and our employees; (vi) the outcome of any third party action to obtain the Bankruptcy Court’s approval to modify or terminate the automatic stay, to appoint a Chapter 11 trustee or to convert the Chapter 11 cases to Chapter 7 cases; (vii) our ability to maintain contracts that are critical to our operations; and (viii) our ability to retain key executives and employees. These matters create uncertainty concerning our ability to continue as going concern.

As more fully discussed in the “Liquidity” section below, during the first half of 2006, we continued to be impacted by liquidity constraints and violated various covenants included in the Original DIP Facility. The covenant violations were waived pursuant to a fifth amendment to the Original DIP Facility which among other things, provided us with an additional $30 million of liquidity through a new term loan. Those violations required us to enter into certain forbearance agreements and amendments to the Original DIP Facility. To create additional liquidity, we also requested and received from the Bankruptcy Court interim relief to temporarily reduce wages earned by our collective bargaining employees under the Master Agreement with the Teamsters in the U.S. by 10% in May and June of 2006, and undertook a number of internal cost-saving initiatives.

During 2006, the number of vehicles delivered by our Automotive Group was consistently less than the number of vehicles delivered during comparable periods of 2005. Furthermore, the level of decline on a year-over-year basis has been increasing. The decline was 2% in the first quarter of 2006, 6% in the second quarter of 2006, 10% in the third quarter of 2006 and 16% in the fourth quarter of 2006. During the Chapter 11 Proceedings, we were able to renew contracts and obtain rate increases with certain of our major customers, which has offset at least a portion of the unfavorable effect on our revenue caused by the reduction in the volume of vehicles delivered. Our Automotive Group’s largest customers, General Motors, Ford and DaimlerChrysler each reduced production levels during 2006, including selected plant closures in the U.S., some of which we serve. Further, General Motors and Ford have publicly announced additional plans to further reduce production levels and eliminate excess manufacturing capacity including plans to eliminate jobs and reduce costs for certain employees. The efforts underway by our customers to improve their overall financial condition could result in numerous changes that are beyond our control including additional unannounced customer plant closings, changes in products or distribution patterns, further volume reductions, labor disruptions, changes or disruptions in our accounts receivable, mandatory reductions in our pricing, terms or service conditions or market share losses. We cannot accurately anticipate some of the risks associated with the financial condition of our largest customers.

We are working towards emerging from the Chapter 11 process with a redesigned capital structure, improved customer contracts and improved contract terms with the IBT regarding our employees in the U.S. represented by the Teamsters but can provide no assurance that any of these actions will succeed. If the Chapter 11 process is delayed, we may incur increased legal and professional fees or other costs which could adversely affect our operations. Due to these uncertainties, an investment in our common stock or debt securities is highly speculative and accordingly, we urge investors to exercise caution with respect to existing and future investments in our common stock or debt securities.

In this section, we discuss the following:

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• Results of Operations;

• Liquidity and Capital Resources;

• Off-Balance Sheet Arrangements;

• Disclosures About Market Risks;

• Critical Accounting Policies and Estimates; and

• Recent Accounting Pronouncements.

Results of Operations

We recorded net losses of $12.3 million, $125.7 million and $53.9 million in 2006, 2005 and 2004, respectively. Factors affecting the results for these years included the following:

• 2006 — a reduction in the number of vehicles delivered, which was primarily offset by an improvement in revenue per vehicle delivered, resulting from customer rate increases and fuel surcharge revenue; lower interest costs; and additional expenses related to the Chapter 11 Proceedings.

• 2005 — a non-cash impairment charge related to our Automotive Group’s goodwill; a reduction in the number of vehicles delivered; an increase in the cost of fuel and labor; recognition of a withdrawal liability related to multiemployer pension plans from which we withdrew; expenses related to the Chapter 11 Proceedings; and increased interest expense associated with higher average outstanding debt and higher effective interest rates.

• 2004 — increased expenses related to our self-insurance programs including a non-cash charge related to our conclusion that we could no longer reliably determine insurance reserves on a discounted basis due to continued adverse development for claims incurred in prior years, as well as higher than expected costs for insurance premiums; a non-cash impairment charge related to goodwill at the Axis Group; increased audit and accounting costs; increased depreciation expense on some of our Rigs due to a revision of their estimated useful lives; a non-cash charge to record an additional valuation allowance against our deferred tax assets; increased maintenance costs; the adverse impact of excess costs associated with lower than expected shipment levels in January 2004; and dramatically higher fuel prices beginning in the second quarter and continuing throughout the year.

The following table sets forth the percentage relationship of expense items to revenues for the years ended December 31, 2006, 2005 and 2004:

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	As a % of revenues
	2006			2005			2004
	%			%			%
Revenues		100.0	%		100.0	%		100.0	%
Operating expenses:
Salaries, wages, and fringe benefits		50.4	%		54.0	%		54.6	%
Operating supplies and expenses		20.5	%		20.2	%		18.1	%
Purchased transportation		12.9	%		13.4	%		12.4	%
Insurance and claims		4.7	%		4.7	%		4.6	%
Operating taxes and licenses		3.1	%		3.3	%		3.3	%
Depreciation and amortization		3.3	%		3.4	%		4.8	%
Rents		0.8	%		0.8	%		1.0	%
Communications and utilities		0.7	%		0.7	%		0.7	%
Other operating expenses		0.9	%		1.3	%		1.1	%
Impairment of goodwill		0.0	%		8.9	%		0.9	%
Gain on disposal of operating assets, net		(0.4	)%		(0.1	)%		(0.1	)%
Total operating expenses		96.9	%		110.6	%		101.4	%
Operating income (loss)		3.1	%		(10.6	)%		(1.4	)%
Other income (expense):
Interest expense		(3.4	)%		(4.4	)%		(3.5	)%
Investment income		0.5	%		0.3	%		0.1	%
Foreign exchange (losses) gains, net		(0.1	)%		0.2	%		0.2	%
Other, net		0.0	%		0.1	%		0.0	%
Total other income (expense)		(3.0	)%		(3.8	)%		(3.2	)%
Income (loss) before reorganization items and income taxes		0.1	%		(14.4	)%		(4.6	)%
Reorganization items		(1.4	)%		(0.8	)%		0.0	%
Loss before income taxes		(1.3	)%		(15.2	)%		(4.6	)%
Income tax (expense) benefit		(0.0	)%		1.2	%		(1.4	)%
Net loss		(1.3	)%		(14.0	)%		(6.0	)%

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

During 2006, the number of vehicles delivered was 8.4% lower than it was in 2005. However, the effect on revenues of the lower vehicle deliveries was almost completely offset by an increase in our revenue per vehicle delivered, which was due primarily to customer rate increases, an increase in fuel surcharges and the strengthening of the Canadian dollar. Our operating income for 2006 reflected an improvement of $121.1 million over 2005 and our net loss improved $112.7 million over 2005. The improvement in our operating income and our net loss were primarily a result of the $79.2 million impairment of goodwill recorded during 2005 and a $15.8 million charge recorded during 2005 to recognize the withdrawal liability for our estimated portion of the underfunded benefit obligation of two multiemployer pension plans. Also positively impacting our operating performance and net loss were customer rate increases, which were partially offset by the effect of the lower number of vehicles that we delivered and certain categories of higher expenses including insurance. Also, our net loss was positively impacted by a reduction in interest expense in 2006 compared to 2005 but was negatively impacted by higher reorganization items in 2006, as well as a $10.8 million income tax benefit recorded during 2005 related to the impairment of goodwill.

Revenues

Revenues were relatively flat year over year although the number of vehicles delivered by our Automotive Group declined from 8,275,000 in 2005 to 7,578,000 in 2006, a decrease of 8.4%. This reduction was due primarily to a 6.2% decline in vehicle production by our three largest customers. To a lesser extent, the number of vehicles delivered by our Automotive Group was also negatively impacted by the discontinuation of unprofitable business for one of our major customers at one of our terminal locations, the closure of certain unprofitable terminal locations in the latter part of 2005 and fewer vehicles hauled for Toyota and Honda due to lost market share. The effect of the decrease in volume was primarily offset by an increase in revenue per vehicle delivered by our Automotive Group. During 2006, revenue per vehicle delivered increased by $9.51 or 9.1% over 2005. The

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increase in revenue per unit was due primarily to certain customer rate increases, an increase in fuel surcharges received from customers and the strengthening of the Canadian dollar.

During the Chapter 11 Proceedings, we renewed contracts with rate increases with certain of our major customers. As a result of these rate increases, our revenues increased by approximately $37.6 million or $4.96 per unit in 2006 versus 2005.

Revenues from our fuel surcharge programs represent billings to our customers related to the price of fuel in excess of certain levels established with those customers. The fuel surcharge programs mitigate, in part, the rising cost of fuel by allowing us to pass on at least a portion of the increase to those customers who participate in the programs. In 2006, revenues from fuel surcharges represented 7.3% of the Automotive Group’s revenues, whereas, in 2005, revenues from the fuel surcharge programs represented only 5.2% of our Automotive Group’s revenues. Rate increases related to the fuel surcharge programs contributed $2.96 to the overall increase in revenue per unit and $22.4 million to the overall increase in revenues. However, this increase was partially offset by a reduction of $3.7 million due to the lower number of vehicles delivered, resulting in an overall increase of $18.7 million. The increase in fuel surcharge revenues is due primarily to the increase in the average price of fuel, which was approximately 12.5% higher in 2006 than 2005 for our U.S. operations. For our Canadian operations, the average price of fuel was 5.4% higher without considering the impact of the strengthening of the Canadian dollar and 12.5% higher after factoring in the currency impact. Customer fuel surcharges reset at varying intervals, which do not exceed one quarter, based on fuel prices in the applicable preceding time period. This results in a lag between the time period when fuel prices change and the time period when the fuel surcharge is adjusted. Future revenues derived from fuel surcharges would be impacted if any customer terminated its fuel surcharge agreement with us.

The Canadian dollar strengthened relative to the U.S. dollar in 2006 compared to 2005. During 2006, the Canadian dollar averaged the equivalent of U.S. $0.8821 versus U.S. $0.8262 during 2005, which resulted in an increase in revenues of approximately $12.5 million. This amount contributed $1.65 to the overall increase in revenue per unit of $9.51. However, the effect on operating income was partially offset by a corresponding increase in expenses for our Canadian subsidiary related to the currency fluctuation.

Revenues for our Axis Group increased $1.8 million in 2006 over 2005 primarily as a result of new business in Mexico, which commenced in the latter part of 2005 and which increased revenues by approximately $2.2 million. Additional business from the Axis Group’s other Mexican locations accounted for an increase of approximately $0.8 million. However, these increases were partially offset by reduced revenues of $1.3 million from our South African operations due to the sale of the Axis Group’s interest in Kar-Tainer International, LLC and Kar-Tainer International (Pty) Ltd. during the fourth quarter of 2005.

Our revenues are variable and can be impacted by changes in OEM production levels, especially sudden unexpected or unanticipated changes in production schedules, changes in distribution patterns, product type, product mix, product design or the weight or configuration of vehicles transported by our Automotive Group. As an example, our 2006 revenues were adversely affected by recent decisions by General Motors, Ford and DaimlerChrysler to reduce production in the fourth quarter of 2006 at several of its manufacturing plants and will be adversely affected by recent announcements by General Motors and Ford to close certain manufacturing plants in the future.

In addition, our revenues are seasonal, with the second and fourth quarters generally experiencing higher revenues than the first and third quarters as a result of the higher volume of vehicles delivered. The volume of vehicles delivered is generally higher during the second quarter as North American light vehicle production has historically been at its highest level during this quarter due to higher consumer sales of automobiles, light trucks and SUVs in the spring and early summer. The introduction of new models in the fall of each year combined with the manufacturers’ motivation to ship vehicles before calendar year-end, increase shipments to dealers through the fourth quarter. During the first and third quarters, vehicle deliveries typically decline due to lower production volume during those periods. The third quarter volume does benefit from the introduction of new models, but the net volume for the quarter is typically lower than the second and fourth quarters due to the scheduled OEM plant shutdowns, which generally occur early in the third quarter. The first quarter volume is negatively impacted by the holiday shutdown in December of each year and the relatively low inventory of vehicles to ship as a result of maximizing shipments at the end of the year. However, given the unpredictable nature of consumer sentiment and our customers’ emphasis on more effective use of plant capacity, particularly at the Big Three, there can be no assurance that historical revenue patterns or manufacturer production levels will be an accurate indicator of future

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OEM shipment activity. Delivery activity at our Automotive Group and the Axis Group can also be impacted by the availability of rail cars, rail transportation schedules or changes in customer service demands.

Salaries, wages and fringe benefits

Salaries, wages and fringe benefits decreased from 54.0% of revenues in 2005 to 50.4% of revenues in 2006. The decrease in salaries, wages and fringe benefits as a percentage of revenues was due in part to a $15.8 million charge recorded during 2005 for a probable withdrawal liability for our estimated portion of the underfunded benefit obligation of two multiemployer pension plans to which we contributed. Salaries, wages and fringe benefits as a percentage of revenues also decreased as a result of the increases in revenues related to the fuel surcharge programs and customer rate increases, which do not cause salary expense to vary, as well as a decrease in expense for our nonbargaining employees. Driver pay is based primarily on the number of miles driven to deliver vehicles and is affected by changes in revenue related to changes in volume, but is not affected by fluctuations in customer rates or fluctuations in fuel surcharge revenues. Salaries, wages and fringe benefits related to our nonbargaining employees, who are not directly involved in the generation of revenues, decreased by approximately $3.2 million. This decrease was due primarily to a reduction in headcount, the effect of unpaid furloughs and lower employee benefit costs. Employees with annual salaries of less than $80,000 were required to accept a five-day unpaid furlough in the month of June 2006 and those with annual salaries of $80,000 or more were required to accept ten days of unpaid furlough by the end of June 2006. The unpaid furloughs of our salaried nonbargaining employees reduced our salaries, wages and fringe benefits by approximately $200,000 in May 2006 and $800,000 in June 2006.

Our labor costs for employees covered by bargaining agreements related to the delivery of vehicles decreased $20.9 million in 2006 compared to 2005 primarily as a result of the lower number of vehicles that we delivered during 2006. However, the labor cost per vehicle delivered for these employees increased by approximately 3.1%. The effect of the lower number of vehicles delivered is estimated to be approximately $31.8 million, partially offset by the increase in the bargaining labor cost per vehicle delivered, which we estimate to be approximately $10.9 million. The increase in bargaining labor cost per vehicle delivered was due primarily to the agreed-upon rate increases related to our employees covered by the Master Agreement with the Teamsters, an increase in the average distance driven to deliver a vehicle (the “average length of haul”) and the strengthening of the Canadian dollar. Our salaries, wages and fringe benefit expense increased by approximately $6.3 million in 2006 compared to 2005 as a result of the agreed-upon rate increases related to employees covered by the Master Agreement with the Teamsters, partially offset by the 10% reduction in wages earned by these employees in May and June 2006. An increase in health, welfare and pension benefits went into effect on August 1, 2005, a 2% wage increase went into effect on June 1, 2005 and another 2% wage increase was effected on July 1, 2006. The average length of haul for vehicles delivered by these employees was approximately 1.4% higher in 2006 compared to 2005. We estimate that the strengthening of the Canadian dollar resulted in an increase in bargaining labor costs of approximately $4.6 million in 2006 compared to 2005.

Workers’ compensation expense, which is a component of salaries, wages and fringe benefit expense, increased by approximately $8.4 million during 2006 as compared to 2005 due primarily to the change in our insurance programs, and higher charges related to the unfavorable development of claims incurred in prior years. As previously discussed, in 2006, a fully insured program with no deductible covers the majority of our risk for workers’ compensation claims resulting in an increase in our premium expense. Charges related to the unfavorable development of claims were $5.9 million in 2006 versus $4.8 million in 2005. In order to more effectively manage risk management costs in future periods, we continue to implement initiatives to improve our hiring and training practices, prevent employee injuries, improve the claims management process and expedite the settlement of outstanding historical claims.

Operating supplies and expenses

Operating supplies and expenses increased from 20.2% of revenues in 2005 to 20.5% of revenues in 2006. The increase was due primarily to an increase in fuel expense, which increased from 8.4% of revenues in 2005 to 8.9% of revenues in 2006. See the revenue section above for a discussion of the approximate price increases. We estimate that the increase in the price of fuel resulted in additional fuel expense of approximately $11.6 million in 2006 compared to 2005. The increase in fuel expense related to the increase in price of fuel was partially offset by a decrease of $6.3 million related to the reduced number of vehicles delivered in 2006 compared with 2005. Due to the fuel surcharge agreements we have in place with substantially all of our customers, any unfavorable impact on

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our operating income due to the increase in fuel prices was mitigated as the corresponding effect of fuel surcharges, net of broker participation, was approximately $20.6 million, resulting in a favorable impact of $9.0 million on our operating income. The difference between the increase in fuel expense resulting from higher fuel prices and the amount of fuel surcharges received from customers during any quarter is due to the timing difference described above in the revenue discussion.

Repairs and maintenance expense increased from 4.5% of revenues in 2005 to 4.8% of revenues in 2006. The actual expense increased $3.1 million due primarily to an increase in the frequency and nature of vehicle repairs as a result of the increasing age of our fleet. Due to the significance of their nature, more of these repairs required outside vendor assistance.

Purchased transportation

Purchased transportation as a percentage of revenues decreased from 13.4% of revenues in 2005 to 12.9% of revenues in 2006 and actual purchased transportation expense decreased $4.2 million, or 3.5%. Purchased transportation primarily represents the cost to our Automotive Group of utilizing owner-operators of Rigs. The payments to the owner-operators, who receive a percentage of the revenue generated from transporting vehicles on our behalf, are covered by collective bargaining agreements with the Teamsters. The decrease in the expense was a result of a 5.2% reduction in the average length of haul driven by owner-operators in 2006, partially offset by the impact of the increase in fuel surcharge revenue per vehicle delivered as well as the customer rate increases discussed in revenues above. Purchased transportation, as a percentage of revenues fluctuates based on changes in the distribution patterns of our customers and how the vehicle deliveries are dispatched from our terminal locations. Fuel surcharge revenue and customer rate increases derived from deliveries by owner-operators are reimbursed to the owner-operator and recorded in purchased transportation. Fuel surcharge revenue derived from vehicle deliveries by owner-operators is included in revenues while the reimbursement of the fuel surcharge revenue to the owner-operator is included in purchased transportation expense.

Insurance and claims

Insurance and claims expense as a percentage of revenues was relatively flat year over year although there was (i) a change in coverage for 2006 to reduce the amount of risk that we retain, which resulted in higher premiums, and (ii) we experienced unfavorable development of claims from prior years. The 2006 expense includes unfavorable development of claims from prior years of $2.1 million while the 2005 expense reflects favorable development of claims of $1.6 million. Offsetting these 2006 increases were the impact of a major accident that occurred during the fourth quarter of 2005 and lower cargo claims expense in 2006. Cargo claims expense was lower in 2006 primarily as a result of the lower volume of vehicles delivered, partially offset by an increase in the cost per unit as the percentage of damage-free vehicle deliveries was 99.70% compared to 99.80% for 2005, a decline of approximately 1,000 units. We continue to manage cargo claims costs as part of our on going cost reduction initiatives. As such, we have continued to emphasize cargo claims prevention to our drivers, re-engineered the claims review process so that we can more quickly identify damage that we did not cause and deny claims that are not in compliance with our documented guidelines.

Other operating expenses

Other operating expenses decreased from 1.3% of revenues in 2005 to 0.9% of revenues in 2006 primarily as a result of the incurrence of professional fees relating to the review of various strategic alternatives related to our operating performance and highly leveraged financial position and to prepare for a potential Chapter 11 filing during 2005.

Impairment of goodwill

The impairment of goodwill of $79.2 million was recorded at our Automotive Group during 2005 and represented the entire carrying amount of goodwill for this reporting unit, since the estimated fair value of the reporting unit’s goodwill was determined to be zero. To determine the fair value of the reporting unit, management considered available information including market values of securities, appraisals of the Automotive Group’s long-term tangible assets and discounted cash flows from our revised forecasts. The fair value of goodwill at our Automotive Group was affected by a decrease in projected sales volume for this reporting unit that was impacted by a decline in actual and projected OEM production levels, particularly at our two largest customers, as well as management’s analysis of other cash flow factors and trends, including capital expenditure requirements in excess of previous

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estimates. The goodwill reflected in our consolidated balance sheet as of December 31, 2006 relates to the Axis reporting unit. No such impairment was found on the remaining goodwill in 2006.

Gain on disposal of operating assets, net

For 2006, the gain on disposal of operating assets, net of $3.3 million primarily represents the gain on the sale of a portion of property located in Ontario, Canada. There were no significant asset sales in 2005.

Interest expense

Interest expense decreased from $39.4 million in 2005 to $30.2 million in 2006. This reduction was primarily the result of:

• The discontinuation of interest accrued on our Senior Notes subsequent to the Petition Date. Effective August 1, 2005 and in accordance with the American Institute of Certified Public Accountants’ Statement of Position 90-7 (“SOP 90-7”), Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, we ceased accruing interest on our Senior Notes since the repayment of this debt and related interest are stayed by the Bankruptcy Court as a result of the Chapter 11 Proceedings. Interest expense recognized on the Senior Notes was $7.5 million for 2005;

• Lower charges related to deferred financing costs. Charges related to deferred financing costs decreased $2.8 million in 2006 compared to 2005. This was due primarily to the write-off of $4.9 million in deferred financing costs during 2005 as a result of the violation of one of the financial covenants in our pre-petition facility as of June 30, 2005, the effect of which was partially offset by higher amortization of deferred financing costs related to the Original DIP Facility in 2006. The amortization was higher in 2006 as a result of the revision, in March 2006, of the end of the amortization period of the deferred financing costs related to the Original DIP Facility as a result of certain financial covenant violations. As a result of the covenant violations related to the Original DIP Facility, we revised the end of the amortization period from February 2, 2007, the initial maturity date of the Original DIP Facility, to May 18, 2006, the end of the forbearance period under the Original DIP Facility;

• The prepayment penalty of $1.9 million, which we paid to our pre-petition lenders in August 2005; and

• Reduced letter of credit fees. Letter of credit fees were approximately $1.2 million lower in 2006 than 2005 due to the incurrence, during 2005, of line of credit fees on both the Original DIP Facility as well as the pre-petition facility as we transitioned from one facility to the other.

The decreases discussed above were partially offset by an increase in our effective interest rate, an increase in our average outstanding debt and a $1.2 million increase in lender fees which was due primarily to the amendments and forbearance agreements negotiated with the lenders of the Original DIP Facility during the second quarter of 2006. Our effective interest rate was approximately 60 basis points higher in 2006 versus 2005 resulting in additional interest expense of approximately $0.8 million. Our average outstanding debt, excluding the Senior Notes, increased during 2006 by approximately $18.8 million over 2005, resulting in additional interest expense of approximately $2.4 million.

Investment income

Investment income increased from $2.8 million in 2005 to $4.8 million in 2006, which was due primarily to an increase in interest rates on time deposits as well as an increase of $4.7 million in the average amount of restricted cash, cash equivalents and other time deposits held by our captive insurance subsidiary, Haul Insurance Limited. The average amount of restricted cash, cash equivalents and other time deposits increased as a result of additional amounts required, in the second half of 2005, to collateralize letters of credit issued to secure the payment of insurance claims.

Foreign exchange losses/gains, net

Foreign exchange losses were $0.6 million in 2006 compared to foreign exchange gains of $1.4 million in 2005. This fluctuation was due primarily to the effect of changes in currency exchange rates on the intercompany payable

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balance denominated in U.S dollars recorded on one of our Canadian subsidiary’s balance sheet. The Canadian dollar was relatively flat to the U.S. dollar at the end of 2006 compared to the beginning resulting in an immaterial foreign exchange effect on the opening intercompany balance. However, the intercompany payable balance increased approximately $7.7 million during 2006 and the Canadian dollar weakened at the end of December 2006 to U.S $0.8581 compared to the average of U.S $0.8821 maintained during 2006 thereby resulting in a loss on exchange. The Canadian dollar was 3.3% stronger at the end of 2005 than at the beginning resulting in a gain on exchange in 2005. In addition, the average outstanding intercompany amount payable by this subsidiary increased by $8.0 million during 2005 which contributed to the exchange gain during 2005.

Reorganization items

During 2006 and 2005, we incurred approximately $12.8 million and $7.1 million, respectively, in costs related to the Chapter 11 Proceedings. These costs are primarily for legal and professional services rendered in connection with the Chapter 11 Proceedings and for 2005, included the write-off of $1.4 million of deferred financing costs. Since we filed for Chapter 11 on July 31, 2005, the results for 2005 include only five months of reorganization items whereas the results for 2006 include twelve months of reorganization items. Also, as more fully discussed in the liquidity section below, the Bankruptcy Court approved an employee retention plan, in connection with our Chapter 11 filing, which provides for potential payments to approximately 82 employees, both executive and non-executive. Reorganization items for 2005 include only twelve days of amortization of this expense related to the retention plan whereas reorganization items for 2006 include twelve months of this expense. See Note 3 to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for a summary of these reorganization items.

Income taxes

In 2006, a tax expense of $389,000 was recognized. In 2005, a tax benefit of $10.8 million was recognized. In 2006 and 2005, the income tax expense differed from the amount computed by applying statutory rates to the reported loss before income taxes since we did not meet the more likely than not criteria to recognize the tax benefits of losses in most of our jurisdictions. The loss before income taxes generated deferred tax assets for which we increased the valuation allowance. During 2005, we did recognize a tax benefit related to the impairment of goodwill to the extent that related deferred tax liabilities existed. For both periods, we recognized tax expenses related to foreign jurisdictions where the valuation allowance is not required. In our evaluation of the valuation allowance, we consider all sources of taxable income, including tax-planning strategies.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

During 2005, the number of vehicles delivered was 6.3% lower than 2004. However, the effect on revenues of the lower volumes was partially offset by an increase in revenue per vehicle delivered, primarily the result of the positive impact of the fuel surcharge programs, the strengthening of the Canadian dollar and rate increases negotiated with certain customers. The operating loss and net loss for 2005 were $82.0 million and $71.8 million higher than 2004, respectively. The higher operating loss and net loss were primarily a result of the $79.2 million impairment of goodwill recorded during 2005 and the $15.8 million charge, recorded during 2005, for probable withdrawal liability for the estimated portion of underfunded benefit obligation of two multiemployer pension plans. Operating performance and net loss were also negatively impacted by the effect of the lower volume of vehicles delivered partially offset by the positive impact of customer rate increases. The net loss was also negatively impacted by an increase in interest expense and the incurrence of reorganization expenses in 2005 in connection with the Chapter 11 filing in July 2005, but benefited from a $10.8 million income tax benefit recorded during 2005 related to the impairment of goodwill compared to a $12.4 million income tax expense in 2004 related to the recording of additional valuation allowances.

Revenues

Revenues were $892.9 million in 2005 versus revenues of $895.2 million in 2004, a decrease of 0.3% or $2.3 million. This decrease in revenue was due primarily to a decline of 6.3% in the number of vehicles we delivered, which was due, in part, to a 7.9% decline in vehicle production by our two largest customers and the removal of six locations from our contract with DaimlerChrysler during the fourth quarter of 2004. The decline in the number of vehicles delivered was partially offset by an increase in revenue per vehicle delivered. Revenue per vehicle delivered increased by $6.08 per unit in 2005, or 6.2%, due primarily to the positive impact of the fuel surcharge

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programs, the strengthening of the Canadian dollar and rate increases negotiated with certain customers, which were partially offset by a decrease in our average length of haul.

In 2005, revenue from fuel surcharges represented 5.2% of our Automotive Group’s revenues, whereas, in 2004, revenue from fuel surcharges represented only 2.2% of our Automotive Group’s revenues, an increase of approximately $26.0 million. For eight of the twelve months of 2004, fuel surcharge programs were in place with customers who comprised only 59% of our Automotive Group’s revenues whereas for the full year of 2005, fuel surcharge programs were in place with customers comprising substantially all of our Automotive Group’s revenues. The impact of the fuel surcharge program on our revenue per vehicle delivered was an increase of approximately $3.28 per unit.

The Canadian dollar strengthened relative to the U.S. dollar during 2005. Revenues from our Canadian subsidiary are positively impacted when the Canadian dollar strengthens relative to its U.S. counterpart. During 2005, the Canadian dollar averaged the equivalent of U.S. $0.8262 versus U.S $0.7701 during 2004 which resulted in an increase in revenues of $11.7 million or $1.41 per unit in 2005 versus 2004.

Revenue per unit was also higher by $1.83 per unit as a result of certain rate increases negotiated with our customers. Offsetting the increases in revenue per vehicle delivered was a decline of $0.26 per unit due to a reduction in the average length of haul. Since a portion of our revenue is based on the number of miles driven to deliver a vehicle, a decrease in the average length of haul reduces our revenue and revenue per unit. The average length of haul may fluctuate based on changes in the distribution patterns of our customers and how the vehicle deliveries are dispatched from our terminal locations.

Salaries, wages, and fringe benefits

Salaries, wages and fringe benefits decreased from 54.6% of revenues in 2004 to 54.0% of revenues in 2005 primarily as a result of a decrease in workers’ compensation expense. For 2004, workers’ compensation expense was 6.1% of revenues versus 4.5% of revenues for 2005. Workers’ compensation expense decreased from $55.0 million in 2004 to $40.0 million in 2005. This decrease was due primarily to the discontinuation of discounting of our insurance reserves in the fourth quarter of 2004, which resulted in a non-cash charge of approximately $10.0 million during 2004. Workers’ compensation expense also decreased as a result of the decline in the number of units hauled in 2005 versus 2004. Workers’ compensation expense for 2005 and 2004 include comparable charges related to the unfavorable development of claims incurred in prior years.

Driver pay, which is based primarily on the number of miles driven to deliver vehicles, is affected by changes in revenue related to changes in volume. As a result of the decrease in volume, we estimate that driver pay decreased by approximately $16.5 million. However, this decrease was partially offset by increases in wage rates and benefits related to our bargaining employees. As a result of the agreed-upon rate increases for our employees covered by the Master Agreement with the Teamsters, an increase in benefits went into effect on August 1, 2004 and 2005 and a 2% wage increase went into effect on June 1, 2005. As a result, our bargaining labor costs per vehicle delivered increased by approximately 5.1% and resulted in additional expense of approximately $13.7 million in 2005 compared to 2004.

The effects of the decreases described above were almost completely offset by the $15.8 million charge related to the withdrawal from two multiemployer pension plans previously discussed.

Operating supplies and expenses

Operating supplies and expenses increased from 18.1% of revenues in 2004 to 20.2% of revenues in 2005. The increase is due primarily to an increase in fuel expense, which increased from 6.2% of revenues in 2004 to 8.4% of revenues in 2005. The average price of fuel was approximately 32.6% higher in 2005 than 2004 for our U.S. operations. We estimate that the increase in the cost of fuel resulted in an increase in fuel expense of approximately $22.8 million. The corresponding effect of fuel surcharges, which are included in revenues, was approximately $21.8 million, resulting in an unfavorable impact of $1.0 million on our operating income for 2005. Operating supplies and expenses were also impacted by an increase in repairs and maintenance. Repairs and maintenance expense per mile driven increased by 8.5% in 2005 compared to 2004 and resulted in an increase of $3.1 million in repairs and maintenance expense in 2005 compared to 2004. The increase in 2005 was offset by a reduction of $2.7 million due to a decrease in the number of miles driven to deliver vehicles.

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Purchased transportation

Purchased transportation increased from 12.4% of revenues in 2004 to 13.4% of revenues in 2005. Purchased transportation increased in 2005 primarily as a result of the increase in fuel surcharge revenue discussed above and an increase in revenue generated by owner-operators versus company drivers. The percentage of revenues generated by owner-operators versus company drivers increased in 2005 over 2004. These increases in purchased transportation were partially offset by a decrease in the number of vehicles delivered by third-party carriers as a result of the overall decrease in vehicles delivered.

Insurance and claims

Insurance and claims expense remained relatively flat from 4.6% of revenues in 2004 to 4.7% of revenues in 2005. The largest cost component in this category, auto and general liability insurance, was comparable year over year. The expense in 2005 increased due to the effect of one major accident that occurred during the fourth quarter of 2005, but was offset by favorable development of claims from prior years of approximately $1.6 million, the cost of one large claim in 2004 and the effect of discontinuing the discounting of the reserves in 2004 of approximately $0.6 million.

Cargo claims expense remained flat year over year also. Damage-free vehicle deliveries improved from 99.76% for 2004 to 99.80% for 2005, an improvement of 5,395 damage-free units.

Depreciation and amortization

Depreciation and amortization expense decreased from 4.8% of revenues in 2004 to 3.4% of revenues in 2005 due primarily to a decline in the depreciable asset base as a result of a 5-year decline in fixed asset purchases and the removal of idled equipment in 2004 with a net book value of $5.0 million from the asset base, which resulted in a non-cash charge of approximately $4.2 million in the fourth quarter of 2004 to reflect the change in the estimated useful life of the idled equipment. However, the decrease in depreciation expense due to the factors discussed above was partially offset by an increase in depreciation expense of approximately $1.0 million due to the removal of additional idled equipment from the asset base in the fourth quarter of 2005 to reflect the change in its estimated useful life.

Rents

Rent expense decreased from $8.6 million in 2004 to $7.5 million in 2005. During 2004, we had additional rent expense of approximately $1.0 million related to a lease we assumed in the 1997 acquisition of the Ryder Automotive Group. The liability for this lease was fully accrued as of December 31, 2004. Subsequent to the Petition Date, this lease and the related subleases were rejected. Additionally, we rejected two leases in Canada and accrued the potential claim for these leases as reorganization expense of approximately $115,000. The estimated allowed claims related to the rejected leases are classified as liabilities subject to compromise.

Other operating expenses

Other operating expenses increased from $10.1 million during 2004 to $11.8 million in 2005 primarily as a result of an increase in legal and professional fees incurred for the preparation of the Chapter 11 filings.

Impairment of goodwill

As more fully discussed above, the impairment of goodwill of $79.2 million was recorded at our Automotive Group in 2005 and represented the entire carrying amount of goodwill for this reporting unit.

The impairment of goodwill of $8.3 million during 2004 was recorded at our Axis Group and represented the excess of the carrying amount of goodwill for this reporting unit over its estimated fair value as determined during our annual assessment of goodwill.

Interest expense

Interest expense increased from $31.4 million in 2004 to $39.4 million in 2005 due primarily to the following:

• The write off of $4.9 million in deferred financing costs related to the pre-petition facility, discussed above;

• Payment of the $1.9 million prepayment penalty related to our pre-petition facility;

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• An increase in our average outstanding debt. Average outstanding debt increased by approximately $20.3 million during 2005 versus 2004 resulting in additional interest expense of approximately $2.5 million;

• An increase in the effective interest rate from 9.6% in 2004 to 12.2% in 2005 resulting in additional interest expense of approximately $2.9 million;

• An increase in lender fees of approximately $0.9 million including commitment, agent and letter of credit fees as well as additional fees related to amendments to the pre-petition facility; and

• An increase in amortization of debt issuance costs of approximately $0.9 million. Although total deferred debt issuance costs related to the Original DIP Facility are less than those related to the pre-petition facility, the amortization period was much shorter, resulting in higher amortization charges year over year.

The increases noted above were partially offset by:

• The discontinuation of interest accrued on the Senior Notes effective August 1, 2005. Contractual interest not accrued or paid on the Senior Notes was $5.4 million for 2005; and

• A decrease of approximately $1.0 million related to interest on prior year tax assessments.

Investment income

Investment income increased primarily as a result of an increase in interest rates on time deposits as well as an increase of $10.4 million in the average restricted cash, cash equivalents and other time deposits held at our captive insurance subsidiary, Haul Insurance Limited. The average amount of restricted cash, cash equivalents and other time deposits increased as a result of additional amounts required to collateralize letters of credit issued to secure the payment of insurance claims.

Other, net

Other, net in 2005 represents the gain on sale of our interests in Kar-Tainer International, LLC and Kar-Tainer International (Pty) Ltd. On October 28, 2005, with Bankruptcy Court approval, we sold our interests in Kar-Tainer International, LLC and Kar-Tainer Int’l (Pty) Ltd., a South African subsidiary. Other, net of $0.2 million in 2004 relates to the write off of the equity of our last remaining joint venture based on management’s assessment that our investment in this joint venture was not recoverable.

Reorganization items

During 2005, we incurred approximately $7.1 million in costs related to the Chapter 11 Proceedings. These costs were primarily for legal and professional services rendered and the write-off of deferred financing costs related to the issuance of our Senior Notes.

Income taxes

We recorded a tax benefit of $10.8 million in 2005 and a tax expense of $12.4 million in 2004. For both years, the income tax expense differed from the amounts computed by applying statutory rates to the reported loss before income taxes since we did not meet the more likely than not criteria to recognize the tax benefits of losses in most of our jurisdictions. The loss before income taxes generated deferred tax assets for which we increased the valuation allowance. As discussed above, during 2005, we did recognize a tax benefit related to the impairment of goodwill in the second quarter of 2005 to the extent that related deferred tax liabilities existed. In 2004, due to the continuing losses during the year and the worsening trend in the fourth quarter, we concluded that it was “more likely than not” that additional deferred tax assets would not be recovered and recorded an additional valuation allowance of $11.3 million at December 31, 2004.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are funds provided by operations and borrowings under the Original DIP Facility, now replaced by the New DIP Facility. We use our cash primarily for the purchase, remanufacture and maintenance of our Rigs and terminal facilities, the payment of operating expenses, the servicing of our debt, and the funding of other capital expenditures. We also use our cash to pay legal and professional fees related to the Chapter 11 Proceedings.

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We use restricted cash, cash equivalents and other time deposits to collateralize letters of credit required by third-party insurance carriers for the settlement of insurance claims. These collateral assets are not available for our general use in operations, but are restricted for payment of insurance claims. We obtained the Original DIP Facility and the New DIP Facility to provide debtor-in-possession financing in connection with our Chapter 11 filing. Funds under the New DIP Facility will allow us to continue to operate in the normal course of business and are available to help satisfy our working capital obligations during the Chapter 11 Proceedings, including payment under normal terms for goods and services provided after the Petition Date, payment of wages and benefits to active employees and retirees and other items approved by the Bankruptcy Court. In addition, we periodically borrow under insurance financing arrangements to fund our insurance programs.

During 2006, we continued to be impacted by liquidity constraints and took various steps to preserve our liquidity, which included:

• Rescheduling and deferring capital expenditures;

• Obtaining the Bankruptcy Court’s approval to reduce wages paid to our collective bargaining employees covered under the Master Agreement with the IBT by 10% for the months of May and June 2006;

• Obtaining the Bankruptcy Court’s approval to delay, to July 1, 2006, wage and cost of living increases to our collective bargaining employees that were previously scheduled to go into effect on June 1, 2006;

• Implementing unpaid furloughs for certain nonbargaining employees for certain periods in May and June 2006; and

• Implementing other internal cost-saving initiatives.

The reduction of wages paid to our collective bargaining employees covered by the Master Agreement with the IBT decreased our labor costs by approximately $2 million per month in May and June 2006. The wage and cost of living increases scheduled to go into effect on June 1, 2006 for those employees were delayed until July 1, 2006 resulting in cost savings of approximately $325,000 in June 2006. The unpaid furloughs required of our salaried nonbargaining employees reduced our nonbargaining labor costs by approximately $200,000 in May and $800,000 in June 2006.

On January 6, 2006, in connection with our Chapter 11 filing, the Bankruptcy Court approved an employee retention plan, which provides for retention payments to approximately 82 employees, both executive and non-executive. The employee retention plan is designed to provide certain financial incentives aimed at retaining certain employees and provides for the payment of up to approximately $4 million in retention bonuses and approximately $6 million in severance payments in the event that participants are terminated as employees without cause. A portion of the bonus payments were made in 2006 and we expect to pay the remaining bonus payments during 2007. Certain of these retention payments are contingent upon the achievement of certain milestones such as our emergence from Chapter 11.

Continuation of our company as a going concern is predicated upon, among other things: (i) our ability to fund our cash requirements through the effective date of the Joint Plan; (ii) our ability to consummate the Joint Plan, which depends on a number of factors, including our ability to satisfy the conditions under the New DIP Facility necessary for exit financing; (iii) our ability to operate under the terms of the New DIP Facility; (iv) the availability of sufficient cash to meet our working capital needs; (v) our ability to resolve labor disputes involving us and our employees; (vi) the outcome of any third party action to obtain the Bankruptcy Court’s approval to modify or terminate the automatic stay, to appoint a Chapter 11 trustee or to convert the Chapter 11 cases to Chapter 7 cases; (vii) our ability to maintain contracts that are critical to our operations; and (viii) our ability to retain key executives and employees. These matters create uncertainty concerning our ability to continue as going concern.

Operating Activities

We use the indirect method to prepare our statement of cash flows. Accordingly, we compute net cash provided by operating activities by adjusting the net loss for all items included in the net loss that do not currently affect operating cash receipts and payments. Cash provided by operating activities was $48.8 million for 2006 compared to cash used in operating activities of $34.9 million for 2005, an increase in operating cash flows of $83.7 million. This increase in cash from operating activities was primarily due to a reduction in payments relating to insurance in

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2006 compared to 2005 and to a lesser extent to improved collections from our customers and lower payments relating to interest and salaries, wages and fringe benefits.

Although premiums for insurance coverage for 2006 were higher than in 2005, insurance payments for 2006 were less as a result of the payment during 2005 of the majority of the 2006 insurance premiums along with the majority of the 2005 insurance premiums. The majority of the payments for 2006 coverage were made in December 2005. In contrast, the majority of the premiums for 2007 will be paid at intervals during 2007. Cash collections, primarily from our customers, increased approximately $14.0 million primarily as a result of improved collection efforts. Interest paid in 2006 was $7.5 million lower than 2005 primarily as a result of the in-kind payment of interest during 2006 of $6.4 million which was added to the principal balance on the term loans as well as the payment of interest on the Senior Notes of $6.5 million during 2005. These factors were partially offset by an increase in interest payments resulting from increased lender fees, an increase in our outstanding debt and an increase in our effective interest rate. Payments relating to salaries, wages and fringe benefits were lower primarily as a result of the lower volume of vehicles hauled.

The positive impact of these items on operating activities were partially offset by the benefit, obtained in 2005, from the stay of pre-petition liabilities of $26.1 million of accounts and notes payable and other accrued liabilities that were stayed by the Chapter 11 filing. Also offsetting the payment reductions discussed above was an $8.8 million increase in payments relating to reorganization items as a result of a full year of Chapter 11 Proceedings in 2006 compared to only five months in 2005.

Investing Activities

During 2006, we used $24.4 million in investing activities compared to $37.7 million during 2005. During 2005, restricted cash, cash equivalents and other time deposits required to collateralize our self-insurance reserves at our captive insurance subsidiary increased $19.7 million compared to a decrease of $4.3 million in 2006. The collateral requirements are based on the third-party insurance carriers’ estimates of future claims payments. There was no increase in 2006 for workers’ compensation since we are covered by a fully insured policy for most states. In addition, the net amount deposited with insurance carriers was $7.9 million lower during 2006 compared to 2005.

The lower amount of cash required for investing in the activities above were partially offset by higher capital expenditures in 2006 versus 2005. Capital expenditures for 2006 and 2005 were $35.8 million and $19.4 million, respectively, most of which was spent on our fleet of Rigs. During 2006, we purchased 53 new tractors, 53 new trailers and 124 Rigs previously leased. We also remanufactured 191 tractors and 261 trailers and replaced (overhauled) approximately 320 engines. During 2005, we purchased one new Rig, two used Rigs and remanufactured 164 tractors and 165 trailers and replaced (overhauled) approximately 380 engines.

In recent years, as a result of our financial condition, we have operated under a reduced capital expenditure plan with respect to our fleet of Rigs. As a result, we have been unable to replace or remanufacture the number of Rigs or engines we normally would have if we had not been forced to significantly reduce our capital expenditures. We believe that approximately 67% of our active fleet of Rigs will reach the end of their useful lives and must be replaced in 2007 through 2010, which will require a significant increase in our capital spending, from approximately $35.8 million in 2006 to approximately $66.8 million in 2007 (excluding the Blue Thunder Rigs) and $70 million in each of the years 2008, 2009 and 2010. No assurances can be provided that we will have the necessary capital from our operations or that we will be able to obtain financing on terms acceptable to us, or at all, to support this necessary increase in capital investment.

Of the $66.8 million for capital expenditures in 2007 (excluding the Blue Thunder Rigs), we expect to spend $61.4 million on our fleet of Rigs. Of this amount, Allied Automotive expects to spend approximately $27.1 million to purchase over 125 new Rigs, approximately $16.3 million to remanufacture approximately 200 existing Rigs and an additional 55 trailers, approximately $8.0 million to replace approximately 346 engines, $7.1 million to purchase certain used Rigs and approximately $2.9 million to purchase certain Rigs which we currently lease. Our Axis Group expects to spend about $3.6 million of capital in 2007.

Even if we are able to invest the amounts indicated above each year, we will be operating a substantial number of Rigs beyond their scheduled replacement or remanufacturing due dates. Accordingly, Rigs may have to be taken out of service sooner than planned as a result of equipment failures or the Rigs otherwise reaching the end of their

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useful lives. We presently have no excess Rigs to service our existing business or to seek additional business. A large number of Rig failures could result in our inability to meet our service requirements under existing customer contracts, which could result in the termination of such agreements by our customers, which would likely have a material adverse effect on our operations and financial results. Additionally, we may be forced to increase repair and maintenance spending in an effort to maintain the number of Rigs in service. If we are unable to make planned reinvestments in the fleet because of liquidity or other constraints, or if there is inadequate manufacturing or remanufacturing capacity when we require it, repairs and maintenance expense will be adversely impacted.

Subsequent to December 31, 2006, we entered into an agreement with Yucaipa pursuant to which Yucaipa will purchase the Blue Thunder Rigs, which will then be sold to us at cost. The Blue Thunder Rigs range between three to five years in age. The Rig Financing, which was provided by Yucaipa, was approved by the Bankruptcy Court on April 6, 2007. The maximum amount financed under the Rig Financing will not exceed $15 million and includes additional funds to retrofit and make any necessary repairs to the Blue Thunder Rigs, and to pay certain costs and expenses associated with the purchase, such as registration expenses. The notes under the Rig Financing bear interest at LIBOR plus 4%, payable quarterly by addition to principal. In addition, at the option of Yucaipa, upon our successful emergence from Chapter 11, Yucaipa may convert the Rig Financing into additional equity of our company. As of May 3, 2007, we had purchased 117 of these Rigs from Yucaipa at a cost of $8.9 million.

Our estimates of the planned investment in our fleet as set forth above could vary based upon factors such as liquidity constraints, the financial covenants included in the New DIP Facility, the ultimate plan of reorganization, the level of new vehicle production by our customers, changes in our market share, changes in customer requirements regarding Rig specifications, the availability of tractors or engines, changes in the number of Rigs which we lease or utilize through owner-operators, and our ability to continue remanufacturing our Rigs primarily through our current provider.

We utilize primarily one company to remanufacture and supply certain parts needed to maintain a significant portion of our fleet of Rigs. While we believe that a limited number of other companies could provide comparable remanufacturing services and parts, a change in this service provider could cause a delay in and increase the cost of the remanufacturing process and the maintenance of our Rigs. Such delays and additional costs could adversely affect our operating results as well as our Rig remanufacturing and maintenance programs. In addition, we purchase our specialized tractors primarily through one manufacturing company. While this and other manufacturers also produce non-specialized tractors, we have not determined the impact on our equipment and operating costs should the specialized tractors not be available in the future.

Financing activities

We used $25.4 million in financing activities during 2006 while financing activities provided net cash of $74.2 million during 2005. During 2006, borrowings on credit facilities increased by $3.0 million compared to an increase in borrowings of $50.8 million in 2005. We paid $0.3 million of deferred financing costs during 2006 compared to $8.3 million for 2005. In addition, we only borrowed $6.4 million under insurance financing arrangements during 2006 since we were able to obtain funding for most of our 2006 insurance programs in the fourth quarter of 2005 and we were not required to finance the majority of our 2007 insurance premiums in 2006. This is in contrast to 2005 when we borrowed $42.4 million under insurance financing arrangements, since we did not finance our 2005 insurance premiums at the end of 2004. Additionally, during 2006, the repayments under insurance financing arrangements were $23.6 million higher than the repayments during 2005 since more premiums were financed for the 2006 coverage.

Credit facilities

On March 30, 2007, we entered into a New DIP Facility arranged by an affiliate of Goldman Sachs & Co., which provides financing of up to $315 million. The New DIP Facility, which was amended in April 2007, replaced the Original DIP Facility and subject to satisfaction of certain conditions, the New DIP Facility may be converted to a senior secured credit facility upon our emergence from Chapter 11. To the extent that the New DIP Facility is converted to a post-bankruptcy senior secured credit facility, such facility will mature five years after the effective date of the Joint Plan. If the conditions for conversion of the New DIP Facility are not satisfied or if we do not exercise the option to convert the New DIP Facility to a post-bankruptcy secured credit facility upon successful emergence from bankruptcy, the New DIP Facility will mature on the earlier of (i) September 30, 2007 and (ii) the effective

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date of a plan of reorganization or our emergence from Chapter 11. The New DIP Facility includes a $230 million secured term loan facility, a $50 million synthetic senior letter of credit facility and a $35 million senior secured revolving credit facility (“New Revolver”), which includes a swing-line credit commitment of $10 million. Proceeds from the New DIP Facility of $205 million at March 30, 2007 were used to repay all amounts outstanding under the Original DIP Facility and associated fees, and provide additional liquidity for working capital needs. The excess funds are being invested in overnight interest-bearing repurchase agreements. In connection with the termination of the Original DIP Facility and the funding of the New DIP Facility, we paid fees of approximately $9.4 million, $1.3 million of which related to termination of the Original DIP Facility and $8.1 million of which related to the New DIP Facility. The fees relating to the Original DIP Facility will be expensed during the first quarter of 2007 as part of the extinguishment of debt while the fees relating to the New DIP Facility will be deferred and amortized through September 30, 2007.

The New DIP Facility will provide us with working capital during and after the Chapter 11 Proceedings. The interest rates on the term loans in the New DIP Facility may vary based on either the Base Rate plus 2.50%, or Adjusted Eurodollar Rate plus 3.50%. The interest on the New Revolver may vary based on either the Base Rate plus 1.0%, or Adjusted Eurodollar Rate plus 2.0%. The swing line loans bear interest at the Base Rate plus 1.0%. Base Rate means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus ¹/2 of 1%. The Adjusted Eurodollar Rate means any Eurodollar Rate Loan adjusted for any reserve requirement as regulations may be issued from time to time by the Board of Governors of the Federal Reserve System. In addition, we will be charged a participation fee pursuant to the letter of credit facility equal to approximately 3.80% per annum of the amount of the synthetic letter of credit facility plus a fronting fee of 0.55% of the average daily maximum amount available to be drawn under letters of credit issued under the synthetic letter of credit facility. We also will be obligated to pay a commitment fee equal to 0.375% per annum times the daily average undrawn portion of the New Revolver and a commitment fee of 1.75% per annum times the daily average undrawn portion of the term loan facility.

As of May 3, 2007, $35 million of the New Revolver was available. Approximately $41.6 million was committed under letters of credit primarily related to the settlement of insurance claims, $205 million in term loans were outstanding and approximately $25 million in term loans were available.

The Original DIP Facility was entered into on July 31, 2005 in connection with the Chapter 11 filing and during its tenure was amended at certain intervals including the fifth amendment entered into on June 30, 2006, which provided us with an additional $30 million of liquidity through a new term loan, reduced the interest rate on certain other portions of the Original DIP Facility, waived all the defaults previously disclosed, permitted a portion of the interest due to be paid in kind by addition to principal on a monthly basis and extended the maturity date on the term loans to June 30, 2007. The revolving credit facility under the Original DIP Facility (“Original DIP Revolver”) was scheduled to mature on March 30, 2007 and the term loans were scheduled to mature on June 30, 2007.

During 2006, we invoked the option to pay interest in kind under the Original DIP Facility and paid interest in kind with an addition to principal of approximately $6.3 million.

As of May 3, 2007, we were in compliance with the covenants of the New DIP Facility but can provide no assurance that we will be able to comply with these covenants or, if we fail to do so, that we will be able to obtain amendments or waivers of such covenants.

On September 30, 1997, we issued $150 million of 8 5/8% senior notes (the “Senior Notes”) through a private placement. The Senior Notes were subsequently registered with the SEC, are payable in semi-annual installments of interest only and are scheduled to mature on October 1, 2007. Borrowings under the Senior Notes are general unsecured obligations of Allied Holdings, Inc. and are guaranteed by substantially all of our subsidiaries (the “Guarantor Subsidiaries”). The guarantees are full and unconditional and there are no restrictions on the ability of the Guarantor Subsidiaries to make distributions to our company. Allied Holdings, Inc. owns 100% of the Guarantor Subsidiaries. See Note 14 to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for a list of the companies that do not guarantee our obligations under the Senior Notes (the “Nonguarantor Subsidiaries”).

The filing for protection under Chapter 11 on July 31, 2005 constituted an event of default under the Senior Notes. The indenture agreement governing the Senior Notes provides that as a result of this event of default, the outstanding amount of the Senior Notes became immediately due and payable without further action by any holder

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of the Senior Notes or the trustee under the indenture. However, payment of the Senior Notes, including the semi-annual interest payments, is automatically stayed as of the Petition Date, absent further order of the Bankruptcy Court. As a result of the Chapter 11 Proceedings, and pursuant to SOP 90-7, we have reclassified the outstanding balance on the Senior Notes along with the related interest accrued as of the Petition Date to liabilities subject to compromise.

Our credit facilities and the Senior Notes are more fully discussed in Note 14 of our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

Contractual Obligations

We set forth in the table below our minimum contractual obligations as of December 31, 2006 (in thousands). The operating lease obligations, purchase obligations and insurance premium commitments are not recorded in our consolidated balance sheet.

	Payments Due In
Contractual Obligations	Total		2007		2008-2009		2010-2011		Thereafter
Original DIP Facility(1)	$	161,357	$	161,357	$	—	$	—	$	—
Operating lease obligations		18,967		10,043		7,253		1,145		526
Insurance premium financing(2)		5,414		5,414		—		—		—
Liability for unfunded defined benefit pension and other postretirement plans(3)		15,564		1,337		2,541		2,322		9,364
Purchase obligations(4)		77,799		10,658		21,538		21,984		23,619
Insurance premium commitments		22,678		22,678		—		—		—
Claims and insurance reserves(5)		103,093		38,786		28,058		12,491		23,758
Senior Notes(6)		154,313		154,313		—		—		—
Total	$	559,185	$	404,586	$	59,390	$	37,942	$	57,267

(1)	Excludes interest payable of $445,000. The Original DIP Facility was replaced by the New DIP Facility on March 30, 2007. The Original DIP Facility and the New DIP Facility are more fully discussed in Note 14 to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.
(2)	Excludes interest payable of $21,000. See Note 11 to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for a discussion of these financing arrangements.
(3)	The table above includes only the liability for the defined benefit postretirement plans other than pensions since these plans are the only unfunded plans. We also have one underfunded defined benefit pension plan with a recognized liability of $899,000, which is not included in the table above.
(4)	This obligation relates to an agreement with IBM. In April 2001, we entered into a five-year commitment with IBM whereby IBM would provide our mainframe computer processing services. In December 2003, we amended this agreement. The amended agreement is a ten-year commitment, commencing February 2004, for IBM to provide additional services to manage applications for EDI, network services, technical services, and applications development and support. The agreement includes outsourcing at prices defined within the agreement. Our Chapter 11 filing has not affected the terms and services under this contract. The obligation amount included in the table does not include a pre-petition obligation to IBM of $977,000 pursuant to this agreement since the timing and amount of the payment is uncertain.
(5)	Expected payouts of the aggregate amount of claims exclude liabilities subject to compromise since the timing of expected payouts cannot be estimated.
(6)	The Senior Notes, and related accrued interest as of the Petition Date, are expected to be allowed general unsecured claims. The Disclosure Statement for the Joint Plan contemplates distribution of new common stock on a pro rata basis to the holders of general unsecured claims.

The Pension Protection Act of 2006 (“PPA”) may impact the funding requirements for our pension plans beginning in 2008. Among other legislative changes, the PPA alters the manner in which liabilities and asset values are determined for the purpose of calculating required pension contributions and the timing and manner in which required contributions to under-funded pension plans would be made. These changes could result in an increase in the funding requirements for our pension plans.

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We have no significant income tax or litigation-related obligations, except for those covered by our insurance programs. For more information on income taxes and litigation, claims and assessments, see Notes 18 and 19 of our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K

Letters of Credit

We renew our letters of credit annually. At December 31, 2006, we had agreements with third parties to whom we had issued $138.3 million of letters of credit primarily relating to settlements of insurance claims and reserves and support for a line of credit at one of our foreign subsidiaries. Of the $138.3 million, $40.0 million of these letters of credit were secured by borrowings under the Original DIP Revolver and $98.3 million were issued by our wholly owned captive insurance subsidiary, Haul Insurance Limited, and were collateralized by $98.3 million of restricted cash, cash equivalents and other time deposits held by this subsidiary. As previously discussed, the Original DIP Facility was replaced by the New DIP Facility on March 30, 2007.

The amount of letters of credit that we may issue under the New Revolver included in the New DIP Facility may not exceed $50 million. As of May 3, 2007, we had utilized $41.6 million of this availability and had $8.4 million available. See also Note 18 (d) of our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company (1) has made a guarantee (2) has a retained or contingent interest in transferred assets (3) has an obligation under a contract that would be accounted for as a derivative except that it is indexed to the company’s stock and included in stockholders’ equity (4) has an obligation arising out of a variable interest in the unconsolidated entity and the unconsolidated entity provides financing, liquidity, market risk or credit risk support to the company or engages in leasing, hedging or research and development services with the company. Operating lease arrangements have potential off-balance sheet implications. Future minimum lease payments under our noncancelable operating leases at December 31, 2006 are reflected in the table above under “Contractual Obligations.” See also Note 13 to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

Disclosures About Market Risks

The market risks inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes in interest rates, fuel prices, self-insured claims and foreign currency exchange rates.

Fuel Prices

Our Automotive Group is dependent on diesel fuel to operate its fleet of Rigs. Diesel fuel prices are subject to fluctuations due to unpredictable factors such as the weather, government policies, and changes in global demand and global production. To reduce the price risk caused by market fluctuations, Allied Automotive Group periodically purchases fuel in advance of consumption. A 10% increase in diesel fuel prices would increase costs by $9.8 million over the next twelve months assuming levels of fuel consumption in the next twelve months are consistent with levels of fuel consumed in 2006. This increase in costs would at least be partially offset by our fuel surcharge arrangements with our customers. Currently, we have in place fuel surcharges with substantially all of our customers. In periods of rising fuel prices and declining vehicle deliveries, we may not recover all of the fuel price increase through our fuel surcharge programs since fuel surcharge rates reset at varying intervals based on fuel prices in the preceding applicable period.

Interest Rates

We enter into debt obligations to support general corporate purposes including capital expenditures and working capital needs. Prior to the Chapter 11 filing, the Senior Notes bore interest at a fixed rate. During the Chapter 11 Proceedings, the Senior Notes rank as an unsecured claim and we have ceased the accrual and payment of interest pending consummation of a plan of reorganization. As of December 31, 2006, we had $161.4 million outstanding under the Original DIP Facility which was subject to variable rates of interest. As previously discussed, the Original DIP Facility was replaced by the New DIP Facility on March 30, 2007. The interest rates on the term loans and New Revolver in the New DIP Facility may vary based on either the Base Rate plus 2.50%, or LIBOR plus 3.50%. The swing line loans bear interest at the Base Rate plus 1.0%. Based on the outstanding balance of

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the Original DIP Facility as of December 31, 2006, the impact of a three-percentage point increase in interest rates would result in an increase in our annual interest expense of approximately $4.8 million.

Risk Management Retention

We retain losses within certain limits through high deductibles or self-insured retentions. For certain risks, coverage for losses is provided by primary and reinsurance companies unrelated to our company. Our coverage is based on the date that a claim is incurred. Haul Insurance Limited, our captive insurance subsidiary, provides reinsurance coverage to certain of our third-party insurance carriers for certain types of losses for certain years within our insurance program, primarily insured workers’ compensation, automobile and general liability risks. Our retentions and deductibles are more fully discussed in Note 12 of the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K

For 2005, we were self-insured, primarily through our captive insurance company, for the majority of our workers’ compensation losses which will be paid over a number of years. In contrast, the majority of our risk related to workers’ compensation claims in 2007 and 2006 is covered by a fully insured program with no deductible.

We are also required to provide collateral to our insurance companies and various states for losses in respect of worker injuries, accident, theft, and other loss claims. For this purpose, we utilize cash and/or letters of credit. To reduce our risks in these areas as well as the letter of credit or underlying collateral requirements, we have implemented various risk management programs. However, we can provide no assurance that the current letter of credit requirements will be reduced nor can we provide assurance that these letter of credit requirements will not increase.

Claims and insurance reserves are adjusted periodically, as claims develop, to reflect changes in actuarial estimates based on actual experience. During 2006, the estimated ultimate amount of claims from prior years increased approximately $8.0 million or $0.89 per share. During 2005, the estimated ultimate amount of claims from prior years increased approximately $3.2 million or $0.36 per share.

Because we retain liability for a significant portion of our risks, an increase in the number or severity of accidents, on the job injuries, other loss events over those anticipated, or adverse development of existing claims including wage and medical cost inflation could have a material adverse effect on our profitability. While we currently have insurance coverage for claims above our retention levels, there can be no assurance that we will be able to obtain insurance coverage in the future.

Foreign Currency Exchange Rates

Though we operate primarily in the U.S., we own foreign subsidiaries, the most significant being Allied Systems (Canada) Company. The net investment in our foreign subsidiaries translated into U.S. dollars using the rate of exchange in effect at December 31, 2006, was $38.3 million. The potential impact on other comprehensive income resulting from a hypothetical 10% change in quoted foreign currency exchange rates approximates $3.8 million.

At December 31, 2006, we had an intercompany payable balance of $43.0 million denominated in U.S. dollars recorded on our Canadian subsidiary’s balance sheet. The potential impact from a hypothetical 10% change in quoted foreign currency exchange rates related to this balance would be a $4.3 million charge or credit to the income statement. We do not use derivative financial instruments to hedge our exposure to changes in foreign currency exchange rates.

Inflation

While we may have been subject to some measure of inflation, we do not believe that this has impacted our results significantly. In addition, it would be difficult to isolate such effects on our operations.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make decisions based upon estimates, assumptions, and factors we consider relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in

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their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of our estimates and assumptions. Accordingly, actual results could differ materially from those anticipated.

A summary of the significant accounting policies followed in the preparation of the financial statements is contained in Note 2 of our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K. Other footnotes describe various elements of the financial statements and the assumptions on which specific amounts were determined.

We believe that the following critical accounting policies and underlying estimates and judgments involve a higher degree of complexity than others do:

LIABILITIES SUBJECT TO COMPROMISE AND REORGANIZATION ITEMS — The consolidated financial statements included in Item 15 of this Annual Report on Form 10-K include as liabilities subject to compromise our estimate of pre-petition liabilities at the amounts expected to be allowed by the Bankruptcy Court, which, are not necessarily the amounts at which they will be settled. We also include in liabilities subject to compromise our estimate of liabilities for damages under rejected contracts. Though based on the best available information, we expect that some of these estimates will change when resolved under a plan of reorganization. In addition, liabilities classified as subject to compromise may change to the extent that payment of a pre-petition liability is approved by the Bankruptcy Court.

Furthermore, the classification of an item of income or expense as a reorganization item requires management’s judgment in deciding whether the item is directly associated with the Chapter 11 Proceeding. Reorganization items for the year ended December 31, 2006 were approximately $12.8 million.

CLAIMS AND INSURANCE RESERVES — As discussed above in “Disclosures About Market Risks — Risk Management Retention,” we retain liability for a significant portion of our risks through self-insured retentions and/or deductibles. Claims and insurance reserves reflect the estimated cost of claims for workers’ compensation, cargo loss and damage, automobile and general liability, and products liability losses that are not covered by insurance. Amounts that we estimate will be paid within the next year have been classified as current in “accrued liabilities” in our consolidated balance sheet while the noncurrent portion is included in “other long-term liabilities.” Costs related to these reserves are included in the statement of operations in “insurance and claims” expense, except for workers’ compensation, which is included in “salaries, wages, and fringe benefits.”

We utilize third-party claims administrators, who work under our direction, and third-party actuarial valuations to assist in the determination of the majority of our claims and insurance reserves. The third-party claims administrators set claims reserves on a case-by-case basis. The third-party actuary utilizes the aggregate data from those reserves, along with historical paid and incurred amounts, to determine, by loss year, the projected ultimate cost of all claims reported and not yet reported, including possible adverse developments. Our reserve for estimated retrospective premium adjustments for workers’ compensation losses in Canada is based on historical experience and the most recently available actual claims data provided by the Canadian government. Our product liability claims reserves are set on a case-by-case basis by our management in conjunction with legal counsel handling the claims, and include an estimate for claims incurred but not yet reported. We track cargo claims and record reserve amounts on a case-by-case basis. The reserve for cargo claims includes an estimate of incurred but not reported claims.

The process of determining reserves for all losses is subject to our evaluation of accident frequency, the nature and severity of claims, litigation risks and historical claims experience adjusted for current industry trends. The claims and insurance reserves are adjusted periodically as such claims develop to reflect changes in estimates made by our third-party claims processors and changes in actuarial estimates by our third-party actuary based on actual experience. Changes in the estimate of these accruals are charged or credited to expense in the period determined. If we were to use different assumptions or if different conditions occur in future periods, future operating results or liquidity could be materially impacted.

Based on self-insurance accruals at December 31, 2006, if our estimate of unpaid claims was increased by 5%, the accrual and operating loss would have increased by approximately $5.3 million.

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ACCOUNTS RECEIVABLE VALUATION RESERVES — Substantially all our revenue is derived from transporting new automobiles, SUVs, and light trucks from manufacturing plants, ports, auctions, and railway distribution points to automobile dealerships. For such services, we record revenues when vehicles are delivered to the dealerships and make estimates to determine the collectibility of our accounts receivable. Estimates include assessments of the potential for customer billing adjustments based on the timing of delivery, the accuracy of pricing, as well as evaluations of the historical aging of customer accounts. In addition, estimates include periodic evaluations of the creditworthiness of customers, including the impact of market and economic conditions on their ability to honor their obligations to us. If billing adjustments outside of our estimates arose or the financial condition of a customer were to deteriorate, additional allowances may be required. Accounts receivable balances at December 31, 2006 and 2005 were $52.4 million and $61.4 million, respectively, net of allowances for doubtful accounts of $1.7 million and $2.2 million, respectively as of December 31, 2006 and 2005.

ACCOUNTING FOR INCOME TAXES — As part of the process of preparing our consolidated financial statements, we are required to determine income taxes related to each of the jurisdictions in which we operate. This process involves estimating current tax exposure, together with assessing temporary differences resulting from differing treatments of items for tax versus financial reporting purposes. These differences result in deferred tax assets and liabilities in our consolidated balance sheet. We must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. In determining the required level of valuation allowance, we consider whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. This assessment is based on management’s expectations as to whether sufficient taxable income of an appropriate character will be realized within tax carryback and carryforward periods. Our assessment involves estimates and assumptions about matters that are inherently uncertain, and unanticipated events or circumstances could cause actual results to differ from these estimates. Should we change our estimate of the amount of deferred tax assets that we would be able to realize, a change to the valuation allowance would result in an increase or decrease to the provision for income taxes in the period in which such change in estimate was made.

At December 31, 2006, we had U.S. federal net operating loss carryforwards of $81.5 million that expire between 2021 and 2026. Included in the federal loss carryforwards are the federal taxable losses related to our Canadian operations, whose income and losses are included in the U.S tax return as well as in the Canadian tax returns. The net operating loss carryforwards for Canadian tax filing purposes total CDN $23.7 million, which expire between 2009 and 2015. We had federal capital loss carryforwards of $0.3 million that expire in 2009. In addition, $7.0 million of tax credit carryforwards are available to reduce future income taxes. Of the tax credit carryforwards, $6.3 million consists of foreign tax credits that expire between 2011 and 2016 and $0.7 million consists of alternative minimum tax credits that have no expiration.

In the normal course of business, we are subject to audits from the federal, state, provincial and other tax authorities regarding various tax liabilities. We record refunds from audits when receipt is assured and record assessments when a loss is probable and estimable. These audits may alter the timing or amounts of taxable income or deductions, or the allocation of income among tax jurisdictions. The amount ultimately paid upon resolution of issues raised may differ from the amounts accrued.

PENSION AND POSTRETIREMENT BENEFITS — As more fully discussed in Note 16 of the Notes to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K, at December 31, 2006, we adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards (“SFAS”) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106 and 132(R). Accordingly, we recognized the funded status of our defined benefit pension and other postretirement benefit plans in our consolidated balance sheet at December 31, 2006. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation. The adoption of SFAS No. 158 had no effect on our consolidated statement of operations for the year ended December 31, 2006. The incremental effects on our consolidated balance sheet at December 31, 2006 are disclosed in Note 16 of the Notes to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

Our pension and other postretirement benefit costs are calculated using various actuarial assumptions and methodologies as prescribed by SFAS No. 87, Employers’ Accounting for Pension and, SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other than Pensions. These assumptions include discount rates, healthcare cost trend rates, inflation, rate of compensation increases, expected return on plan assets, mortality rates, and other

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factors. Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect the expense we recognize and obligation we record in such future periods. Though there is authoritative guidance on how these assumptions should be selected, management must exercise some measure of judgment in the selection of these assumptions. We believe that the assumptions utilized in recording the obligations under our plans are reasonable based on input from our third-party actuaries and other advisors and information as to historical experience and performance. Differences in actual experience or changes in assumptions may affect our pension and other postretirement obligations and future expense. Disclosure of the significant assumptions used in calculating the 2006 net pension expense is presented in Note 16 of the notes to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

Our discount rates are based primarily on the Moody AA Corporate Bond Rates with a twenty-year maturity, rounded up to the nearest quarter point, since we believe that this approximates the ultimate payout of the benefits in our plans.

Our targeted rate of return on plan assets is between 8.0% and 9.0%. To calculate pension expense, the expected long-term rate of return on plan assets was 8.0% in 2006. In determining the long-term rate of return on assets for our plans, we consider the historical rates of return, the nature of the plan’s investments and the targeted rate of return on plan assets. The weighted average asset allocation of the pension plans as of December 31, 2006 are shown in Note 16 of the notes to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

We have estimated that the approximate effect, on the calculation of the projected 2007 net periodic benefit cost, of an increase or decrease of 0.25% in the discount rate or expected rate of return on assets would be as follows:

			%
Discount rate	Investment return		Impact
5.50%		8.00%		(12.9	)%
6.00%		8.00%		10.0	%
5.75%		8.25%		8.5	%
5.75%		7.75%		(8.5	)%

A substantial number of our employees are covered by union-sponsored, collectively bargained, multiemployer pension plans. Contributions to these plans are determined in accordance with the provisions of negotiated labor contracts and are generally based on the number of hours worked. In the event we reduce the level of our participation in any of these plans, we could incur a withdrawal liability for a portion of the unfunded benefit obligation of the plan, if any. If a withdrawal were to occur, the liability would be the actuarially determined unfunded obligation based on factors at the time of withdrawal. During 2005, we recorded a $15.8 million charge for a probable withdrawal liability for our estimated portion of the underfunded benefit obligation of two multiemployer pension plans.

PROPERTY AND EQUIPMENT — We own approximately 2,600 Rigs which we use to transport motor vehicles for our customers. Property and equipment, including these Rigs, are stated at cost less accumulated depreciation and any impairment charges. We compute depreciation by taking the cost of these assets less the estimated residual value and dividing the result by the estimated useful lives of these assets. This method of depreciation is referred to as the straight-line method. We also evaluate the carrying amount of these long-lived assets for impairment by analyzing the operating performance and future cash flows of these assets, whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable, including the need to adjust the carrying amount of the underlying assets if the sum of the expected cash flows is less than the carrying amount. Our evaluation of the carrying amount can be impacted by our projection of future cash flows, the level of actual cash flows, the salvage values, the methods of estimation used for determining fair values and the impact of guaranteed residuals. Any changes in our judgments could impact our estimates of annual depreciation expense and impairment charges.

GOODWILL — In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we do not amortize goodwill but instead, we evaluate it annually for impairment and will evaluate it between annual tests if an event occurs or circumstances change which indicate that the carrying amount of reporting unit goodwill might be impaired. We complete our annual impairment tests in the fourth quarter of each year and generally recognize an

45

impairment loss when the carrying amount of reporting unit goodwill exceeds the unit’s estimated fair value. The fair value of goodwill is derived by using a discounted cash flow analysis. This analysis involves estimates and assumptions by management regarding future sales volume, prices, inflation, expenses and capital spending, appropriate discount rates, exchange rates, tax rates and other factors. We believe that the estimates and assumptions are reasonable, and that they are consistent with the assumptions, which the reporting units use for internal planning purposes. However, significant judgment is involved in estimating these factors and they include inherent uncertainties. If we had used other estimates and assumptions, the analysis could have resulted in different conclusions regarding the amount of goodwill impairment, if any. Furthermore, additional future impairment losses could result if actual results differ from those estimates.

ADOPTION OF SEC STAFF ACCOUNTING BULLETIN NO. 108 - In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 requires registrants to quantify misstatements using both the balance-sheet and the income-statement approaches and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is determined to be material, SAB No. 108 allows registrants to record that effect as a cumulative-effect adjustment to beginning-of-year retained earnings or accumulated deficit. The new guidance applies when uncorrected misstatements in a previous year affect the current year, either because misstatements carry over or reverse.

We were required to consider the provisions of SAB No. 108 in the preparation of our financial statements for the year ended December 31, 2006 and recorded a cumulative-effect adjustment to accumulated deficit as of January 1, 2006 of $1.5 million. We identified three uncorrected misstatements affecting the prior year financial statements that were not material to those statements individually, or in the aggregate, using the balance-sheet approach. However, the impact of correcting these misstatements was material to the financial statements for the year ended December 31, 2006 under the income-statement approach. Therefore, in accordance with SAB No. 108 we recorded the cumulative-effect adjustment as of January 1, 2006. The detail of the items included in the adjustment were as follows:

• In 1994, in connection with the acquisition of Auto Haulaway, a Canadian company, we assumed the obligations of a postretirement benefit plan to provide certain retired employees with healthcare and life insurance benefits. The obligation of $810,000 as of January 1, 2006, related to this plan had not been reflected in our consolidated balance sheet.

• We identified several uncertain tax positions during 2006 that did not meet the criteria under GAAP for recognition of the benefit. The estimated liability for tax, interest and penalties of $370,000 as of January 1, 2006 had not been reflected in our consolidated balance sheet.

• A number of proofs of claim were filed against the Debtors by various creditors and security holders prior to the bar date set by the Bankruptcy Court. As part of the claims reconciliation process, the Debtors are reviewing these claims for validity. In reconciling proofs of claims submitted by creditors, we identified additional pre-petition liabilities of $296,000 during 2006 that had not been reflected in liabilities subject to compromise. As additional proofs of claim are reconciled, the Debtors may need to record additional liabilities subject to compromise. Such adjustments could have a material effect on the consolidated financial statements.

POTENTIAL APPLICABILITY OF FRESH START-REPORTING — We may be required, as part of our emergence from bankruptcy protection, to adopt fresh-start reporting in a future period. If fresh-start reporting is applicable, our assets and liabilities will be recorded at fair value as of the fresh-start reporting date. The fair value of our assets and liabilities may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. In addition, if fresh-start reporting is required, the financial results of our company after the application of fresh-start reporting could differ materially from historical results.

In addition, pursuant to SOP 90-7, changes in accounting principles that will be required within twelve months following the adoption of fresh-start reporting will need to be adopted at the date we implement fresh-start reporting.

See Note 3 to our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for additional information on our accounting during the Chapter 11 Proceedings.

Recent Accounting Pronouncements

For a discussion of recently issued accounting pronouncements that have not yet been adopted, see Note 4 to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information required under this item is provided under the caption “Disclosures About Market Risks” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 8. Financial Statements and Supplementary Data

Financial statements and supplementary data are set forth beginning on page F-1 in Item 15 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this annual report, Allied, under the supervision and with the participation of Allied’s management, including the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of Allied’s disclosure controls and procedures (as defined in Sections 13a -15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Allied’s disclosure controls and procedures were effective as of December 31, 2006, in alerting them in a timely manner of material information required to be included in Allied’s periodic SEC filings.

(b) Changes in Internal Control over Financial Reporting:

In connection with its audits of our consolidated financial statements for the years ended December 31, 2005, 2004 and 2003, including reviews of the quarterly periods for those years, KPMG advised the Audit Committee and management that KPMG had identified deficiencies in our analysis, evaluation and review process for financial reporting. KPMG informed the Audit Committee and management that it believed such deficiencies were a “material weakness” in our internal control over financial reporting, with respect to our analysis, evaluation and review of financial information included in our financial reporting.

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During 2004 and 2005, in response to the material weakness, we undertook a review and, where necessary, revised our accounting policies and procedures to ensure that all reasonable steps were being taken to address and correct the material weakness identified by KPMG. As part of this process, we hired an external consulting firm to assist us in reviewing and revising our policies and procedures, hired a new Chief Financial Officer and two senior level accounting staff members and added several other accounting professionals in February and March 2005. We believe that these actions, among others, established the appropriate foundation upon which to remediate this material weakness as processes, including regular evaluation and management reviews, which were put in place and strengthened during 2005. During 2006, we allocated additional resources to address the material weakness and made continuing improvements.

In connection with the audit of our consolidated financial statements for the year ended December 31, 2006, KPMG indicated that they did not identify a material weakness as of December 31, 2006. Since we are not an accelerated filer (as defined in Exchange Act Rule 12b-2), we have not conducted the initial assessment of our internal control over financial reporting mandated by Section 404 of the Sarbanes-Oxley Act of 2002 and will report on that annual assessment in our Annual Report on Form 10-K, when required, which will be no earlier than for the year ending December 31, 2007. That process could identify significant deficiencies or material weaknesses not previously reported.

KPMG has not audited the effectiveness of our internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States), and they have not expressed an opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

We can provide no assurances that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be discovered in the future. If we fail to remediate any such material weakness, our operating results or customer relationships could be adversely affected or we may fail to meet our SEC reporting requirements or our financial statements may contain a material misstatement.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives or of preventing fraud due to its inherent limitations, regardless of how well designed or implemented. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Because of these limitations, there is a risk that material misstatements or instances of fraud may not be prevented or detected on a timely basis by our internal control over financial reporting.

Other than the items identified above, there were no other changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Set forth below are the names, ages, summary background and experience of each of our directors:

DAVID G. BANNISTER
Director Since 1993
Age 51

Mr. Bannister is Senior Vice President — Strategy and Development of FTI Consulting, Inc. and has held that position since June 2005. Mr. Bannister was a private investor from January 2004 to May 2005 and was Managing Director of Grotech Capital Group, a private equity group, from June 1998 to December 2003. Mr. Bannister was Managing Director in the Transportation Group of BT Alex Brown Incorporated and was employed by that firm in various capacities from 1983 to June 1998. Mr. Bannister is also a director of Landstar System, Inc.

THOMAS E. BOLAND
Director Since 2001
Age 72

Mr. Boland retired as Chairman of the Board of Wachovia Corporation of Georgia and Wachovia Bank of Georgia, N.A., in April, 1994. Mr. Boland joined Wachovia (formerly The First National Bank of Atlanta) in 1954 and was a senior executive in various capacities until his retirement. Mr. Boland has been Special Counsel to the President of Mercer University of Macon and Atlanta since October 1995. Mr. Boland currently serves on the boards of directors of Citizens Bancshares, Inc. and its subsidiary Citizens Trust Bank in Atlanta and Neighbors Bancshares, Inc. and its subsidiary Neighbors Bank, Alpharetta, Georgia. Mr. Boland is past chairman of the board of directors of Minbanc Capital Corporation of Washington, D.C. and formerly served on the boards of directors of InfiCorp Holdings, Inc. of Atlanta, and VISA International and VISA U.S.A. of San Mateo, California.

GUY W. RUTLAND, III
Director Since 1964
Age 70

Mr. Rutland was elected Chairman Emeritus in December 1995 and served as Chairman of the Board from 1986 to December 1995. Prior to October 1993, Mr. Rutland was Chairman or Vice Chairman of each of our subsidiaries.

GUY W. RUTLAND, IV
Director Since 1993
Age 43

Mr. Rutland has been our Senior Vice President of Labor and Recruiting since July 2001, and was Executive Vice President and Chief Operating Officer of Allied Automotive Group, Inc., a subsidiary of our company, from February 2001 to July 2001. Mr. Rutland was Senior Vice President - Operations of Allied Automotive Group, Inc. from November 1997 to February 2001. Mr. Rutland was Vice President — Reengineering Core Team of Allied Automotive Group, Inc., from November 1996 to November 1997. From January 1996 to November 1996, Mr. Rutland was Assistant Vice President of the Central and Southeast Region of Operations for Allied Systems, Ltd., a subsidiary of our company. 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 for Allied Systems, Ltd.

ROBERT J. RUTLAND
Director Since 1965
Age 65

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Mr. Rutland has been our Chairman since 1995, and served as Chief Executive Officer from February 2001 to June 2001 and from December 1995 to December 1999 and President and Chief Executive Officer from 1986 to December 1995. Prior to October 1993, Mr. Rutland was Chief Executive Officer of each of our subsidiaries. Mr. Rutland is a member of the board of directors of Fidelity National Bank, a national banking association.

HUGH E. SAWYER
Director Since 2001
Age 52

Mr. Sawyer has been our President and Chief Executive Officer since June 2001. Mr. Sawyer served as President and Chief Executive Officer of Aegis Communications Group, Inc. from April 2000 to June 2001. Mr. Sawyer served as President of Allied Automotive Group, Inc., a subsidiary of our company, from January 2000 to April 2000. Mr. Sawyer was President and Chief Executive Officer of National Linen Service, a subsidiary of National Service Industries, Inc., from 1996 to 2000, and President of Wells Fargo Armored Service Corp., a subsidiary of Borg-Warner Corp., from 1988 to 1995. Mr. Sawyer previously served as member of the board of directors of Spiegel, Inc. from October 2003 to June 2005.

J. LELAND STRANGE
Director Since 2002
Age 65

Mr. Strange is Chairman of the board of directors, Chief Executive Officer and President of Intelligent Systems Corporation and has been with that company since its merger with Quadram Corporation in 1982. Mr. Strange is Chairman of the Georgia Tech Research Corp. He serves on the advisory board of the Georgia Institute of Technology’s College of Management.

BERNER F. WILSON, JR.
Director Since 1993
Age 68

Mr. Wilson retired as Vice President and ViceChairman of our company in June 1999. Mr. Wilson was Secretary of our company from December 1995 to June 1998. Prior to October 1993, Mr. Wilson was an officer or Vice Chairman of several of our subsidiaries. Mr. Wilson joined our company in 1974 and held various finance, administration, and operations positions prior to his retirement in 1999. Mr. Wilson currently serves on the board of directors of Mountain Heritage Bank in Clayton, Georgia.

ROBERT R. WOODSON
Director Since 1993
Age 75

Mr. Woodson retired as a member of the board of directors of John H. Harland Company in April 1999 and served as its Chairman from October 1995 to April 1997. Mr. Woodson was also the President and Chief Executive Officer of John H. Harland Company prior to October 1995. Mr. Woodson also served as a director of Haverty Furniture Companies, Inc. through May 2002.

AUDIT COMMITTEE

The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to our company’s financial matters. The Board of Directors has adopted a written charter for the Audit Committee, which was included as Appendix A to our Proxy Statement for the 2004 annual meeting of shareholders as filed with the SEC on April 16, 2004. Under the charter, the Audit Committee’s principal responsibilities include hiring our independent auditors; reviewing the plans and results of the audit engagement with the independent auditors; inquiring as to the adequacy of our internal accounting controls; monitoring compliance with material policies and laws, including our Code of Conduct; and reviewing our financial statements, reports and releases.

The Audit Committee oversees our Code of Conduct, which applies to all of our directors, executive officers and nonbargaining unit employees. The Code of Conduct was included as an exhibit to our 2003 Annual Report on Form 10-K filed with the SEC on April 13, 2004.

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The members of our Audit Committee are David G. Bannister, Thomas E. Boland and Robert R. Woodson, with Mr. Bannister serving as the Chairman. The Board has determined that Messrs. Bannister, Boland and Woodson each qualifies as an “audit committee financial expert” as that term is defined by the SEC rules adopted pursuant to the Sarbanes-Oxley Act of 2002. All members of the audit committee are independent in accordance with the AMEX rules governing independence. During 2005 the Audit Committee held 10 meetings and in 2006 the Audit Committee held 4 meetings.

EXECUTIVE OFFICERS

The following table sets forth certain information regarding our executive officers:

Name	Age		Title
Robert J. Rutland		65	Chairman and Director
Hugh E. Sawyer		52	President, Chief Executive Officer and Director
Guy W. Rutland, IV		43	Senior Vice President and Director
Thomas M. Duffy		46	Executive Vice President, General Counsel and Secretary
Thomas H. King		52	Executive Vice President and Chief Financial Officer
Joseph V. Marinelli		50	Senior Vice President, Field Operations

Mr. Robert Rutland has been our Chairman since 1995. He served as Chairman and Chief Executive Officer between February 2001 and June 2001, also as President and Chief Executive Officer between 1986 and December 1995. Prior to October 1993, Mr. Rutland served as Chief Executive Officer of each of our subsidiaries. Mr. Rutland is a member of the board of directors of Fidelity National Bank, a national banking association.

Mr. Sawyer has been our President and Chief Executive Officer since June 2001. Between April 2000 and June 2001, he served as President and Chief Executive Officer of Aegis Communications Corp. Mr. Sawyer also served as President of our Automotive Group between January 2000 and April 2000, as President and Chief Executive Officer of National Linen Service (a subsidiary of National Service Industries, Inc.) between 1996 and 2000 and as President of Wells Fargo Armored Service Corp. (a subsidiary of Borg-Warner Corp.) between 1988 and 1995. Mr. Sawyer previously served as member of the board of directors of Spiegel, Inc. from October 2003 to June 2005.

Guy W. Rutland IV has been a Senior Vice President since July 2001. Mr. Rutland was Executive Vice President and Chief Operating Officer of our Automotive Group between February 2001 and July 2001, Senior Vice President — Operations of our Automotive Group between November 1997 and February 2001 and Vice President — Reengineering Core Team of our Automotive Group between November 1996 and November 1997. Between January 1996 and November 1996, Mr. Rutland was Assistant Vice President of the Central and Southeast Operations of Allied Systems, Ltd., one of our subsidiaries. Between March 1995 and January 1996, Mr. Rutland was Assistant Vice President of Operations for the Central Division of Allied Systems, Ltd. and Assistant Vice President of its Eastern Division between June 1994 and March 1995. Between 1993 and June 1994, Mr. Rutland was assigned to the special projects department during which time he performed an assignment in the Industrial Relations/Labor Department. Between 1988 and 1993, Mr. Rutland served as our Director of Performance Management.

Mr. Duffy has been our Executive Vice President, General Counsel and Secretary since February 2004, was Senior Vice President, General Counsel and Secretary between November 2000 and February 2004, and was Vice President, General Counsel and Secretary from June 1998 to November 2000. Between May 1997 and June 1998, Mr. Duffy was a partner with the law firm of Troutman Sanders LLP. Prior to May 1997, Mr. Duffy was a partner with the law firm of Peterson Dillard Young Asselin & Powell LLP.

Mr. King was appointed Executive Vice President and Chief Financial Officer on January 25, 2005, prior to which he served us as a full-time accounting consultant when he was with Tatum Partners. Tatum Partners is a consulting group, which he joined in 2000, that provides clients with a full range of chief financial officer services. While at Tatum Partners, Mr. King served as interim CFO and financial vice-president for a number of public and private companies. Prior to joining Tatum Partners, Mr. King served as Chief Financial Officer of John Galt Holdings, Ltd. & Affiliates. Mr. King is a certified public accountant and has worked at the accounting firms of Deloitte & Touche LLP and PriceWaterhouseCoopers.

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Mr. Marinelli has been our Senior Vice President, Field Operations since April 2004. Prior to joining our company, Mr. Marinelli worked with Aegis Communications where he served as Executive Vice President — Operations from July 2001 and as Senior Vice President of Field of Operations between July 2000 and June 2001. Between April 1998 and April 2000, Mr Marinelli was the Senior Vice President of Field Operations at National Linen Services.

SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors, and persons who own more than 10% of our common stock, to file reports of ownership and changes in ownership of our common stock with the SEC. Officers, directors and greater than 10% beneficial owners are required by applicable regulations to furnish us with copies of all Section 16(a) forms that they file.

Based solely upon a review of the copies of the forms and written representations furnished to us, we believe that during the 2005 and 2006 fiscal years, our officers, directors and 10% shareholders complied with all applicable filing requirements.

Item 11. Director and Executive Compensation

Director Compensation

The following table presents information relating to total compensation of our non-employee directors for the fiscal year ended December 31, 2006.

Director Compensation Table

									Change in
									Pension Value
	Fees								and Non-
	Earned								qualified
	or Paid				Option		Non-Equity		Deferred
	in Cash		Stock		Awards		Incentive Plan		Compensation		All Other
	(1)		Awards		(2)		Compensation		Earnings		Compensation		Total
Name	($)		($)		($)		($)		($)		($)		($)
David G. Bannister		79,500		—		2,367		—		—		—		81,867
Thomas E. Boland		74,500		—		2,367		—		—		—		76,867
Guy W. Rutland, III		56,500		—		—		—		—		—		56,500
J. Leland Strange		61,000		—		2,367		—		—		—		63,367
Berner F. Wilson, Jr.		56,500		—		2,367		—		—		—		58,867
Robert R. Woodson		76,000		—		2,367		—		—		—		78,367
William P. Benton(3)		69,000		—		2,367		—		—		—		71,367

(1)

For the year ended December 31, 2006, each director who was not also an employee received an annual fee of $25,000 and a fee of $1,500 for each meeting of the Board or any of its committees attended, plus reimbursement of expenses for attending meetings. An additional fee of $5,000 was paid to the chairman of each committee of the Board. Directors are also eligible to participate in our Amended and Restated Long-Term Incentive Plan (the “LTI Plan”). No awards were made to directors under the LTI Plan in 2006.

(2)

Option Awards. The amounts in this column represent the amount of the expense recognized in the consolidated financial statements for the year ended December 31, 2006 attributable to all outstanding stock option awards for each nonemployee director, disregarding any adjustments for estimated

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	forfeitures, and thus include amounts attributable to option awards made prior to 2006. No awards were granted in 2006. See Note 2(n) to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for the year ended December 31, 2006 for an explanation of the assumptions made in the valuation of these awards.
(3)	Mr. Benton resigned from the Board in March 2007.

For the year ended December 31, 2006, each director who was not also an employee received an annual fee of $25,000 and a fee of $1,500 for each meeting of the Board or any of its committees attended, plus reimbursement of expenses for attending meetings. An additional fee of $5,000 was paid to the chairman of each committee of the Board. Directors are also eligible to participate in our Amended and Restated Long-Term Incentive Plan (the “LTI Plan”). No awards were made to directors under the LTI Plan in 2006.

When we filed for Chapter 11 on July 31, 2005, we owed our directors an aggregate of $177,167 in fees for meetings of the Board and committee meetings that they attended, as well as for reimbursement of expenses for attending meetings prior to August 1, 2005. As a result of our Chapter 11 filing, we did not pay these fees nor did we reimburse our directors for expenses incurred.

Compensation Discussion and Analysis

The Compensation and Nominating Committee of the Board (the “Compensation Committee”) has responsibility for establishing and administering the compensation program for our executive officers. The primary components of our executive compensation program include the payment of base salary, incentive compensation, and stock compensation to our executive officers. The Compensation Committee considers recommendations of the CEO in setting compensation for the named executive officers other than the CEO.

The components of our compensation program were impacted in 2006 by the continuation of the Chapter 11 Proceedings during 2006. An objective of the Compensation Committee during 2006 was to retain its executive officers as we attempted to emerge from Chapter 11. As an example, the Compensation Committee approved the Severance Pay, Retention and Emergence Bonus Plan for Key Employees (the “Retention Plan”) in 2005 as a means of providing an incentive for our executive officers to remain with us during the Chapter 11 Proceedings. The Bankruptcy Court later approved this plan.

The Compensation Committee determined that because the Retention Plan was in place and we were attempting to reduce our labor costs under the collective bargaining agreement with the Teamsters in the U.S. to facilitate the successful reorganization and exit from Chapter 11, it would not increase the base salaries paid to executive officers nor would it adopt any management incentive compensation programs for 2006.

The Compensation Committee also did not grant any stock options or other form of equity awards to any executive officers during 2006. The Compensation Committee was uncertain about how stock options or the underlying equity would be treated as we attempted to reorganize and emerge from Chapter 11 and therefore did not believe that it should issue any form of stock options or equity awards during 2006. Further, we did not make any significant modifications to the benefits plans or the underlying benefits provided to our executive officers during 2006.

We have filed the Disclosure Statement for the Joint Plan with the Bankruptcy Court and anticipate that we will emerge from Chapter 11 during the first half of 2007. We have not yet announced the specific plans for compensation programs subsequent to our anticipated emergence from Chapter 11.

Executive Compensation Components.

Our executive compensation philosophy is to link compensation with enhancement of shareholder value and retain executive talent that we consider important for long-term success. Our executive compensation is based on the following three principal components, each of which is intended to support the overall compensation philosophy:

Base Salary. The Compensation Committee considers several factors in determining the annual salary of each of the executive officers. Factors considered by the committee include its evaluation of each executive officer’s performance, its assessment of the executive officer’s value to the organization and any planned change in functional responsibilities of the executive officer. Base salary amounts for each of the named executive officers are specified in their employment agreements. The Compensation Committee believes these base salary amounts

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are appropriate given the need to attract and retain qualified executives and that these base salary amounts are competitive with those paid to executives of other leading companies engaged in the transportation, logistics and trucking industries, and turnaround management.

Incentive Compensation. The Compensation Committee considers several factors in determining whether to award incentive compensation to its executive officers, including criteria related to the implementation and achievement of our company’s turnaround plan and executive officers’ individual performance in connection with the revitalization initiatives that we adopted. For 2006, the Compensation Committee did not award any incentive compensation for the named executive officers.

Retention Plan. Effective August 1, 2005, the Bankruptcy Court approved the Severance Pay, Retention and Emergence Bonus Plan for Key Employees (the “Retention Plan”), which applies to certain employees. As described in more detail below, the Retention Plan provides participating employees with both severance benefits and bonuses for staying with us during the Chapter 11 Proceedings. The Retention Plan supersedes any severance or bonus payments that would otherwise be payable to participating employees, including any benefits payable under employment agreements with such participants. Any employee eligible to participate in the Retention Plan had the right to opt out of the Retention Plan and to continue to be covered by any severance or bonus arrangement in place for such individual. No employee has elected to opt out of the Retention Plan. However, in May of 2006, Mr. Sawyer voluntarily removed himself from the bonus component of the Retention Plan. Further, Mr. Sawyer also voluntarily reduced his base salary by 15% effective March 1, 2006. Mr. Robert Rutland is not covered by the Retention Plan.

Under the terms of the Retention Plan, participants are entitled to receive a lump-sum severance payment that is payable no later than 30 days after an involuntary termination or a voluntary termination for good reason, as defined. The amount of any severance payment is equal to a percentage of the employee’s annual base salary, excluding bonus payments or other extraordinary income, as of the eligibility date for benefits under the Retention Plan. Under the Retention Plan, each of Messrs. Sawyer, Duffy and King would be entitled to a severance payment equal to 150% of his base salary and Mr. Marinelli would be entitled to a severance payment equal to 100% of his base salary.

The Retention Plan provides for a retention bonus payable upon the achievement of certain milestones. The last payment is payable 60 days after the effective date of the confirmed plan of reorganization. The retention bonus is based on a percentage of the employee’s annual base salary. Under the Retention Plan, each of Messrs. Duffy and King are eligible to receive a total bonus equal to 75% of his annual base salary and Mr. Marinelli is eligible to receive a bonus equal to 70% of his annual base salary. The bonuses for Messrs. King, Duffy and Marinelli are payable in three installments: 30% of the bonus is payable upon the filing of a plan of reorganization with the Bankruptcy Court, 35% of the bonus is payable upon confirmation of the plan of reorganization by the Bankruptcy Court and the remaining 35% is payable 60 days after the effective date of the confirmed plan of reorganization. We filed a plan of reorganization on March 2, 2007 and in accordance with the terms of the Retention Plan, on March 5, 2007 paid $74,250 to Mr. Duffy, $74,250 to Mr. King and $47,250 to Mr. Marinelli.

Stock Compensation. The Compensation Committee believes that stock options assist us in the long-term retention of our executives and serve to align the interests of the executives with the shareholders by increasing their ownership stake in our company. Executive officers are eligible to receive annual grants of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance units and performance shares under the LTI Plan. During 2006, the Compensation Committee did not award incentive stock options or non-qualified stock options to any named executive officer, pursuant to the LTI Plan. We did not award any shares of restricted stock to any of our executive officers in 2006.

Other Compensation. In January 2005, the Compensation Committee approved an amendment to the Employment Agreement of Thomas M. Duffy to provide for a bonus to be paid to him if he remained employed with us as of certain dates in 2005 and 2006. We paid Mr. Duffy $86,625 in April 2005 in accordance with such agreement. We did not pay Mr. Duffy the amount due under such agreement in September 2005 or in March 2006.

CEO Compensation. The Compensation Committee believes that Mr. Sawyer’s compensation as Chief Executive Officer for the year ended December 31, 2006 was appropriately related to our short and long-term performance. Mr. Sawyer’s base salary in 2006 was $700,000; however, his base salary was reduced by 15% effective March 1, 2006 due to a voluntary wage reduction taken by Mr. Sawyer. Mr. Sawyer was not paid a bonus for the year ended December 31, 2005 or 2006. The Compensation Committee believes that the base salary and benefits

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provided by Mr. Sawyer’s employment agreement provide for appropriate compensation to Mr. Sawyer in light of our goal of attracting and retaining a qualified chief executive, and considers the compensation received by Mr. Sawyer for 2006 to have been comparable to chief executive officers of other leading companies engaged in the transportation, logistics and trucking industries or companies engaged in revitalization efforts.

On April 30, 2007, the Board of Directors notified Mr. Sawyer that his employment would be terminated on or about May 31, 2007. We paid Mr. Sawyer $1,050,000, the severance amount due to him under the Retention Plan, on or about May 8, 2007 and agreed to continue to pay Mr. Sawyer’s salary at the rate of $700,000 per year on a pro rata basis and his existing benefits through his last day of employment. The Compensation Committee also authorized a payment to Mr. Sawyer of $80,000 on May 3, 2007 to assist him in defraying his legal fees incurred in connection with the termination of his employment and the cost of outplacement services.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” section of this Annual Report on Form 10-K with management and, based on such review and discussion, the Compensation Committee recommends to the Board of Directors that it be included in this Annual Report on Form 10-K.

COMPENSATION COMMITTEE
David G. Bannister
Robert R. Woodson
J. Leland Strange

Notwithstanding anything to the contrary which is or may be set forth in any of our filings under the Securities Act of 1933 or the Exchange Act that might incorporate company filings, including this Annual Report on Form 10-K, in whole or in part, the preceding Compensation Committee Report shall not be incorporated by reference in any such filings.

Summary Compensation Table

The following table presents information relating to total compensation paid to Hugh E. Sawyer, our President and Chief Executive Officer, Robert J. Rutland, our Chairman, Thomas H. King, our Executive Vice President and Chief Financial Officer, Thomas M. Duffy, our Executive Vice President, General Counsel and Secretary, and Joseph V. Marinelli, our Senior Vice President, Field Operations. We refer to these officers as our named executive officers.

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												Change in
												Pension Value
										Non-		and
										Equity		Nonqualified
										Incentive		Deferred
						Stock		Option		Plan		Compensation		All Other
Name and		Salary		Bonus		Awards		Awards		Compensation		Earnings (7)		Compensation			Total
Principal Position	Year	($)		($)		($)		($)(1)		($)		($)		($)			($)
Hugh E. Sawyer President and Chief Executive Officer	2006		589,615		—		—		—		—		96		17,964	(2)		607,675
Robert J. Rutland Chairman	2006		394,423		—		—		—		—		—		43,869	(3)		438,292
Thomas H. King Executive Vice President and Chief Financial Officer	2006		317,308		—		—		37,867		—		—		11,964	(4)		367,139
Thomas M. Duffy Executive Vice President, General Counsel and Secretary	2006		317,308		—		—		20,800		—		—		43,317	(5)		381,425
Joseph V. Marinelli Senior Vice President, Field Operations	2006		216,346		—		—		64,533		—		—		10,481	(6)		291,360

(1)	Option Awards. The amounts in this column represent the amount of the expense recognized in the consolidated financial statements for the year ended December 31, 2006 attributable to all outstanding stock option awards for each of the named executive officers, disregarding any adjustments for estimated forfeitures, and thus include amounts attributable to option awards made prior to 2006. No awards were granted in 2006. See Note 2(n) to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for the year ended December 31, 2006 for an explanation of the assumptions made in the valuation of these awards.
(2)	Consists of a car allowance of $15,600 and $2,364 for long-term disability and life insurance enhancements.
(3)	Consists of a car allowance of $9,600 and $34,269 for long-term disability and life insurance enhancements.
(4)	Consists of a car allowance of $9,600 and $2,364 for long-term disability and life insurance enhancements.
(5)	Consists of a car allowance of $9,600 and $2,344 for long-term disability and life insurance enhancements and $31,257 for certain premiums for life insurance for Mr. Duffy and his wife.
(6)	Consists of a car allowance of $8,400 and $2,081 for long-term disability and life insurance enhancements.
(7)	The amounts in this column represent the change in the present value of the accumulated benefit obligation in the Allied Holdings Defined Benefit Plan during 2006 attributable to the named executive officer. The accumulated benefit obligation was calculated using assumptions consistent with those used for financial reporting purposes. For the year ended December 31, 2006 we revised some of these assumptions. Due to this and the application of various actuarial factors, the accumulated benefit obligation decreased for Messrs. Rutland and Duffy. Therefore, there is no compensation expense reported in this category for these individuals. Messrs. King and Marinelli are not participants in the pension plan. The assumptions are included in Note 16 of the notes to the consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

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For additional information regarding the compensation reflected in the “Summary Compensation table” above, see “Agreements with Named Executive Officers and Directors” and “Long-Term Incentive Plans” below.

Grants of Plan-Based Awards

No grants of plan-based awards were made in 2006 to the named executive officers.

Outstanding Equity Awards at Fiscal Year-End

The following table presents information concerning the number and value of unexercised options, stock appreciation rights and similar instruments, nonvested stock (including restricted stock, restricted stock units or other similar instruments) and incentive plan awards for the named executive officers outstanding as of the end of the fiscal year ended December 31, 2006.

	Option Awards (1)										Stock Awards
															Equity		Equity
					Equity										Incentive		Incentive Plan
					Incentive										Plan		Awards:
					Plan						Number		Market		Awards:		Market or
	Number				Awards:						of Shares		Value of		Number of		Payout Value
	of		Number of		Number of						or Units		Shares or		Unearned		of Unearned
	Securities		Securities		Securities						of Stock		Units of		Shares,		Shares, Units
	Underlying		Underlying		Underlying						That		Stock		Units or		or Other
	Unexercised		Unexercised		Unexercised		Option				Have		That Have		Other Rights		Rights That
	Options		Options		Unearned		Exercise		Option		Not		Not		That Have		Have Not
	Exercisable		Unexercisable		Options		Price		Expiration		Vested		Vested		Not Vested		Vested
Name	(#)		(#)		(#)		($)		Date		(#)		($)		(#)		($)
Hugh E. Sawyer:												—		—		—		—
		74,626		—		—		2.68		6/18/2011
		425,374		—		—		2.68		6/18/2011
		100,000		—		—		3.70		12/17/2012
Robert J. Rutland		—		—		—		—				—		—		—		—
Thomas H. King:
		13,333		26,667		—		3.68		1/25/2015		—		—		—		—
Thomas M. Duffy:												—		—		—		—
		25,000		—		—		7.06		11/29/2009
		50,000		—		—		2.77		6/1/2011
		10,000		—		—		2.60		9/24/2012
		13,333		6,667		—		6.65		2/11/2014
		6,667		13,333		—		4.16		2/16/2015
Joseph V. Marinelli:												—		—		—		—
		26,667		13,333		—		5.50		5/19/2014
		3,333		6,667		—		4.16		2/16/2015

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(1) Each option grant has a ten-year term and vests in equal annual installments commencing one year from the date of grant with full vesting occurring on the second, third or fifth anniversary of the grant date. Vesting may be accelerated upon the occurrence of certain events, such as death, disability, retirement or certain changes in control of our company. All options were granted with an exercise price equal to the closing price of the common stock on the date of grant.

Option Exercises and Stock Vested

There were no option or stock awards during the fiscal year ended December 31, 2006 and no options were exercised during 2006.

Pension Benefits

The following table presents information concerning our tax qualified defined benefit pension plan (the “Retirement Plan”) that provides for payments or other benefits to the named executive officers at, following, or in connection with retirement.

		Number of	Present
		Years	Value of	Payments
		Credited	Accumulated	During Last
		Service	Benefit	Fiscal Year
Name	Plan Name	(#)	($)	($)
Hugh E. Sawyer	Allied Defined Benefit Pension Plan	0.6	10,418	—
Robert J. Rutland	Allied Defined Benefit Pension Plan	37.7	944,446	—
Thomas H. King	Allied Defined Benefit Pension Plan	0.0	0.0	—
Thomas M. Duffy	Allied Defined Benefit Pension Plan	3.6	45,954	—
Joseph V. Marinelli	Allied Defined Benefit Pension Plan	0.0	0.0	—

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Allied Defined Benefit Pension Plan

The table set forth below illustrates the total combined estimated annual benefits payable under the Retirement Plan to eligible salaried employees in specified compensation and years of credited service classifications, assuming normal retirement at age 65.

	Years of Service
Remuneration	10		15		20		25		30		35 or more
$100,000	$	20,000	$	30,000	$	40,000	$	50,000	$	50,000	$	50,000
125,000		25,000		37,500		50,000		62,500		62,500		62,500
150,000		30,000		45,000		60,000		75,000		75,000		75,000
175,000		34,000		51,000		68,000		85,000		85,000		85,000
200,000		34,000		51,000		68,000		85,000		85,000		85,000
225,000		34,000		51,000		68,000		85,000		85,000		85,000
250,000		34,000		51,000		68,000		85,000		85,000		85,000
275,000		34,000		51,000		68,000		85,000		85,000		85,000
300,000		34,000		51,000		68,000		85,000		85,000		85,000

The Retirement Plan uses average compensation, as defined by the Retirement Plan, paid to an employee by the plan sponsor during a plan year for computing benefits. Compensation includes bonuses and any amount contributed by a plan sponsor on behalf of an employee pursuant to a salary reduction agreement, which is not includable in the gross income of the employee under Code Sections 125, 402(a)(8), or 402(h). However, compensation in excess of Code Section 401(a)(17) limit shall not be included. The limit under the Retirement Plan is $170,000.

We amended the Retirement Plan effective April 30, 2002 in order to freeze the Retirement Plan. As a result of this amendment to the Retirement Plan, commencing April 30, 2002, participants do not accrue credit towards years of service, participants do not accrue credit for pay increases received, and new employees may not become participants in the Retirement Plan. However, vesting does continue to accrue after April 30, 2002. The compensation covered by the Retirement Plan for each of Messrs. Bob Rutland, Sawyer, Duffy and Guy Rutland is $170,000.

Nonqualified Deferred Compensation

The Company does not have any plan that provides for the deferral of compensation of the named executive officers on a basis that is not tax qualified.

Agreements with Named Executive Officers and Directors

Employment and Severance Agreements

Effective August 1, 2005, the Bankruptcy Court approved the Retention Plan. As described in more detail below, the Retention Plan provides participating employees with both severance benefits and bonuses for staying with us during the Chapter 11 Proceedings. The Retention Plan supersedes any severance or bonus payments that would otherwise be payable to participating employees, including any benefits payable under employment agreements with such participants. Any employee eligible to participate in the Retention Plan had the right to opt out of the Retention Plan and to continue to be covered by any severance or bonus arrangement in place for such individual. No employee has elected to opt out of the Retention Plan. However, in May of 2006, Mr. Sawyer voluntarily removed himself from the bonus component of the Retention Plan. Further, Mr. Sawyer, also voluntarily reduced his base salary by 15% effective March 1, 2006. Mr. Robert Rutland is not covered by the Retention Plan. Employees are required to agree to covenants restricting their ability to solicit our customers or employees after the termination of their employment for one year in order to receive payment of their severance.

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Under the terms of the Retention Plan, participants are entitled to receive a lump-sum severance payment that is payable no later than 30 days after an involuntary termination or a voluntary termination for good reason, as defined. The amount of any severance payment is equal to a percentage of the employee’s annual base salary, excluding bonus payments or other extraordinary income, as of the date of eligibility for benefits under the Plan. Under the Retention Plan, each of Messrs. Sawyer, Duffy and King would be entitled to a severance payment equal to 150% of his base salary and Mr. Marinelli would be entitled a severance payment equal to 100% of his base salary.

The Retention Plan provides for a retention bonus payable upon the achievement of certain milestones. The last payment is payable 60 days after the confirmation of a plan of reorganization. The retention bonus is based on a percentage of the employee’s annual base salary. Under the Retention Plan, each of Messrs. Duffy and King are eligible to receive a total bonus equal to 75% of his annual base salary and Mr. Marinelli is eligible to receive a bonus equal to 70% of his annual base salary. The bonuses for Messrs. King, Duffy and Marinelli are payable in three installments: 30% of the bonus is payable upon our filing of a plan of reorganization with the Bankruptcy Court, 35% of the bonus is payable upon confirmation of a plan of reorganization by the Bankruptcy Court and the remaining 35% is payable 60 days after the confirmation of a plan of reorganization.

Robert Rutland has entered into an employment agreement with our company, which has been renewed for a two-year term ending in February 2009, and is automatically renewed for an additional two-year period at the end of each term. Mr. Rutland’s employment agreement was amended in January 2005 in order to provide that calculations of bonus amounts are made pursuant to the bonus plans utilized by our company from time to time.

Mr. Sawyer entered into an employment agreement with our company for a five-year term ending in June 2006, which is automatically renewed for an additional two-year period at the end of each term. Mr. Duffy entered into an employment agreement with our company for a one-year term ending in December 2005, which automatically renews for an additional one-year period at the end of each term. Also, we entered into an employment agreement with Mr. Marinelli for a one-year term ending in October 2005, which automatically renews for an additional one-year period at the end of each term. These agreements provide for compensation to the officers in the form of annual base salaries, plus percentage annual increases in subsequent years based upon either the Consumer Price Index for certain executive officers, or such amount established by the Compensation Committee.

The employment agreements also provide for bonus and severance payments. However, as a result of the adoption of the Retention Plan, such provisions in the employment agreements for Messrs. Sawyer, Duffy, King and Marinelli are not applicable during the Chapter 11 Proceedings. Robert Rutland’s employment agreement provides that he will receive severance benefits if: (i) his employment is terminated due to death or disability; (ii) we terminate his employment other than for cause or elect not to extend his employment beyond the initial or any renewal term of the agreement, (iii) he terminates his employment with us as a result of (A) a material change in his duties or responsibilities or a failure to be elected or appointed to the position held by him, (B) our relocating him or requiring him to perform substantially all of his duties outside the metropolitan Atlanta, Georgia area, (C) our committing any material breach of the agreement that remains uncured for 30 days following written notice thereof from him, (D) our liquidation, dissolution, consolidation or merger (other than with an affiliated entity), or (E) a petition in bankruptcy being filed by or against us or our making an assignment for the benefit of creditors or seeking appointment of a receiver or custodian; or (iv) within two years following a “change of control” with respect to us, his employment agreement is terminated by us or by Mr. Rutland or not extended for any renewal term.

The severance benefits payable to Mr. Robert Rutland include a cash payment equal to three times (i) his annual base salary for the year such termination occurs, plus (ii) his “bonus.”

For purposes of the severance benefits set forth above, the term “bonus” includes an amount equal to (A) the greatest of (1) the average of each of the previous two years’ bonus payments under the incentive plan in effect, (2) the average of each of the previous two years’ “target bonus” amounts under the incentive plan in effect or (3) the amount of the “target bonus” for Mr. Robert Rutland under the incentive plan in effect for the year in which his employment with us is terminated, plus (B) an amount equal to the dollar value of his restricted stock target or other form of equity award with respect to the most recent annual award of restricted stock or other equity award made under the LTI Plan.

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A “change of control” under Robert Rutland’s employment agreement occurs (i) in the event of a merger, consolidation or reorganization of our company following which the shareholders of our company immediately prior to such reorganization, merger or consolidation own in the aggregate less than seventy percent (70%) of the outstanding shares of common stock of the surviving corporation, (ii) upon the sale, transfer or other disposition of all or substantially all of the assets or more than thirty percent (30%) of the then outstanding shares of common stock of our company, other than as a result of a merger or other combination of our company and an affiliate of our company, (iii) upon the acquisition by any person of beneficial ownership (as defined in the Exchange Act) of twenty percent (20%) or more of the combined voting power of our company’s then outstanding voting securities or (iv) if the members of the Board of Directors who served as such on the date of the applicable employment agreement (or any successors approved by two-thirds (2/3) of such Board members) cease to constitute at least two-thirds (2/3) of the membership of the Board.

The maximum severance benefits that would have been due upon termination meeting the criteria for severance compensation under the Retention Plan, with respect to Messrs. Sawyer, Duffy, King and Marinelli and the employment agreement with respect to Mr. Robert Rutland as of December 31, 2006 are approximately: $1,050,000 to Mr. Sawyer, $495,000 to Mr. Duffy, $495,000 to Mr. King, $225,000 to Mr. Marinelli and $1,415,190 to Mr. Robert Rutland.

On April 30, 2007, the Board of Directors notified Mr. Sawyer that his employment would be terminated on or about May 31, 2007. We paid Mr. Sawyer $1,050,000, the severance amount due to him under the Retention Plan, on or about May 8, 2007 and agreed to continue to pay Mr. Sawyer’s salary at the rate of $700,000 per year on a pro rata basis and his existing benefits through his last day of employment. The Compensation Committee also authorized a payment to Mr. Sawyer of $80,000 on May 3, 2007 to assist him in defraying his legal fees incurred in connection with the termination of his employment and the cost of outplacement services.

Split-Dollar Life Insurance Agreements

We are party to contractual agreements related to life insurance policies that cover certain current and former employees, directors and officers of our company. These contractual agreements are between our company and the trusts that own the policies. Each of these agreements was entered into while such persons were employed as executive officers with our company. The agreements are between our company and certain trusts established for the benefit of the executive officers and directors. The trusts retain any proceeds in excess of our company’s interest in the policies, net of any outstanding policy loans.

We paid the premiums on the life insurance policies for Messrs. Berner F. Wilson, Guy W. Rutland III, Guy W. Rutland, IV and Robert J. Rutland until the enactment of the Sarbanes-Oxley Act of 2002 on June 30, 2002, at which time we discontinued such payments. As permitted by the trusts, premiums due on these policies have been paid by increasing loans taken against the available cash surrender value of the policies since June 30, 2002 through the year ended December 31, 2006. A portion of the premiums paid by our company is taxable compensation recognized by the director or executive officer.

The following table sets forth the annual amount of premiums payable on these policies for each of these agreements as of December 31, 2006:

Name of Insured	Annual Premiums
Berner F. Wilson, Jr.	$	62,976
Guy W. Rutland III		324,638
Guy W. Rutland IV		13,098
Robert J. Rutland		257,441

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As a result of our Chapter 11 filing, we believe that the contractual arrangements were terminated and that we continue to retain our interest in the policies. In this regard, notice of termination of the contractual arrangements has been given to the life insurance companies and the trusts. We also believe that we are entitled to receive our interest in each policy in cash upon the earlier of the death of the insured or the termination of the contractual arrangement related to the policy. However, certain of the trusts believe that even though the contractual arrangements may have terminated, we will be entitled to receive our interest in each policy only upon the earlier of the death of the insured or upon the surrender of the policy. At this time we are unable to determine the timing of future cash flows from these policies.

Long-Term Incentive Plan

Our company’s LTI Plan allows for the issuance of an aggregate of 2,150,000 shares of common stock. The LTI Plan authorizes us to grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, and performance awards to eligible employees and directors, including each of the executive officers named herein, as determined under the LTI Plan. The LTI Plan was adopted and approved by the Board of Directors and shareholders in July 1993, amended in 2000, amended and restated in 2001, amended in 2002 and amended and restated in 2004.

The Compensation Committee selects those employees to whom awards are granted under the LTI Plan and determines the number of stock options, performance units, performance shares, shares of restricted stock, and stock appreciation rights and the amount of cash awards granted pursuant to each award and prescribes the terms and conditions of each such award.

Nonqualified Stock Options

The Board of Directors may grant non-qualified stock options under the LTI Plan. We granted no non-qualified stock options during 2005 or 2006. Non-qualified options to acquire 684,374 shares of common stock pursuant to the LTI Plan were exercisable at December 31, 2006.

Restricted Stock Awards

The Board of Directors may grant restricted stock under the LTI Plan. We granted no restricted stock in 2005 or 2006 and no such shares are outstanding.

Incentive Stock Options

No incentive stock options were granted in 2006. During 2005, we granted incentive stock options to purchase 210,000 shares. These options become exercisable after one year in increments of 33.3% per year and expire 10 years from the date of grant. Options that are granted pursuant to the incentive stock option provisions of the LTI Plan are intended to qualify as incentive stock options within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”). Incentive stock options to acquire 683,461 shares of common stock pursuant to the LTI Plan were exercisable at December 31, 2006.

Stock Appreciation Rights

The Board of Directors of our company adopted the Stock Appreciation Rights Plan (“SAR Plan”) pursuant to the terms of the LTI Plan effective January 1, 1997. The purpose of the SAR Plan is to provide incentive compensation to certain management employees of our company. Such incentive compensation shall be based upon the award of stock appreciation rights units, the value of which are related to the appreciation in fair market value of the common stock. All payments under the SAR Plan are made in cash. The Compensation Committee determines the applicable terms for each award under the SAR Plan. The SAR awards vest over 3 years and may be exercised only during the fourth year. The exercise price increases 6% per year. We have granted no SAR’s during the past three years.

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Compensation Committee Interlocks and Insider Participation in Compensation Decisions

David G. Bannister, William P. Benton, Robert R. Woodson and J. Leland Strange served as members of the Compensation Committee during the year ended December 31, 2005 and 2006. Mr. Benton resigned as a member of the Compensation Committee in March 2007. None of the members of the Compensation Committee has served as an officer of our company, and none of the executive officers of our company has served on the board of directors or the compensation committee of any entity that had officers who served on our company’s Board of Directors.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information:

	Number of Securities to be				Number of Securities
	Issued Upon Exercise of		Weighted-Average		Remaining Available for Future
	Outstanding Options,		Exercise Price of		Issuance Under Equity
Plan Category	Warrants and Rights		Outstanding Options		Compensation Plans
Equity compensation plans approved by security holders(1)		1,550,167	$	3.66		542,510	(2)
Equity compensation plans not approved by security holders.		—		—		—
Total		1,550,167	$	3.66		542,510

(1)	Consists of our 1993 Long-Term Incentive Plan as adopted in 1993, amended in 2000, amended and restated in 2001, amended in 2002, and amended and restated in 2004. For a description of our equity compensation plans, see Note 20 to our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.
(2)	Includes our Employee Stock Purchase Plan, which has 199,269 shares available for future issuance. However, in June 2005 the Employee Stock Purchase Plan was amended to suspend future purchases under the plan.

COMMON STOCK OWNERSHIP BY MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information about beneficial ownership of our common stock as of May 3,2007 by (i) each director and each named executive officer of our company named herein, and (ii) all directors and executive officers of our company as a group. Unless otherwise indicated, the beneficial owners of the common stock listed below have sole voting and investment power with respect to all shares shown as beneficially owned by them.

	Number of Shares		Percentage of Shares
BENEFICIAL OWNER	Beneficially Owned(1)		Outstanding(2)
Robert J. Rutland(3)		1,123,894		12.5
Guy W. Rutland, III(4)		850,718		9.5
Guy W. Rutland, IV(5)		651,936		7.3
Hugh E. Sawyer(6)		620,000		6.5
Berner F. Wilson, Jr.(7)		108,743		1.2
Thomas M. Duffy(8)		113,197		1.2
David G. Bannister(9)		39,334		*
Robert R. Woodson(9)		39,334		*
Thomas E. Boland(9)		38,334		*
J. Leland Strange(9)		35,334		*
Thomas H. King(10)		13,333		*
Joseph V. Marinelli(11)		30,000		*
All executive officers and directors as a group(12) (12 persons)		3,664,157		37.0

* Less than 1%

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(1)	Under the rules of the SEC, a person is deemed to be a beneficial owner of any securities that such person has the right to acquire beneficial ownership of within 60 days as well as any securities owned by such person’s spouse, children or relatives living in the same household.
(2)	Based on 8,980,329 shares outstanding as of May 3, 2007. Shares underlying outstanding stock options or warrants held by the person indicated and exercisable within 60 days of such date are deemed to be outstanding for purposes of calculating the percentage owned by such holder.
(3)	Includes 18,099 shares owned by his wife as to which he disclaims beneficial ownership.
(4)	Includes 18,099 shares owned by his wife and 67,800 shares owned by a private foundation as to which he disclaims beneficial ownership.
(5)	Includes 647,211 shares held in a limited partnership of which he is the direct beneficiary.
(6)	Includes options to acquire 600,000 shares.
(7)	Includes options to acquire 8,334 shares.
(8)	Includes 5,245 shares owned by his wife as to which he disclaims beneficial ownership, and options to acquire 105,000 shares.
(9)	Includes options to acquire 33,334 shares for each individual.
(10)	Includes options to acquire 13,333 shares.
(11)	Includes options to acquire 30,000 shares.
(12)	Includes options to acquire 923,337 shares.

The following table sets forth certain information about beneficial ownership of each person known to us to own more than 5% of the outstanding common stock as of May 3, 2007, other than directors of our company:

Name and Address of	Number of Shares		Percentage of Shares
Beneficial Owner	Beneficially Owned		Outstanding
Robert E. Robotti, Robotti & Company, LLC, Robotti & Company Advisors, LLC and The Ravenswood Management Company, LLC and the Ravenswood Investment Company, L.P.(1) 52 Vanderbilt Avenue, Suite 503 New York, New York 10017		594,390		6.6
Nikon Hecht Aspen Advisors LLC Sopris Capital Partners, L.P. Sopris Capital, LLC Sopris Capital Advisors, LLC(2) 152 West 57th Street New York, New York 10019		889,895		9.9
Armory Master Fund Ltd., Armory Fund LP, Armory Partners LLC, Armory Offshore Fund Ltd., Armory Advisors LLC, The Seaport Group, LLC Profit Sharing Plan, Stephen C. Smith, Michael Meagher and Jay Burnham(3) 999 Fifth Avenue, Suite 450 San Rafael, California 94901		648,700		7.2

(1) According to a Schedule 13G filed on February 15, 2006 on behalf of Robert E. Robotti, Robotti & Company, LLC and Robotti & Company Advisors LLC, in its role as a broker dealer and an investment advisor, and The Ravenswood Management Company, LLC and the Ravenswood Investment Company, L.P., of which Mr. Robotti serves as Managing Member of the General Partner of such limited partnership. Mr. Robotti possesses shared voting and investment power as to the securities but does not have sole voting or investment power as to the securities.

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(2)

According to a Schedule 13D/A filed on April 24, 2007 on behalf of Nikos Hecht, Sopris Capital Partners, L.P., Sopris Capital, LLL, Aspen Advisors, LLL and Sopris Capital Advisors, LLC, in its role as a broker dealer and an investment advisor, Mr. Hecht is the managing member and owner of a majority of the membership interests of Sopris Capital, Aspen Advisors and Sopris Advisors. Each of Sopris Capital, Aspen Advisors and Sopris Advisors, as investment managers for their respective private clients, has discretionary investment authority over the common stock held by their respective private clients. Mr. Hecht possesses shared voting and investment power but does not have sole voting and investment power.

(3)

According to a Schedule 13G filed on February 7, 2007 on behalf of Armory Master Fund Ltd., Armory Fund LP, Armory Partners LLC, Armory Offshore Fund Ltd., Armory Advisors LLC, in its role as an investment advisor, The Seaport Group, LLC Profit Sharing Plan, Stephen C. Smith, Michael Meagher and Jay Burnham. Armory Advisors LLC, as investment manager for its private clients, has discretionary investment authority over the common stock held by its respective private clients. Mr. Smith and Mr. Meagher possess shared voting and investment power but do not have sole voting and investment power.

If we emerge from Chapter 11, we will experience a change in control. See “Voluntary Reorganization under Chapter 11” under “Item 1. Business” for more information.

Item 13. Certain Relationships, Related Transactions and Director Independence

Beginning in the first quarter of 2006, we subleased certain space in our home office headquarters in Decatur, Georgia to an entity of which Robert J. Rutland, Chairman of the Board of Directors, owns approximately one-third of the equity. We believe that the rental rate charged to this entity is the fair market rate for the space based upon rental rates paid for comparable space in the area. The annual rents to be collected by us are approximately $128,000 based upon the terms of the sublease agreement, which is comparable to other sublease agreements we utilize with our subtenants.

The Board has determined that the following directors, which constitute a majority of the Board, are independent in accordance with the AMEX rules governing director independence: Messrs. Bannister, Boland, Strange, Wilson and Woodson.

Item 14. Principal Accountant Fees and Services

The Audit Committee has selected KPMG to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2007. Approval of our company’s accounting firm is not a matter required to be submitted to the shareholders. Upon the recommendation of the Audit Committee, we first appointed KPMG on April 2, 2002 to serve as our independent registered public accounting firm for the fiscal year ended December 31, 2002. We have been advised by KPMG that neither it nor any member thereof has any financial interest, direct or indirect, in our company or any of its subsidiaries in any capacity. KPMG is considered by our company to be well qualified.

Audit Fees

Fees for KPMG’s audit services totaled approximately $1,572,000 in 2006 and $1,800,000 in 2005, including fees for professional services rendered for the audit of our annual financial statements included in Item 15 of this Annual Report on 10-K and the review of our quarterly reports on Form 10-Q.

Audit-Related Fees

No audit-related fees were billed by KPMG during 2006 or 2005.

Tax Fees

There were no fees billed by KPMG for professional services rendered for income tax consulting services in 2006 or 2005.

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All Other Fees

There were no fees billed by KPMG for professional services rendered in 2006 and 2005 other than as stated under the captions “Audit Fees,” “Audit-Related Fees,” and “Tax Fees.”

All of KPMG’s fees for services, whether for audit or non-audit services, are pre-approved by the Audit Committee, which concluded that the provision of such services by KPMG was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

     (a) The following documents are filed as part of this report:

          (1) Financial Statements:

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets at December 31, 2006 and 2005		F-2
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005, and 2004		F-3
Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the Years Ended December 31, 2006, 2005, and 2004		F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005, and 2004		F-5
Notes to Consolidated Financial Statements		F-6

          (2) Financial Statement Schedules:

INDEX TO FINANCIAL STATEMENT SCHEDULES

	Page
Schedule II — Valuation and Qualifying Accounts for the Years Ended December 31, 2006, 2005, and 2004		S-1

All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.

          (3) Exhibits: The list of exhibits required by this item is set forth in “(b) Exhibits” below.

     (b) Exhibits.

     Exhibit Index filed as part of this report

Exhibit
No.	Description
3.1	Amended and Restated Articles of Incorporation of the Company (incorporated by reference from Exhibit 3.1 to the Registration Statement on Form S-1 (File Number 33-66620) filed with the Commission on July 28, 1993, as amended on September 2, 1993 and September 17, 1993 and deemed effective on September 29, 1993).
3.2	Amended and Restated Bylaws of the Company (incorporated by reference from Exhibit 3.2 to the Annual Report on Form 10-K filed with the Commission on April 16, 2001).
4.1	Form of certificate representing shares of the Company’s common stock (incorporated by reference from Exhibit 4.1 to the Registration Statement on Form S-1 (File Number 33-66620) filed with the Commission on July 28, 1993, as amended on September 2, 1993 and September 17, 1993 and deemed effective on September 29, 1993).
4.2	Indenture by and among the Company, the Guarantors listed therein, and The First National Bank of Chicago, as Trustee, dated September 30, 1997 (incorporated by reference from Exhibit 4.1 to the Registration Statement on Form S-4 (File Number 333-37113) filed with the Commission on October 3, 1997).
4.3*	SECURED SUPER-PRIORITY DEBTOR IN POSSESSION AND EXIT CREDIT AND GUARANTY AGREEMENT, dated as of March 30, 2007, entered into by and among ALLIED HOLDINGS, INC., a Georgia corporation and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (as defined) (“Holdings”), ALLIED SYSTEMS, LTD. (L.P.), a Georgia limited partnership and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (“Systems” and, together with Holdings, the “Borrowers”), CERTAIN SUBSIDIARIES OF BORROWERS, as Subsidiary Guarantors, the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P. (“GSCP”), as Syndication Agent (in such capacity, “Syndication Agent”), and THE CIT GROUP/BUSINESS CREDIT, INC. (“CIT”),

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Exhibit
No.	Description
	as Administrative Agent (together with its permitted successors in such capacity, “Administrative Agent”) and as Collateral Agent (together with its permitted successor in such capacity, “Collateral Agent”)
4.3 (a)*	First Amendment dated April 18, 2008 to the SECURED SUPER-PRIORITY DEBTOR IN POSSESSION AND EXIT CREDIT AND GUARANTY AGREEMENT, dated as of March 30, 2007, entered into by and among ALLIED HOLDINGS, INC., a Georgia corporation and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (as defined) (“Holdings”), ALLIED SYSTEMS, LTD. (L.P.), a Georgia limited partnership and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (“Systems” and, together with Holdings, the “Borrowers”), CERTAIN SUBSIDIARIES OF BORROWERS, as Subsidiary Guarantors, the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P. (“GSCP”), as Syndication Agent (in such capacity, “Syndication Agent”), and THE CIT GROUP/BUSINESS CREDIT, INC. (“CIT”), as Administrative Agent (together with its permitted successors in such capacity, “Administrative Agent”) and as Collateral Agent (together with its permitted successor in such capacity, “Collateral Agent”).
4.4*	LOAN AND SECURITY AGREEMENT AND GUARANTY dated April 5, 2007, by and among ALLIED SYSTEMS, LTD. (L.P.), a Georgia limited partnership and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (“Borrower”) ALLIED HOLDINGS, INC., a Georgia corporation and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (“Holdings”), THE OTHER SUBSIDIARIES (AS DEFINED) OF HOLDINGS PARTY HERETO (such Subsidiaries, together with any future Subsidiaries of Holdings, the “Subsidiary Guaranters,”and together with Borrower and Holdings, collectively, the “Loan Parties,” and individually, a “Loan Party”), and YUCAIPA TRANSPORTATION, LLC, A Delaware limited liability company (“Lender”).
10.1†	Amended and Restated Long Term Incentive Plan of Allied Holdings, Inc. (incorporated by reference from Exhibit 10.2 to the Annual Report on Form 10-K for the year ended December 31, 2000, filed with the Commission on April 16, 2001).
10.2†	Allied Holdings, Inc. 401(k) Retirement Plan (incorporated by reference from Exhibit 10 to the Registration Statement on Form S-8 (File Number 33-76108) filed with the Commission on March 4, 1994).
10.3†	Allied Holdings, Inc. Deferred Compensation Plan (incorporated by reference from Exhibit 4 to the Registration Statement on Form S-8 (File Number 333-51102) filed with the Commission on December 1, 2000).
10.4†	Allied Holdings, Inc. Amended and Restated 1999 Employee Stock Purchase Plan, as amended through June 19, 2003 (incorporated by reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the Commission on August 12, 2003).
10.4(a)†	First Amendment to Allied Holdings, Inc. Amended and Restated 1999 Employee Stock Purchase Plan (incorporated by reference from Exhibit 10.4(a) to the Current Report on Form 8-K filed with the Commission on June 22, 2005).
10.5†£	Allied Holdings, Inc. Amended Severance Pay and Retention and Emergence Bonus Plan for Key Employees and Summary Plan Description (incorporated by reference from Exhibit 10.5 to the Annual Report on Form 10-K filed with the Commission on June 16, 2006).
10.6	Intentionally Omitted.
10.7	Intentionally Omitted.
10.8†	Employment Agreement between Allied Holdings, Inc. and Hugh E. Sawyer (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the Commission on August 14, 2001).
10.8(a)†	First Amendment to Employment Agreement between Allied Holdings, Inc. and Hugh E. Sawyer (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the Commission on May 15, 2002).

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Exhibit
No.	Description
10.8(b)†	Second Amendment to Employment Agreement between Allied Holdings, Inc. and Hugh E. Sawyer (incorporated by reference from Exhibit 10.8(b) to the Quarterly Report on Form 10-Q filed with the Commission on May 17, 2004).
10.9†	Employment Agreement between Allied Holdings, Inc. and Thomas King (incorporated by reference from Exhibit 10.21 to the Current Report on Form 8-K filed with the Commission on January 27, 2005).
10.9(a)†	First Amendment to Employment Agreement between Allied Holdings, Inc. and Thomas King (incorporated by reference from Exhibit 10.21(a) to the Current Report on Form 8-K filed with the Commission on May 27, 2005).
10.10†	Amended and Restated Employment Agreement between Allied Holdings, Inc. and Thomas Duffy (incorporated by reference from Exhibit 10.10 to the Current Report on Form 8-K filed with the Commission on January 27, 2005).
10.10(a)†	First Amendment to Amended and Restated Employment Agreement between Allied Holdings, Inc. and Thomas Duffy (incorporated by reference from Exhibit 10.10(a) to the Current Report on Form 8-K filed with the Commission on May 27, 2005).
10.11†	Employment Agreement between Allied Holdings, Inc. and Robert J. Rutland (incorporated by reference from Exhibit 10.4 to the Quarterly Report on Form 10-Q filed with the Commission on May 15, 2002).
10.11(a)†	First Amendment to Employment Agreement between Allied Holdings, Inc. and Robert J. Rutland (incorporated by reference from Exhibit 10.11(a) to the Current Report on Form 8-K filed with the Commission on January 27, 2005).
10.12†	Employment Agreement between Allied Holdings, Inc. and Guy Rutland IV (incorporated by reference from Exhibit 10.12 to the Annual Report on Form 10-K filed with the Commission on April 18, 2005).
10.13*	Severance Agreement and Full Release dated April 20, 2007 by and between Hugh E. Sawyer and Allied Holdings, Inc., a Georgia corporation.
10.14	Summary of Financial Terms of Collective Bargaining Agreement with the International Brotherhood of Teamsters in the United States, effective June 1, 2003 (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the Commission on August 12, 2003).
10.15 £	Agreement between Allied Automotive Group, Inc. and UPS Autogistics, Inc., as amended (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the Commission on November 13, 2001).
10.15(a) £	Amendment No. 2 to Agreement between Allied Automotive Group, Inc. and UPS Autogistics, Inc. (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the Commission on November 14, 2002).
10.15(b)	Amendment to Agreement between Allied Automotive Group, Inc. and UPS Autogistics, Inc. (incorporated by reference from Exhibit 10.15(b) to the Current Report on Form 8-K filed with the Commission on July 18, 2005).
10.16 £	Agreement between the Company and DaimlerChrysler Corporation (incorporated by reference from Exhibit 10.6 to the Annual Report on Form 10-K filed with the Commission on April 16, 2001).
10.16(a) £	Amendment to Agreement between the Company and DaimlerChrysler Corporation (incorporated by reference from Exhibit 10.12(a) to the Annual Report on Form 10-K filed with the Commission on March 27, 2003).
10.16(b) £	Amendment dated October 29, 2004 to the Agreement between the Company and DaimlerChrysler

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Exhibit
No.	Description
	Corporation (incorporated by reference from Exhibit 10.16(b) to the Current Report on Form 8-K filed with the Commission on November 3, 2004).
10.16(c) £	Amendment dated December 19, 2005 to the Agreement between the Company and DaimlerChrysler Corporation (incorporated by reference from Exhibit 10.16(c) to the Annual Report on Form 10-K filed with the Commission on June 16, 2006).
10.17 £	Agreement between the Company and General Motors Corporation (incorporated by reference from Exhibit 10.17 to the Annual Report on Form 10-K filed with the Commission on April 13, 2004).
10.17(a) £	Amendment to Agreement between the Company and General Motors dated April 6, 2005 (incorporated by reference from Exhibit 10.19 to the Current Report on Form 8-K filed with the Commission on April 18, 2005).
10.17(b) £	Amendment to Agreement between the Company and General Motors dated December 8, 2005 (incorporated by reference from Exhibit 10.17(b) to the Annual Report on Form 10-K filed with the Commission on June 16, 2006).
10.18 £	Amendment to Agreement between the Company and American Honda Motor Company dated January 30, 2006 (incorporated by reference from Exhibit 10.18 to the Annual Report on Form 10-K filed with the Commission on June 16, 2006).
10.19	Intentionally Omitted.
10.20	Agreement between the Company and Toyota Motor Sales, U.S.A., Inc., dated April 1, 1990 (incorporated by reference from Exhibit 10.20 to the Annual Report on Form 10-K filed with the Commission on April 18, 2005).
10.20(a) £	Amendment to Agreement between the Company and Toyota Motor Sales, U.S.A., Inc. dated December 20, 2004 (incorporated by reference from Exhibit 10.20(a) to the Annual Report on Form 10-K filed with the Commission on April 18, 2005).
10.21	Intentionally Omitted.
10.22 £	Agreement between the Company and American Honda Motor Co., Inc., dated April 1, 2002 (incorporated by reference from Exhibit 10.22 to the Annual Report on Form 10-K filed with the Commission on April 18, 2005).
10.23	IBM Global Services National Agreement between Allied Holdings, Inc. and International Business Machines Corporation, dated April 1, 2001 (incorporated by reference from Exhibit 10.12 to the Annual Report on Form 10-K filed with the Commission on March 27, 2002).
10.23(a)	Amendment No. 4 to the IBM Global Services National Agreement between Allied Holdings, Inc. and International Business Machines Corporation, effective February 1, 2004 (incorporated by reference from Exhibit 10.20(a) to the Annual Report on Form 10-K filed with the Commission on April 13, 2004).
10.24*	Settlement Agreement entered into by and among (a) Allied Holdings, Inc., and its affiliates that are debtors and debtors in possession (collectively, the “Debtors”), (b) Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP (collectively, “Yucaipa”), (c) the Official Committee of Unsecured Creditors in the Bankruptcy Cases (the “Creditors’ Committee”), (d) Sopris Capital Advisors, LLC, Aspen Advisors LLC and Armory Advisors LLC (collectively, the “Equity Holders”), (e) Andrews & Kurth LLP, (f) Sonnenschein Nath & Rosenthal LLP, (g) Kilpatrick Stockton LLP and (h) Jeffries & Company, Inc.
21.1*	Subsidiaries of Allied Holdings, Inc.
23.1*	Consent of KPMG LLP.
24.1*	Powers of Attorney (included within the signature page of this Report).

69

Exhibit
No.	Description
31.1*	Rule 13a-14(a)/15d-14(a) Certification by Hugh E. Sawyer.
31.2*	Rule 13a-14(a)/15d-14(a) Certification by Thomas H. King.
32.1*	Section 1350 Certification by Hugh E. Sawyer.
32.2*	Section 1350 Certification by Thomas H. King.
99.1	Charter of the Audit Committee of the Board of Directors (incorporated by reference from Exhibit 99.1 to the Annual Report on Form 10-K filed with the Commission on April 13, 2004).
99.2	Charter of the Compensation and Nominating Committee of the Board of Directors (incorporated by reference from Exhibit 99.2 to the Annual Report on Form 10-K filed with the Commission on April 13, 2004).
99.3	Allied Holdings, Inc. Code of Conduct (incorporated by reference from Exhibit 99.3 to the Annual Report on Form 10-K filed with the Commission on April 13, 2004).

*	Filed herewith.
£	Confidential treatment has been requested and/or granted with respect to portions of this exhibit.
†	Management contract, compensatory plan or arrangement.
(c)	Financial Statement Schedules. The list of exhibits required by this item is set forth above.

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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: May 23, 2007	By:	/s/ HUGH E. SAWYER
		Hugh E. Sawyer,
		President and Chief Executive Officer (Principal Executive Officer)

Date: May 23, 2007	By:	/s/ THOMAS H. KING
		Thomas H. King,
		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert J. Rutland and Hugh E. Sawyer, 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 Annual 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.

Signature	Title	Date
/s/ ROBERT J. RUTLAND Robert J. Rutland	Chairman and Director	May 23, 2007
/s/ GUY W. RUTLAND, III Guy W. Rutland, III	Chairman Emeritus and Director	May 23, 2007
/s/ HUGH E. SAWYER Hugh E. Sawyer	President, Chief Executive Officer and Director	May 23, 2007
/s/ DAVID G. BANNISTER David G. Bannister	Director	May 23, 2007
/s/ THOMAS E. BOLAND Thomas E. Boland	Director	May 23, 2007
/s/ GUY W. RUTLAND, IV Guy W. Rutland, IV	Senior Vice President and Director	May 23, 2007
/s/ J. LELAND STRANGE J. Leland Strange	Director	May 23, 2007
/s/ BERNER F. WILSON, JR. Berner F. Wilson, Jr.	Director	May 23, 2007
/s/ ROBERT R. WOODSON	Director	May 23, 2007
Robert R. Woodson

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors Allied Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Allied Holdings, Inc. and subsidiaries (the Company) as of December 31, 2006 and 2005, and the related consolidated statements of operations, changes in stockholders’ (deficit) equity and cash flows for each of the years in the three-year period ended December 31, 2006. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed at Item 15(a) (2) of the accompanying index. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Allied Holdings, Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements as a whole, presents fairly, in all material respects, the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred losses of $12.3 million, $125.7 million and $53.9 million from operations during 2006, 2005 and 2004, respectively, and has an accumulated deficit at December 31, 2006 and 2005, and, as discussed in Notes 2 and 3 to the consolidated financial statements, filed voluntary petitions seeking to reorganize under Chapter 11 of the federal bankruptcy laws. All of these conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Notes 2 and 3. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

As discussed in Notes 2 and 20 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment effective January 1, 2006. Also, as discussed in Notes 2 and 16 to the consolidated financial statements, the Company adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans as of December 31, 2006. As discussed in Note 1, to the consolidated financial statements, the Company adopted the Securities and Exchange Commission's Staff Accounting Bulletin No. 108, Considering the Effects of Prior-Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.

As discussed in Note 2 to the consolidated financial statements, in 2005 the Company adopted the provisions of Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.

/s/ KPMG LLP  

Atlanta, Georgia
May 23, 2007

F-1

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
CONSOLIDATED BALANCE SHEETS
December 31, 2006 and 2005
(In thousands)

	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	2,314		$	4,117
Restricted cash, cash equivalents and other time deposits		32,436			32,830
Receivables, net of allowances of $1,701 and $2,218 as of December 31, 2006 and December 31, 2005, respectively		52,427			61,427
Inventories		4,916			5,132
Deferred income taxes		1,907			128
Prepayments and other current assets		21,463			59,434
Total current assets		115,463			163,068
Property and equipment, net of accumulated depreciation		129,231			123,904
Goodwill, net		3,545			3,545
Other assets:
Restricted cash, cash equivalents and other time deposits		65,857			69,764
Other noncurrent assets		24,672			22,835
Total other assets		90,529			92,599
Total assets	$	338,768		$	383,116
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities not subject to compromise:
Debtor-in-possession credit facility	$	161,357		$	151,997
Accounts and notes payable		26,364			56,960
Accrued liabilities		74,439			83,317
Deferred income taxes		106			—
Total current liabilities		262,266			292,274
Long-term liabilities not subject to compromise:
Postretirement benefits other than pensions		14,227			4,648
Deferred income taxes		1,926			143
Other long-term liabilities		65,269			74,096
Total long-term liabilities		81,422			78,887
Liabilities subject to compromise		199,212			199,322
Commitments and contingencies		—			—
Stockholders’ deficit:
Preferred stock, no par value. Authorized 5,000 shares; none outstanding		—			—
Common stock, no par value. Authorized 20,000 shares; 8,980 shares outstanding at December 31, 2006 and December 31, 2005		—			—
Additional paid-in capital		49,081			48,545
Treasury stock, 139 shares at cost		(707	)		(707	)
Accumulated deficit		(228,432	)		(214,631	)
Accumulated other comprehensive loss, net of tax		(24,074	)		(20,574	)
Total stockholders’ deficit		(204,132	)		(187,367	)
Total liabilities and stockholders’ deficit	$	338,768		$	383,116

See accompanying notes to these consolidated financial statements.

F - 2

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2006, 2005 and 2004
(In thousands, except per share data)

	2006			2005			2004
Revenues	$	893,837		$	892,934		$	895,213
Operating expenses:
Salaries, wages and fringe benefits		451,018			482,609			488,728
Operating supplies and expenses		183,723			180,481			162,266
Purchased transportation		115,209			119,431			111,214
Insurance and claims		41,651			42,033			40,821
Operating taxes and licenses		28,059			29,841			29,804
Depreciation and amortization		29,430			29,925			42,943
Rents		7,158			7,500			8,556
Communications and utilities		6,252			6,090			6,342
Other operating expenses		7,810			11,797			10,124
Impairment of goodwill		—			79,172			8,295
Gain on disposal of operating assets, net		(3,297	)		(869	)		(839	)
Total operating expenses		867,013			988,010			908,254
Operating income (loss)		26,824			(95,076	)		(13,041	)
Other income (expense):
Interest expense (excludes contractual interest of $12.9 million and $5.4 million in 2006 and 2005, respectively)		(30,160	)		(39,410	)		(31,355	)
Investment income		4,807			2,813			1,136
Foreign exchange (losses) gains, net		(635	)		1,414			1,929
Other, net		—			834			(191	)
Total other income (expense)		(25,988	)		(34,349	)		(28,481	)
Income (loss) before reorganization items and income taxes		836			(129,425	)		(41,522	)
Reorganization items		(12,772	)		(7,131	)		—
Loss before income taxes		(11,936	)		(136,556	)		(41,522	)
Income tax (expense) benefit		(389	)		10,832			(12,361	)
Net loss	$	(12,325	)	$	(125,724	)	$	(53,883	)
Basic and diluted loss per common share:
Net loss:
Basic and diluted	$	(1.37	)	$	(14.02	)	$	(6.15	)
Weighted-average common shares outstanding:
Basic and diluted		8,980			8,970			8,757

See accompanying notes to these consolidated financial statements.

F - 3

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
Years Ended December 31, 2006, 2005, and 2004
(In thousands)

																	Accumulated
	Comprehensive								Additional								Other
	Income			Common Stock					Paid-in		Treasury			Accumulated			Comprehensive
	(Loss)			Shares			Amount		Capital		Stock			Deficit			Income (Loss)			Total
Balance, December 31, 2003					8,764		$	—	$	47,511	$	(707	)	$	(35,024	)	$	(2,966	)	$	8,814
Net loss	$	(53,883	)		—			—		—		—			(53,883	)		—			(53,883	)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of income taxes of $(256)		2,941			—			—		—		—			—			2,941			2,941
Minimum pension liability, net of income taxes of $0		(331	)		—			—		—		—			—			(331	)		(331	)
Comprehensive loss	$	(51,273	)
Issuance of common stock					196			—		589		—			—			—			589
Compensation expense for restricted stock, net of forfeitures					(41	)		—		321		—			—			—			321
Balance, December 31, 2004					8,919		$	—	$	48,421	$	(707	)	$	(88,907	)	$	(356	)	$	(41,549	)
Net loss	$	(125,724	)		—			—		—		—			(125,724	)		—			(125,724	)
Other comprehensive loss:
Foreign currency translation adjustment, net of income taxes of $256		(1,075	)		—			—		—		—			—			(1,075	)		(1,075	)
Minimum pension liability, net of income taxes of $0		(19,143	)		—			—		—		—			—			(19,143	)		(19,143	)
Comprehensive loss	$	(145,942	)
Issuance of common stock					61			—		124		—			—			—			124
Balance, December 31, 2005					8,980		$	—	$	48,545	$	(707	)	$	(214,631	)	$	(20,574	)	$	(187,367	)
Cumulative-effect adjustment resulting from the adoption of SAB 108, net of income taxes of $0															(1,476	)					(1,476	)
Net loss	$	(12,325	)		—			—		—		—			(12,325	)		—			(12,325	)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of income taxes of $0		(161	)		—			—		—		—			—			(161	)		(161	)
Adjustment to minimum pension liability, net of income taxes of $0		20,169			—			—		—		—			—			20,169			20,169
Comprehensive income	$	7,683
Adjustment to initially apply Statement of Financial Accounting Standards No. 158, net of income taxes of $0	$	(23,508	)															(23,508	)		(23,508	)
Stock-based compensation					—			—		536		—			—			—			536
Balance, December 31, 2006					8,980		$	—	$	49,081	$	(707	)	$	(228,432	)	$	(24,074	)	$	(204,132	)

See accompanying notes to these consolidated financial statements.

F - 4

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2006, 2005, and 2004
(In thousands)

	2006			2005			2004
Cash flows from operating activities:
Net loss	$	(12,325	)	$	(125,724	)	$	(53,883	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		29,430			29,925			42,943
Impairment of goodwill		—			79,172			8,295
Gain on disposal of operating assets, net		(3,297	)		(1,703	)		(839	)
Write-off and amortization of deferred financing costs		5,817			8,631			2,797
Interest expense paid in kind		6,351			—			—
Foreign exchange losses (gains), net		635			(1,414	)		(1,929	)
Reorganization items		12,772			7,131			—
Deferred income taxes		110			(11,261	)		11,275
Stock-based compensation expense		536			—			321
Change in operating assets and liabilities:
Receivables, net of allowances		8,979			(2,712	)		(4,727	)
Inventories		216			(623	)		414
Prepayments and other assets		33,193			(31,993	)		(3,299	)
Accounts and notes payable		(2,236	)		13,045			(1,747	)
Accrued liabilities		(19,646	)		5,518			13,860
Net cash provided by (used in) operating activities before payment of reorganization items		60,535			(32,008	)		13,481
Reorganization items paid		(11,690	)		(2,939	)		—
Net cash provided by (used in) operating activities		48,845			(34,947	)		13,481
Cash flows from investing activities:
Purchases of property and equipment		(35,846	)		(19,405	)		(22,542	)
Proceeds from sales of property and equipment		4,496			3,253			3,040
Proceeds from sale of equity in subsidiaries		—			2,000			—
Decrease (increase) in restricted cash, cash equivalents and other time deposits		4,301			(19,714	)		(796	)
Funds deposited with insurance carriers		(1,856	)		(9,766	)		(32,072	)
Funds returned from insurance carriers		4,512			5,969			34,995
Net cash used in investing activities		(24,393	)		(37,663	)		(17,375	)
Cash flows from financing activities:
(Repayment of) addition to debtor-in-possession revolving credit facility, net		(6,991	)		51,997			—
(Repayments of) additions to pre-petition revolving credit facilities, net		—			(2,972	)		2,972
Additions to debtor-in-possession term debt		10,000			100,000			—
Additions to pre-petition term debt		—			25,000			20,000
Repayment of pre-petition term debt		—			(123,266	)		(18,234	)
Payment of financing costs		(345	)		(8,271	)		(475	)
Proceeds from insurance financing arrangements		6,362			42,401			31,252
Repayments of insurance financing arrangements		(34,446	)		(10,827	)		(32,634	)
Proceeds from issuance of common stock		—			124			589
Net cash (used in) provided by financing activities		(25,420	)		74,186			3,470
Effect of exchange rate changes on cash and cash equivalents		(835	)		25			792
Net change in cash and cash equivalents		(1,803	)		1,601			368
Cash and cash equivalents at beginning of year		4,117			2,516			2,148
Cash and cash equivalents at end of year	$	2,314		$	4,117		$	2,516
Supplemental cash flow information:
Cash paid (refunds received) during the year for:
Interest	$	19,943		$	27,461		$	27,136
Income taxes, net		313			(346	)		489
Supplemental disclosure of noncash financing activity:
Interest paid in kind via addition to term debt	$	6,351		$	—		$	—

See accompanying notes to these consolidated financial statements.

F - 5

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006, 2005, and 2004

(1) Organization and Operations

Company Overview

Allied Holdings, Inc. (“Allied”), a Georgia corporation, is a holding company which operates through its wholly owned subsidiaries. The accompanying consolidated financial statements include the accounts of Allied and its wholly owned subsidiaries (collectively “the Company”). The principal operating divisions of the Company are Allied Automotive Group, Inc. (Allied Automotive Group) and Axis Group, Inc. (Axis Group). Allied Automotive Group, through its subsidiaries, is engaged in the business of transporting automobiles, light trucks, and sport-utility vehicles (“SUVs”) from manufacturing plants, ports, auctions, and railway distribution points to automobile dealerships. Axis Group, through its subsidiaries, is engaged in the business of securing and managing vehicle distribution services, automobile inspections, auction and yard management services, vehicle tracking, vehicle accessorization, and dealer preparatory services for the automotive industry.

Chapter 11 Overview

On July 31, 2005 (“the Petition Date”), Allied and substantially all of its subsidiaries (the “Debtors”) filed voluntary petitions with the U.S. Bankruptcy Court for the Northern District of Georgia (the “Bankruptcy Court”) seeking protection under Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”). The Company’s captive insurance company, Haul Insurance Limited, as well as its subsidiaries in Mexico and Bermuda (the “Non-debtors”) were not included in the Chapter 11 filings. The Canadian subsidiaries obtained approval for creditor protection under the Companies Creditors’ Arrangement Act in Canada and are included among the subsidiaries that filed voluntary petitions seeking bankruptcy protection. Like Chapter 11, the Companies Creditors Arrangement Act in Canada allows for reorganization under the protection of the court system. The Debtors are currently operating their business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and cannot engage in transactions considered to be outside of the ordinary course of business without obtaining Bankruptcy Court approval. Proceedings between the Petition Date and the date that a plan of reorganization is effective will be referred to as the Chapter 11 Proceedings.

On April 6, 2007, the Bankruptcy Court approved the Disclosure Statement (“Disclosure Statement”) for the Second Amended Joint Plan of Reorganization (as amended, the “Joint Plan”) filed by the Debtors, the Teamsters National Automobile Transportation Industry Negotiating Committee, on behalf of the International Brotherhood of Teamsters (the “Teamsters” or “IBT”) and Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP (collectively “Yucaipa”) and authorized its use in connection with the solicitation of votes from those creditors and other parties in interest that were entitled to vote on a plan of reorganization. The Company subsequently received the votes needed and the Bankruptcy Court approved the Joint Plan on May 18, 2007. The Joint Plan includes several conditions precedent to the effective date, including the closing and funding of exit financing. See Note 3 for other Chapter 11 related disclosures.

On March 30, 2007, the Company obtained financing arranged by an affiliate of Goldman Sachs & Co., (the “New DIP Facility”) which provides debtor-in-possession financing of up to $315 million. The New DIP Facility, which was amended in April 2007, replaces the financing obtained on August 1, 2005 in connection with the Chapter 11 filing (the “Original DIP Facility”) and subject to the satisfaction of certain conditions, the New DIP Facility may convert, at the Company’s option, to a senior secured credit facility upon its emergence from Chapter 11. Also, subsequent to December 31, 2006, the Company entered into an agreement with Yucaipa pursuant to which Yucaipa will purchase approximately 150 specialized tractors and car-haul trailers (“Rigs”) from the bankruptcy auction of Blue Thunder Auto Transport, Inc. (the “Blue Thunder Rigs”). The Blue Thunder Rigs will then be sold by Yucaipa to the Company at cost. The purchase of these Rigs are being financed with purchase money financing provided by Yucaipa (the “Rig Financing”), which Rig Financing was approved by the Bankruptcy Court on April 6, 2007. The maximum amount financed under the Rig Financing will not exceed $15 million. At the option of Yucaipa, upon the Company’s successful emergence from Chapter 11, Yucaipa may convert the Rig Financing into additional equity of the Company. See Note 14 for additional discussion on the New DIP Facility and the Rig Financing.

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation

F - 6

The accompanying consolidated financial statements have been prepared on a going concern basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany transactions and accounts have been eliminated in consolidation.

F - 7

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As a result of the Company’s Chapter 11 filing, the Company has applied the guidance of the American Institute of Certified Public Accountants’ Statement of Position 90-7 (“SOP 90-7”), Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, in the preparation of the accompanying consolidated financial statements. SOP 90-7 does not change the application of GAAP in the preparation of financial statements. However, SOP 90-7 does require that financial statements, for periods including and subsequent to the filing of a Chapter 11 petition, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business and also that liabilities subject to compromise be segregated from those not subject to compromise (See Note 3).

The going concern basis assumes that the Company will continue in operation for the foreseeable future and will realize its assets and discharge its post-petition liabilities in the ordinary course of business. However, the Company’s ability to continue as a going concern is predicated upon, among other things, the Joint Plan becoming effective, compliance with the provisions of the New DIP Facility, its ability to generate cash flows from operations, its ability to obtain financing sufficient to satisfy its future obligations and to comply with the terms of the Joint Plan. As a result of the Chapter 11 Proceedings, the Company may take, or be required to take, actions that may cause assets to be realized or liabilities to be settled for amounts other than those reflected in the financial statements. The appropriateness of continuing to present financial statements on a going concern basis is dependent upon, among other things, the terms of the Joint Plan, future profitable operations, the ability to comply with the terms of its financing agreements and the ability to generate sufficient cash from operations and financing sources to meet obligations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern, nor do they include any adjustments to the carrying amounts of assets and liabilities that might be required as a result of the Joint Plan. The Joint Plan could substantially change the amounts currently recorded in the accompanying consolidated financial statements. Asset and liability carrying amounts do not purport to represent the realizable or settlement values that will be reflected in the Joint Plan and, at this time, it is not possible to estimate the impact on the Company’s financial statements.

(b) Foreign Currency Translation

The Company’s functional currency is the local currency for each of its subsidiaries. The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using current exchange rates in effect at the balance sheet date. Revenues and expenses are translated using average monthly exchange rates. The resulting translation adjustments are recorded as accumulated other comprehensive income (loss) in the accompanying consolidated statements of changes in stockholders’ (deficit) equity, net of related income taxes.

(c) Revenue Recognition and Related Allowances

Substantially all revenue is derived from transporting automobiles, light trucks, and SUVs from manufacturing plants, ports, auctions, and railway distribution points to automobile dealerships, providing vehicle rail-car loading and unloading services, providing yard management services, and other distribution and transportation support services to the pre-owned and new vehicle market. Revenue is recorded by the Company when the vehicles are delivered to the dealerships or when services are performed. The Company records an allowance for estimated customer billing adjustments and an allowance for potentially uncollectible accounts based on an evaluation of specific aged customer accounts and historical collection and adjustment patterns. Included in receivables, net of allowances, are $4.2 million and $5.9 million of amounts due from other than trade customers as of December 31, 2006 and 2005, respectively.

(d) Cash, Cash Equivalents and Other Time Deposits

The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents. The time deposits have original maturities of twelve months or less. The portion of cash, cash equivalents and other time deposits that are contractually restricted to secure outstanding letters of credit for the settlement of insurance claims are identified as restricted in the accompanying consolidated financial statements. Restricted cash, cash equivalents and other time deposits are not available to the Company for general use in its operations but are restricted for payment of insurance claims. These amounts are allocated between

F - 8

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

current and noncurrent in the accompanying consolidated balance sheets in proportion to the related insurance claims reserves.

(e) Inventories

Inventories consist primarily of parts and supplies for servicing the Company’s tractors and trailers and are recorded at the lower of cost (on a first-in, first-out basis) or market. Inventories consisted of the following as of December 31, 2006 and 2005 (in thousands):

	2006		2005
Parts	$	3,696	$	3,863
Shop supplies		331		345
Bulk fuel		738		660
Other		151		264
	$	4,916	$	5,132

(f) Tires on Tractors and Trailers

New or replacement tires on tractors and trailers are charged to operating supplies and expenses based on expected usage. The Company estimates the average useful life of a tire to be approximately two years. Tires with estimated remaining useful lives of one year or less are classified as current within prepayments and other current assets. Tires with estimated remaining useful lives in excess of one year are classified within other noncurrent assets.

(g) Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Major property additions, replacements, and betterments are capitalized, while maintenance and repairs that do not extend the useful lives of these assets are expensed. Depreciation is provided using the straight-line method over the estimated useful lives of the assets which are as follows:

• 4 to 10 years for tractors and trailers;

• 6 years for costs capitalized as part of the tractor and trailer remanufacturing program;

• 5 to 30 years for buildings and facilities (including leasehold improvements); and

• 3 to 10 years for furniture, fixtures, service cars and equipment.

(h) Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets to be held and used is measured by comparing their carrying amounts to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of would be reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated. No charges for impairment of long-lived assets were recorded during the years ended December 31, 2006, 2005 or 2004.

(i) Financing Costs

On August 1, 2005, in connection with its Chapter 11 filing, the Company entered into the Original DIP Facility for debtor-in-possession financing of up to $230 million. As previously discussed, on March 30, 2007, the Original DIP Facility was replaced by the New DIP Facility. The deferred financing costs as of December 31, 2006 and December 31, 2005 are included in other noncurrent assets net of accumulated amortization and represent costs related to the Original DIP Facility. Amortization of the Company’s deferred financing costs are included in interest expense. The New DIP Facility and amendments to the Original DIP Facility are more fully discussed in Note 14.

F - 9

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The deferred financing costs at December 31, 2005 were fully amortized as interest expense as of May 18, 2006. As more fully disclosed in Note 14, during the first quarter of 2006, the Company obtained forbearance from its lenders as a remedy to certain covenant violations. The forbearance period ended on May 18, 2006. Accordingly, the Company reduced the amortization period of the deferred financing costs to coincide with the end of the forbearance period resulting in the full amortization of these costs as of May 18, 2006. Fees of approximately $558,000 related to the forbearance agreements were recognized as expense as incurred and are included in interest expense in the accompanying consolidated statement of operations. Additional costs were deferred in 2006 related to the fifth amendment to the Original DIP Facility, which extended the term of the Original DIP Facility. These costs were being amortized using the straight-line method of amortization. The deferred financing costs at December 31, 2006, which relate to the fifth amendment to the Original DIP Facility, will be expensed in the first quarter of 2007 since, during the first quarter of 2007, the Original DIP Facility was replaced by the New DIP Facility.

(j) Interest in Split-Dollar Life Insurance Policies

The Company is party to contractual arrangements related to life insurance policies that cover certain current and former employees, directors and officers of the Company. These contractual arrangements are between the Company and the trusts that own the policies. The Company records as a noncurrent asset the lesser of its interest in each policy (equal to net cash outlay less certain adjustments) as defined in the contractual arrangements or the cash surrender value of the policy. The Company records the increase or decrease in its interest each year as a reduction or increase to premium expense. The trusts retain any proceeds in excess of the Company’s interest in the policies, net of any outstanding policy loans. During the year ended December 31, 2002, the Company discontinued making premium payments on the policies for current directors and officers due to the enactment of the Sarbanes-Oxley Act of 2002. As permitted by the trusts, premiums due on these policies have been paid by increasing loans taken against the available cash surrender value of the policies from the time of enactment of the Sarbanes-Oxley Act of 2002 through the year ended December 31, 2006.

As a result of the Company’s Chapter 11 filing, the Company believes that the contractual arrangements were terminated and that it continues to retain its interest in the policies. In this regard, notice of termination of the contractual arrangements has been given to the life insurance companies and the trusts. The Company also believes that it is entitled to receive its interest in each policy in cash upon the earlier of the death of the insured or the termination of the contractual arrangement related to the policy. However, certain of the trusts believe that even though the contractual arrangements may have terminated, the Company will be entitled to receive its interest in each policy only upon the earlier of the death of the insured or upon the surrender of the policy. At this time the Company is unable to determine the timing of future cash flows from these policies.

(k) Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price and related costs over the fair value of the net tangible and identifiable intangible assets of businesses acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill and intangible assets acquired in a business combination and determined to have indefinite useful lives are not amortized, but instead are evaluated for impairment annually, and between annual tests if an event occurs or circumstances change which indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.

In accordance with SFAS No. 142, intangible assets, other than those determined to have an indefinite life, are amortized to their estimated residual values on a straight-line basis over their estimated useful lives. These intangible assets are reviewed for impairment in accordance with SFAS No. 144.

(l) Fair Value of Financial Instruments

SFAS No. 107, Disclosures About Fair Values of Financial Instruments, requires disclosure of the information below 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.

F - 10

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 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:

• The carrying amount of cash, cash equivalents and other time deposits, including restricted amounts, approximates fair value due to the relatively short period to maturity of these instruments.

• The carrying amount of the Company’s credit facilities approximates fair value based on the borrowing rates currently available to the Company for borrowings with similar terms and average maturities. The fair value of the 8⁵/₈% senior notes is based on trade prices of transactions at or prior to the year-end measurement date. The pricing of such trades may have been impacted by the limited trading of these notes.

The asset and (liability) amounts recorded on the balance sheets and the estimated fair values of financial instruments as of December 31, 2006 and 2005 consisted of the following (in thousands):

	Carrying Amount						Estimated Fair Value
	2006			2005			2006			2005
Cash, cash equivalents and other time deposits (including restricted amounts)	$	100,607		$	106,711		$	100,607		$	106,711
Debtor-in-possession financing		(161,357	)		(151,997	)		(161,357	)		(151,997	)
85/8% senior notes		(150,000	)		(150,000	)		(103,500	)		(119,250	)

(m) Claims and Insurance Reserves

The Company retains losses within certain limits through high deductibles or self-insured retentions. For certain risks, coverage for losses is provided by unrelated primary and reinsurance companies (“third-party insurance carriers”). The Company’s coverage is based on the date that a claim is incurred. Haul Insurance Limited, the Company’s captive insurance subsidiary, provides reinsurance coverage to certain of the Company’s third-party insurance carriers for certain types of losses for certain years within its insurance program, primarily insured workers’ compensation, automobile and general liability risks.

Claims and insurance reserves reflect the estimated cost of claims for workers’ compensation, cargo loss and damage, automobile and general liability, and products liability losses that are not covered by insurance. Amounts that the Company estimates will be paid within the next year have been classified as current in “accrued liabilities” in the consolidated balance sheet while the noncurrent portion is included in “other long-term liabilities.” Costs related to these reserves are included in the statement of operations in “insurance and claims” expense, except for workers’ compensation, which is included in “salaries, wages and fringe benefits.”

The Company utilizes third-party claims administrators, who work under management’s direction, and third-party actuarial valuations to assist in the determination of the majority of its claims and insurance reserves. The third-party claims administrators set claims reserves on a case-by-case basis. The third-party actuary utilizes the aggregate data from these reserves, along with historical paid and incurred amounts, to determine, by loss year, the projected ultimate cost of all claims reported and not yet reported, including potential adverse developments. The Company’s reserve for estimated retrospective premium adjustments for workers’ compensation losses in Canada is based on historical experience and the most recently available actual claims data provided by the Canadian government. The Company’s product liability claims reserves are set on a case-by-case basis by management in conjunction with legal counsel handling the claims, and include an estimate for claims incurred but not yet reported. The Company tracks cargo claims and records reserve amounts on a case-by-case basis. The reserve for cargo claims includes an estimate of incurred but not reported claims.

As part of its insurance programs, the Company is required to provide collateral to its third-party insurance carriers and various states for losses in respect of worker injuries, accident, theft and other loss claims. For this purpose, the Company utilizes letters of credit and/or cash, cash equivalents and other time deposits, classified as restricted in the consolidated balance sheet.

F-11

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(n) Stock-Based Compensation

Effective January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), Share-Based Payment ("SFAS 123(R)") using the modified prospective transition method under which compensation expense is recognized for any new stock options granted and for the unvested portion of outstanding stock options at the date of adoption of SFAS No. 123(R). The Company recognizes compensation expense on a straight-line basis over the vesting period. Compensation expense is adjusted for estimated forfeitures based on the Company’s historical experience. In accordance with the provisions of the modified prospective method, the financial statements of prior periods have not been restated.

For the years ended December 31, 2005 and 2004, the Company applied the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations to account for its fixed-plan stock options. Under this method, compensation expense was recorded on the date of grant only if the market price of the underlying stock, on the date of grant, exceeded the exercise price of the stock option. SFAS No. 123, Accounting for Stock-Based Compensation and SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123, established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company elected to continue to apply the intrinsic value-based method of accounting described above, and adopted only the disclosure requirements of SFAS No. 123 and the amended disclosure requirements of SFAS No. 148.

If the Company had applied the fair-value-based method prescribed by SFAS No. 123 prior to January 1, 2006, net loss and loss per common share would have been changed to the pro forma amounts presented below for the years ended December 31, 2005 and 2004 (in thousands, except per share data):

	2005			2004
Reported net loss	$	(125,724	)	$	(53,883	)
Plus: stock-based employee compensation included in reported net loss		—			321
Less: stock-based employee compensation determined under the fair value method		(923	)		(1,119	)
Pro forma net loss	$	(126,647	)	$	(54,681	)
Loss per share:
As reported:
Basic and diluted	$	(14.02	)	$	(6.15	)
Pro forma:
Basic and diluted	$	(14.12	)	$	(6.24	)

There is no applicable tax expense on the stock-based employee compensation in the table above since the Company has valuation allowances against its deferred tax assets.

The grant-date fair value of the Company’s stock options was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions for the years ended December 31, 2005 and 2004:

	2005			2004
Dividend yield		0	%		0	%
Expected volatility		74	%		72	%
Risk-free interest rate	4.16% and 4.20%			3.56% and 4.39%
Expected holding period	7.85 years			7.85 years

(o) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

F-12

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company assesses the recoverability of deferred tax assets based on estimates of future taxable income and establishes a valuation allowance against its deferred tax assets if it believes that it is more likely than not that the deferred tax assets will not be recoverable.

(p) Pension and Other Benefit Plans

The Company has a defined benefit pension plan for management and office personnel in the U.S. The benefits are based on years of service and the employee’s compensation during the five years before retirement. However, employee participation in the plan has been frozen since 2002. No funding was provided to this plan during the years ended December 31, 2006 and 2005. The Company also has two defined benefit pension plans that are currently active for a specific terminal’s employees. The Pension Protection Act of 2006 (“PPA”) may impact the funding requirements for the Company’s pension plans beginning in 2008. Among other legislative changes, the PPA alters the manner in which liabilities and asset values are determined for the purpose of calculating required pension contributions and the timing and manner in which required contributions to underfunded pension plans would be made. These changes could result in an increase in the funding requirements for the Company’s pension plans.

The Company sponsors a self-insured healthcare plan for substantially all U.S. employees. The amount of the Company’s obligation under this plan is measured based on the Company’s best estimate of claims costs incurred, including an estimate for claims incurred but not reported. The cost is recorded in salaries, wages and fringe benefits in the accompanying consolidated statement of operations.

The Company also sponsors postretirement plans that provide healthcare and other benefits for certain of its retired employees.

A substantial number of the Company’s employees are covered by union-sponsored, collectively bargained, multiemployer pension and health and welfare plans. Contributions to these plans are determined in accordance with the provisions of negotiated labor contracts and are generally based on the number of hours worked.

As more fully discussed in Note 16, the Company adopted the recognition and disclosure provisions of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106 and 132(R), at December 31, 2006. Accordingly, the Company recognized the funded status of its defined benefit pension and other postretirement plans in its consolidated balance sheet at December 31, 2006.

(q) Earnings Per Share

SFAS No. 128, Earnings Per Share, requires presentation of basic and diluted earnings or loss per share. Basic earnings or loss per share is calculated by dividing net income or loss available to common stockholders by the weighted-average number of common shares outstanding for the years presented. Diluted earnings or loss per share reflects the potential dilution that could occur if securities and other contracts to issue common stock were exercised or converted into common stock or if they resulted in the issuance of common stock. The following were excluded from the calculation of diluted earnings per share as the impact would have been antidilutive:

• For the years ended December 31, 2006, 2005 and 2004, options to acquire 1,550,167, 1,572,667 and 1,588,667 shares of common stock, respectively; and

• For the year ended December 31, 2004, 8,957 shares of unvested restricted stock.

Any plan of reorganization could require the issuance of new or additional common stock or common stock equivalents which could dilute current equity interests.

(r) Commitments and Contingencies

F-13

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

(s) Guarantees and Indemnifications

Guarantees

The Company leases office space, certain terminal facilities, computer equipment, Rigs and other equipment under noncancelable and cancelable operating lease agreements, some of which provide guarantees to third parties. No accruals for guarantees were required at December 31, 2006 and 2005.

Indemnifications

The Company enters into agreements containing indemnification provisions with certain of its customers, suppliers, service providers, and business partners in the ordinary course of business. Under the indemnification provisions, subject to various limitations and qualifications, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities. The potential losses primarily relate to obligations that are insured under the Company’s insurance programs. These indemnification provisions generally survive termination of the underlying agreement. The maximum potential amount of future payments that the Company could be required to make under these indemnification provisions is unlimited. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions and does not expect to incur any such costs at this time. No accruals for these indemnification provisions were considered necessary at December 31, 2006 and 2005.

In addition, the Company is obligated to indemnify its directors and officers who are, or were, serving at the Company’s request in such capacities, subject to the Company’s By-laws. The maximum potential amount of future payments that the Company could be required to make under the indemnification provisions of its By-laws is unlimited; however, the Company has Director and Officer insurance policies that, in most cases, would enable it to recover a portion of any future amounts paid. Historically, the Company has not incurred any costs to settle claims related to these indemnifications, and there were no claims outstanding at December 31, 2006. No accruals for these indemnification provisions were considered necessary at December 31, 2006 and 2005.

(t) Derivatives and Hedging Activities

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded on the balance sheet as either an asset or a liability measured at its fair value. SFAS No. 133 requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative’s gains and losses to offset related results on the hedged item in the statement of operations and requires a company to formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

From time to time, the Company enters into futures contracts to manage the risk associated with changes in fuel prices. Gains and losses from fuel hedging contracts are recognized as part of fuel expense when the Company uses the underlying fuel being hedged. The Company does not enter into fuel hedging contracts for speculative purposes. During the years ended December 31, 2006, 2005, and 2004, the Company had no fuel hedging contracts or other derivative instruments that fall within the provisions of SFAS No. 133.

(u) Use of Estimates

The preparation of the consolidated financial statements requires management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and disclosures about contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment and goodwill; valuation allowances for receivables and deferred income tax assets; self-

F-14

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

insurance reserves; liabilities subject to compromise, reorganization items and assets and obligations related to employee benefits. Actual results could differ materially from those estimates.

(v) Other Comprehensive Loss

Accumulated other comprehensive loss, net of income taxes of $1.9 million as of December 31, 2006 and 2005, consists of the following (in thousands):

	2006			2005
Foreign currency translation adjustment	$	(156	)	$	(317	)
Pension and other postretirement benefit plan adjustments		24,230			20,891
Accumulated other comprehensive loss	$	24,074		$	20,574

During the year ended December 31, 2005, the Company recorded net increases to its additional minimum pension liabilities of $19.1 million through other comprehensive loss. During the year ended December 31, 2006, the Company recorded decreases to its additional minimum pension liabilities of $20.2 million through other comprehensive loss. The incremental effect of adopting SFAS No. 158 at December 31, 2006 was to increase accumulated other comprehensive loss by $23.5 million.

The increase in the valuation allowance for deferred income taxes for the years ended December 31, 2006 and 2005 included $1.4 million and $7.7 million, respectively, related to increases in deferred tax assets through accumulated other comprehensive loss. During the year ended December 31, 2004, the Company recorded $990,000 of credits to other comprehensive income related to the reversal of the beginning of the year valuation allowance for deferred tax assets.

(w) Adoption of SEC Staff Accounting Bulletin No. 108

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 requires registrants to quantify misstatements using both the balance-sheet and the income-statement approaches and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is determined to be material, SAB No. 108 allows registrants to record that effect as a cumulative-effect adjustment to beginning-of-year retained earnings or accumulated deficit. The new guidance applies when uncorrected misstatements in a previous year affect the current year, either because misstatements carry over or reverse.

The Company was required to consider the provisions of SAB No. 108 in the preparation of its financial statements for the year ended December 31, 2006 and recorded a cumulative-effect adjustment to accumulated deficit as of January 1, 2006 of $1.5 million. The Company identified three uncorrected misstatements affecting the prior year financial statements that were not material to those statements individually, or in the aggregate, using the balance-sheet approach. However, the impact of correcting these misstatements was material to the financial statements for the year ended December 31, 2006 under the income- statement approach. Therefore, in accordance with SAB No. 108 the Company recorded the cumulative-effect adjustment as of January 1, 2006. The detail of the items included in the adjustment were as follows:

• In 1994, in connection with the acquisition of Auto Haulaway, a Canadian company, the Company assumed the obligations of a postretirement benefit plan to provide certain retired employees with healthcare and life insurance benefits. The obligation of $810,000 as of January 1, 2006, related to this plan had not been reflected in the Company’s consolidated balance sheet.

• The Company identified several uncertain tax positions during 2006 that did not meet the criteria under GAAP for recognition of the benefit. The estimated liability for tax, interest and penalties of $370,000 as of January 1, 2006 had not been reflected in the Company’s consolidated balance sheet.

• A number of proofs of claim were filed against the Debtors by various creditors and security holders prior to the bar date set by the Bankruptcy Court. As part of the claims reconciliation process, the Debtors are reviewing these claims for validity. In reconciling proofs of claims submitted by creditors, the Company identified additional pre-petition liabilities of $296,000 during 2006 that had not been reflected in liabilities subject to compromise. As additional proofs of claim are reconciled, the Debtors may need to record additional liabilities subject to compromise. Such adjustments could have a material effect on the consolidated financial statements.

(3) Chapter 11 Proceedings

Summary of Proceedings

As disclosed in Note 1, on July 31, 2005, Allied Holdings, Inc. and substantially all of its subsidiaries filed voluntary petitions seeking protection under Chapter 11. The Chapter 11 filings were precipitated by various factors, including the decline in new vehicle production at certain of the Company’s major customers, rising fuel costs, historically high levels of debt, increasing wage and benefit obligations for the Company’s bargaining employees in the U.S. and the increase in non-union vehicle-hauling competition. The majority of our bargaining employees in the U.S. are covered by the National Master Automobile Transporters Agreement (“Master Agreement”) with the International Brotherhood of Teamsters (the “Teamsters” or “IBT”).

On April 6, 2007, the Bankruptcy Court approved the Disclosure Statement for the Joint Plan, filed by the Debtors, the Teamsters and Yucaipa, and authorized its use in connection with the solicitation of votes from those creditors and other parties in interest that were entitled to vote on a plan of reorganization. The Company received the votes needed, and the Joint Plan was confirmed by the Bankruptcy Court on May 18, 2007. The Joint Plan includes several conditions precedent to the effective date, including the closing and funding of exit financing.

On March 30, 2007, the Original DIP Facility was replaced by the New DIP Facility, which may be converted to an exit financing facility upon the Company’s emergence from Chapter 11. See Note 14 for additional discussion on the New DIP Facility.

The Disclosure Statement for the Joint Plan contemplates that the Company will continue to operate in substantially its current form, and contemplates the resolution of the outstanding claims against and interests in the Debtors pursuant to the Bankruptcy Code. Upon the effective date of the Joint Plan, the Debtors will be reorganized through, among other things, the consummation of the following transactions:

i)	Payment of the Original DIP Facility and funding of the exit financing, both of which have been facilitated by the New DIP Facility, subject to certain conditions;
ii)	Payment in cash, reinstatement, return of collateral or other treatment of other secured claims agreed between the holder of each such claim and Yucaipa;
iii)	Distribution of new common stock on a pro rata basis to the holders of allowed general unsecured claims;

F-15

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

iv)	Cancellation of the existing common stock interests in the Debtors (holders of equity interests would receive nothing under the Disclosure Statement for the Joint Plan); and
v)	Assumption of assumed contracts.

During the Chapter 11 Proceedings, actions by creditors to collect pre-petition indebtedness are stayed and other contractual obligations generally may not be enforced against the Debtors. As debtors-in-possession, the Debtors have the right, subject to Bankruptcy Court approval and certain other limitations, to assume or reject executory contracts and unexpired leases. Executory contracts refer to contracts in which the obligations of both parties are unperformed. In this context “rejection” means that the Debtors are relieved from their obligations to perform further under the contract or lease but are subject to a potential claim for damages for the related breach. Any damages resulting from rejection are treated as general unsecured pre-petition claims during the Chapter 11 Proceedings. Parties affected by these rejections may file claims with the Bankruptcy Court in accordance with bankruptcy procedures. The Debtors have exercised their right to reject certain contracts and have included in liabilities subject to compromise their estimate of liabilities for damages under those contracts and leases that they have rejected. Ultimately, all of the Debtors’ contracts and leases will either be assumed or rejected. The Debtors had until the confirmation of the Joint Plan to assume or reject contracts and leases and cannot reasonably predict the ultimate liability that may result if others file claims for damages related to rejected contracts and leases. Such claims could result in additional liabilities subject to compromise.

Pre-petition claims that were contingent or unliquidated at the commencement of the Chapter 11 Proceedings are generally allowable against the debtor-in-possession in amounts fixed by the Bankruptcy Court. A contingent claim is one which is dependent on the occurrence of a certain event whereas an unliquidated claim is one in which the amount is uncertain. The bar date for creditors to file claims with the Bankruptcy Court was February 17, 2006, and the Company is in the process of reconciling these claims to its records. The rights of and ultimate payment by the Debtors under pre-petition obligations are subject to resolution under the Joint Plan.

In connection with the Chapter 11 Proceedings, the Bankruptcy Court granted the Debtors several “first day” orders that allowed the payment of certain pre-petition liabilities and enabled the Debtors generally to operate in the ordinary course of business. In addition, the Office of the United States Trustee appointed a committee of unsecured creditors (“Creditors Committee”). The Creditors Committee and its legal representatives had the right to be heard on all matters that came before the Bankruptcy Court, including the Joint Plan.

It is not possible to accurately predict the effect of the Chapter 11 Proceedings on the Company’s business. Its future results of operations will depend on the timely and successful implementation of the Joint Plan and no assurance can be provided that the Joint Plan will be consummated. The rights and claims of various creditors and security holders are determined by the Joint Plan under the priority plan established by the Bankruptcy Code.

The SEC has informed the Debtors of its intention to monitor the Chapter 11 Proceedings.

Credit Facilities

On August 2, 2005, using funds received from the Original DIP Facility, the Company paid in full the amounts due and payable under its pre-petition facility. As more fully discussed in Note 14, on March 30, 2007, the Original DIP Facility was replaced by the New DIP Facility. Funds under the New DIP Facility are available to help satisfy the Company’s working capital obligations during the remaining term of the Chapter 11 Proceedings, including

F-16

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

payment under normal terms for goods and services provided after the Petition Date, payment of wages and benefits to active employees and retirees and other items approved by the Bankruptcy Court.

Accounting for Reorganization

As disclosed in Note 2, SOP 90-7 requires that financial statements, for periods including and subsequent to the filing of a Chapter 11 petition, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. In accordance with SOP 90-7, the Debtors have:

• separated liabilities that are subject to compromise from liabilities that are not subject to compromise;

• distinguished transactions and events that are directly associated with the reorganization from the ongoing operations of the business; and

• ceased accruing interest on the 8⁵/₈ % senior notes (“Senior Notes”).

Liabilities Subject to Compromise

Liabilities subject to compromise include certain known liabilities incurred by the Debtors prior to the Petition Date. Liabilities subject to compromise exclude pre-petition claims for which the Debtors have received the Bankruptcy Court’s approval to pay, such as claims related to active employees and retirees, maintenance of insurance programs, cargo damage claims and claims related to certain critical service vendors. Liabilities subject to compromise are included at amounts expected to be allowed by the Bankruptcy Court and are subject to future adjustments that may result from negotiations, actions by the Bankruptcy Court, developments with respect to disputed claims or matters arising out of the proof of claims process whereby a creditor may provide proof of a valid claim and that claim differs from the amount that the Company has recorded.

A number of proofs of claim were filed against the Debtors by various creditors and security holders prior to the bar date set by the Bankruptcy Court. As part of the claims reconciliation process, the Debtors are reviewing these claims for validity. As claims are reconciled, the Debtors may need to record additional liabilities subject to compromise. Adjustments arising out of the claims reconciliation process could have a material effect on the consolidated financial statements.

The Company ceased the recording of interest on liabilities subject to compromise, primarily the Senior Notes as of the Petition Date. Contractual interest on the Senior Notes in excess of reported interest was $12.9 million and $5.4 million for the years ended December 31, 2006 and 2005, respectively. As of December 31, 2006, contractual interest not accrued since the Petition Date was approximately $18.3 million, excluding any potential compound or default interest arising from events of default related to the Chapter 11 Proceedings.

Liabilities subject to compromise are as follows at December 31, 2006 and 2005 (in thousands):

	2006		2005
Accounts payable	$	25,156	$	24,922
Senior Notes		150,000		150,000
Accrued interest on Senior Notes		4,313		4,313
Multiemployer pension withdrawal liabilities		15,847		15,847
Accrued claims and insurance reserves		3,000		3,109
Other accrued liabilities		896		1,131
	$	199,212	$	199,322

Reorganization Items

Reorganization items are presented separately in the accompanying consolidated statements of operations and represent expenses identified as directly relating to the Chapter 11 Proceedings. These items are summarized below for the years ended December 31, 2006 and 2005 (in thousands):

F-17

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2006		2005
Legal and professional fees	$	9,859	$	5,153
Write-off of deferred financing costs		—		1,442
Provision for rejected executory contracts and leases		—		220
Employee retention plan		2,576		173
Other reorganization items		337		143
	$	12,772	$	7,131

Condensed Financial Statement Information of the Debtors and Non-debtors

As disclosed in Note 1, the Company’s captive insurance company, Haul Insurance Limited, as well as its subsidiaries in Mexico and Bermuda (the “Non-debtors”) were not among the subsidiaries that filed for Chapter 11. Presented below are condensed consolidating financial statement information of the Debtors and the Non-debtors:

Condensed Consolidating Balance Sheet Information
December 31, 2006
(In thousands)

	Debtors			Non-Debtors			Eliminations			Consolidated
Current assets	$	78,646		$	36,796		$	21		$	115,463
Intercompany receivables (payables)		16,953			(16,953	)		—			—
Property and equipment, net		125,236			3,995			—			129,231
Goodwill, net		3,545			—			—			3,545
Investment in subsidiaries		18,931			6,220			(25,151	)		—
Other assets		24,402			66,127			—			90,529
Total assets	$	267,713		$	96,185		$	(25,130	)	$	338,768
Liabilities not subject to compromise:
Current liabilities	$	237,603		$	26,273		$	(1,610	)	$	262,266
Other noncurrent liabilities		34,092			47,330			—			81,422
Liabilities subject to compromise		199,212			—			—			199,212
Stockholders’ (deficit) equity		(203,194	)		22,582			(23,520	)		(204,132	)
Total liabilities and stockholders’ (deficit) equity	$	267,713		$	96,185		$	(25,130	)	$	338,768

F-18

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Balance Sheet Information
December 31, 2005
(In thousands)

	Debtors			Non-Debtors			Eliminations			Consolidated
Current assets	$	121,807		$	41,261		$	—		$	163,068
Intercompany receivables (payables)		14,744			(14,744	)		—			—
Property and equipment, net		120,212			3,692			—			123,904
Goodwill, net		3,545			—			—			3,545
Investment in subsidiaries		21,169			6,223			(27,392	)		—
Other assets		22,366			70,233			—			92,599
Total assets	$	303,843		$	106,665		$	(27,392	)	$	383,116
Liabilities not subject to compromise:
Current liabilities	$	264,029		$	28,245		$	—		$	292,274
Other noncurrent liabilities		26,920			51,967			—			78,887
Liabilities subject to compromise		199,322			—			—			199,322
Stockholders’ (deficit) equity		(186,428	)		26,453			(27,392	)		(187,367	)
Total liabilities and stockholders’ (deficit) equity	$	303,843		$	106,665		$	(27,392	)	$	383,116

Condensed Consolidating Statement of Operations Information
For the Year Ended December 31, 2006
(In thousands)

	Debtors			Non-Debtors			Eliminations			Consolidated
Revenues	$	889,638		$	5,561		$	(1,362	)	$	893,837
Operating expenses		856,907			11,468			(1,362	)		867,013
Operating income (loss)		32,731			(5,907	)		—			26,824
Other (expense) income, net		(32,396	)		4,383			2,025			(25,988	)
(Loss) income before reorganization items and income taxes		335			(1,524	)		2,025			836
Reorganization items		(12,772	)		—			—			(12,772	)
Loss before income taxes		(12,437	)		(1,524	)		2,025			(11,936	)
Income tax benefit (expense)		112			(2,132	)		1,631			(389	)
Net loss	$	(12,325	)	$	(3,656	)	$	3,656		$	(12,325	)

F-19

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Statement of Operations Information
For the Year Ended December 31, 2005
(In thousands)

	Debtors			Non-Debtors			Eliminations			Consolidated
Revenues	$	889,643		$	41,413		$	(38,122	)	$	892,934
Operating expenses		982,931			43,201			(38,122	)		988,010
Operating loss		(93,288	)		(1,788	)		—			(95,076	)
Other (expense) income, net		(37,326	)		9,133			(6,156	)		(34,349	)
(Loss) income before reorganization items and income taxes		(130,614	)		7,345			(6,156	)		(129,425	)
Reorganization items		(7,131	)		—			—			(7,131	)
(Loss) income before income taxes		(137,745	)		7,345			(6,156	)		(136,556	)
Income tax benefit (expense)		12,021			(1,189	)		—			10,832
Net (loss) income	$	(125,724	)	$	6,156		$	(6,156	)	$	(125,724	)

Condensed Consolidating Statement of Cash Flows Information
For the Year Ended December 31, 2006
(In thousands)

	Debtors			Non-Debtors			Eliminations		Consolidated
Net cash provided by (used in):
Operating activities	$	53,397		$	(4,552	)	$	—	$	48,845
Investing activities		(27,724	)		3,331			—		(24,393	)
Financing activities		(25,420	)		—			—		(25,420	)
Effect of exchange rate changes on cash and cash equivalents		(794	)		(41	)		—		(835	)
Net change in cash and cash equivalents		(541	)		(1,262	)		—		(1,803	)
Cash and cash equivalents at beginning of year		730			3,387			—		4,117
Cash and cash equivalents at end of year	$	189		$	2,125		$	—	$	2,314

Condensed Consolidating Statement of Cash Flows Information
For the Year Ended December 31, 2005
(In thousands)

	Debtors			Non-Debtors			Eliminations		Consolidated
Net cash provided by (used in):
Operating activities	$	(56,614	)	$	21,667		$	—	$	(34,947	)
Investing activities		(17,070	)		(20,593	)		—		(37,663	)
Financing activities		74,186			—			—		74,186
Effect of exchange rate changes on cash and cash equivalents		25			—			—		25
Net change in cash and cash equivalents		527			1,074			—		1,601
Cash and cash equivalents at beginning of year		203			2,313			—		2,516
Cash and cash equivalents at end of year	$	730		$	3,387		$	—	$	4,117

(4) Recent Accounting Pronouncements

F-20

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes,” and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The evaluation of a tax position in accordance with FIN 48 is a two-step process. The first step is recognition: The enterprise determines whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step is measurement: A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of the benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. FIN 48 requires the evaluation of tax positions to be completed prior to assessing the need for a valuation allowance for deferred tax assets. Additional disclosure requirements of the Interpretation include a rollforward of unrecognized tax benefits, information regarding the uncertainty of unrecognized tax benefits, a description of all open tax years by jurisdiction and the accounting policy on the income statement classification of interest and penalties and amounts of each recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006 — January 1, 2007 for the Company. The cumulative-effect, if any, of applying the provisions of this Interpretation will be reported as an adjustment to the opening balance of accumulated deficit in the year ending December 31, 2007. The Company has not completed its evaluation of the impact of FIN 48 on its financial statements. Therefore, it has not quantified the amount of the adjustments, if any, that might be required.

In September 2006, the FASB ratified the consensus reached by the Emerging Issues Task Force (“EITF”) on EITF Issue No. 06-05, Accounting for Purchases of Life Insurance — Determining the Amount that Could be Realized in Accordance with FASB Technical Bulletin No 85-4, Accounting for Purchases of Life Insurance. This consensus provides guidance regarding the accounting for life insurance policies purchased by entities. Based on the consensus, a policyholder should consider any additional amounts included in the contractual terms of the policy in determining the amount that could be realized under the insurance contract. Contractual limitations should be considered when determining the realizable amounts. Those amounts that are recoverable by the policyholder at the discretion of the insurance company should be excluded from the amount that could be realized. Fixed amounts that are recoverable by the policyholder in future periods in excess of one year from the surrender of the policy should be recognized at their present value. Any amount that is ultimately realized by the policyholder upon the assumed surrender of the final policy (or final certificate in a group policy) shall be included in the amount that could be realized under the insurance contract. This consensus is to be applied through either (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets in the balance sheet as of the beginning of the year of adoption or (b) a change in accounting principle through retrospective application to all prior periods. This consensus is effective for fiscal years beginning after December 15, 2006. The Company has evaluated the impact of this consensus and does not expect it to have a material impact on its financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires expanded disclosures about fair-value measurements. SFAS No. 157 applies only to fair-value measurements that are already required or permitted by other accounting standards and is expected to increase the consistency of those measurements. SFAS No. 157 clarifies the definition of fair value. Specifically, this Statement clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the

F-21

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. This Statement also emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair-value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. SFAS No. 157 expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. The disclosures focus on the inputs used to measure fair value and, for recurring fair-value measurements using significant unobservable inputs, the effect of the measurements on earnings for the period. This Statement encourages entities to combine the fair value information disclosed under this Statement with the fair value information disclosed under other accounting pronouncements, including SFAS No. 107, Disclosures about Fair Value of Financial Instruments, where practicable. SFAS No. 157 will be effective for the Company’s financial statements for the year ending December 31, 2008, and interim periods within 2008. However, if the Company implements fresh-start reporting pursuant to SOP 90-7 during 2007, the provisions of this Statement will be applied as of the date it implements fresh-start reporting. The provisions of this Statement should be applied prospectively, except for limited exceptions, in which case, it should be applied retrospectively. The Company has not determined whether the provisions of SFAS No. 157 will require any changes to its fair-value measurements after the effective date of the Statement. However, expanded disclosures of fair value will be required.

In October 2006, the FASB issued FASB Staff Position FAS 123(R)-5, an amendment of FASB Staff Position FAS 123(R)-1 and FASB Staff Position FAS 123(R)-6, Technical Corrections of FASB Statement No. 123(R). These FASB Staff Positions were effective for the Company’s financial statements beginning in the fourth quarter of 2006 and had no impact on its financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option For Financial Assets and Financial Liabilities, including an Amendment of SFAS No. 115. SFAS No. 159 permits entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected are to be recognized in earnings as incurred and not deferred. SFAS No. 159 is effective at the beginning of fiscal years beginning on or after November 15, 2007. The Company has not yet decided whether it will elect the fair value option in 2008 nor has it determined the associated impact if it makes this election.

(5) Restricted Investments and Investment Income

There were no restricted investments as of December 31, 2006 or December 31, 2005 since during 2004, all of the Company’s investments, which consisted of federal, state, and municipal government obligations and corporate securities, were converted to cash, cash equivalents and other time deposits. The cost of securities sold was based on the specific identification method. Sales of securities for the year ended December 31, 2004 are summarized below (in thousands):

	2004
Cash proceeds	$	157,950
Gross realized gains.		120
Gross realized losses		(299	)

Investment income consists of the following for the years ended December 31, 2006, 2005, and 2004 (in thousands):

	2006		2005		2004
Interest and dividend income	$	4,807	$	2,813	$	1,315
Realized losses		—		—		(179	)
	$	4,807	$	2,813	$	1,136

(6) Prepayments and Other Current Assets

Prepayments and other current assets consist of the following at December 31, 2006 and 2005 (in thousands):

F-22

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2006		2005
Prepaid insurance	$	14,689	$	50,185
Tires on tractors and trailers		2,360		2,245
Prepaid licenses		1,285		1,532
Short-term deposits with Pre-petition lenders		11		2,679
Prepaid taxes		1,065		1,163
Other		2,053		1,630
	$	21,463	$	59,434

In connection with the Company’s fleet analyses of tractors and trailers discussed in Note 7, during the years ended December 31, 2006, 2005 and 2004, the Company expensed $497,000, $158,000 and $1.1 million, respectively, relating to the tires on these units.

(7) Property and Equipment

Property and equipment consisted of the following at December 31, 2006 and 2005 (in thousands):

	2006			2005
Tractors and trailers	$	423,899		$	424,057
Buildings and facilities (including leasehold improvements)		45,360			45,191
Furniture, fixtures and equipment		44,286			44,066
Land		9,786			10,415
Service cars and equipment		4,513			4,477
		527,844			528,206
Less accumulated depreciation		(398,613	)		(404,302	)
	$	129,231		$	123,904

Depreciation expense was $29.3 million, $29.7 million and $42.7 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Of the amount reported as “Gain on disposal of operating assets, net” in the Company’s consolidated statement of operations for the year ended December 31, 2006, approximately $3.0 million relates to the sale of a portion of land located in Ontario, Canada previously owned by the Company’s Automotive Group. The sale was approved by the Bankruptcy Court and was completed on December 8, 2006. Gross proceeds of sale were approximately CDN$4.3 million.

The Company is continuing the remanufacturing program related to its tractors and trailers that began in 2002. Remanufacturing involves structural improvements and/or engine replacements to the tractors and trailers (together called “Rigs”) and is expected to increase the useful life of a Rig to approximately 15 years. The cost of these newly remanufactured assets is depreciated over an estimated useful life of 6 years using the straight-line method of depreciation. Total capital expenditures related to the remanufacturing program, including engine replacements, were approximately $21.6 million, $16.7 million and $11.7 million for the years ended December 31, 2006, 2005 and 2004, respectively.

The Company utilizes primarily one company to remanufacture and supply certain parts needed to maintain a significant portion of its fleet of Rigs. While the Company believes that a limited number of other companies could provide comparable remanufacturing services and parts, a change in this service provider could cause a delay in and increase the cost of the remanufacturing process and the maintenance of its Rigs. Such delays and additional costs could adversely affect the Company’s operating results as well as its Rig remanufacturing and maintenance programs. While this and other manufacturers also produce non-specialized tractors, the Company has not determined the impact on its equipment and operating costs should the specialized tractors not be available in the future.

During 2006, the Company performed an analysis of the fleet of tractors and trailers and determined that a total of 298 tractors and 302 trailers would not be remanufactured and would be sold for scrap value. As a result, the Company revised the estimated useful lives of these tractors and trailers and recorded depreciation expense of approximately $1.8 million to record these assets at estimated scrap value. During 2005, the Company performed a similar analysis of the fleet of tractors and trailers and determined that a total of 128 tractors and 76 trailers would not be remanufactured and would be sold for scrap value. As a result, the Company revised the estimated useful

F-23

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

lives of these assets and recorded depreciation expense of approximately $1.0 million to record these assets at estimated scrap value at December 31, 2005. The analysis performed in 2004 identified a total of 710 tractors and 834 trailers, which were temporarily idled and which would not have been remanufactured but would instead be sold for scrap value. As a result, the company revised the estimated useful lives of the assets and recorded depreciation expense of approximately $4.2 million to record these assets at scrap value at December 31, 2004.

(8) Goodwill and Other Intangible Assets

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Company reviews its goodwill annually for impairment or on an interim basis if an event occurs or circumstances change that would potentially reduce the fair value of its goodwill below its carrying amount. The annual test may be performed at any time during the fiscal year provided that the test is performed at the same time each year. The Company has elected October 1 to be its annual assessment date. SFAS No. 142 requires that if the fair value of a reporting unit is less than its carrying amount, including goodwill (Step I), further analysis (Step II) is required to measure the amount of the impairment loss, if any. The amount by which the reporting unit’s carrying amount of goodwill exceeds the implied fair value of the reporting unit’s goodwill, determined in Step II, is to be recognized as an impairment loss. The Company’s reporting units are the Allied Automotive Group and the Axis Group.

As a result of circumstances affecting Allied Automotive Group that culminated at the end of the second quarter of 2005, the Company reassessed its goodwill for impairment as of June 30, 2005. Allied Automotive Group was adversely affected by the actual and forecasted reduction of Original Equipment Manufacturer (“OEM”) production of automobiles in 2005. Accordingly, the Company revised its forecasts downward in the second quarter of 2005 from those used to perform its annual impairment test as of October 1, 2004. The Company’s deteriorating financial performance combined with its lenders’ reaction to its revised forecasts resulted in the need to execute amendments to its pre-petition facility on a weekly basis to address its borrowing capacity and various covenant violations during the second quarter of 2005. The assessment resulted in an impairment loss of $79.2 million and represented the entire carrying amount of goodwill for this reporting unit, since the estimated fair value of this reporting unit’s goodwill was determined to be zero. To determine the fair value of the reporting unit, management considered available information including market values of securities, appraisals of the Automotive Group’s long-term tangible assets and discounted cash flows from the Company’s revised forecasts.

The annual review of the Axis reporting unit goodwill was completed as of October 1, 2006 and 2005. No impairment was identified.

With respect to the year ended December 31, 2004, the Company completed its annual review for impairment of goodwill during the fourth quarter of 2004. No impairment was identified with respect to Allied Automotive Group. However, the analysis resulted in an impairment loss of $8.3 million related to the Axis Group. The fair value of goodwill, which was used to measure the amount of impairment to be recognized, was derived using discounted cash flow analyses. During the year ended December 31, 2004, Axis experienced a decline in operating performance compared to prior years. As a result of this decline and management’s analysis of trends in operational metrics, the Company lowered the projected future operating cash flows for the Axis Group. This was the primary contributing factor that resulted in the impairment loss of $8.3 million for the year ended December 31, 2004.

The discounted cash flow analyses involved estimates and assumptions by management regarding future sales volume, prices, inflation, expenses and capital spending, discount rates, exchange rates, tax rates and other factors. The assumptions used in these discounted cash flow analyses were consistent with the assumptions that were used for internal planning. Impairment losses are reflected as “impairment of goodwill” in the accompanying consolidated statement of operations.

The following table summarizes the activity in the carrying amount of goodwill by reporting unit for the year ended December 31, 2005 (in thousands):

	Allied
	Automotive
	Group			Axis Group		Total
Balance as of December 31, 2004	$	80,041		$	3,936	$	83,977
Impairment of goodwill		(79,172	)		—		(79,172	)
Change in carrying amount due to a change in currency rates		(869	)		3		(866	)

F-24

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Disposal of reporting unit component		—		(394	)		(394	)
Balance as of December 31, 2005	$	—	$	3,545		$	3,545

There was no activity for the year ended December 31, 2006.

The table below provides a summary of the carrying and unamortized amounts relating to the Company’s other intangible assets as of December 31, 2006 and 2005 which are included in other noncurrent assets (in thousands):

	2006			2005
Gross carrying amount	$	1,333		$	1,504
Accumulated amortization		(1,067	)		(1,040	)
Unamortized balances	$	266		$	464

The intangibles are being amortized over the estimated useful life of ten years. Amortization expense for these intangible assets was approximately $150,000 for each of the years ended December 31, 2006, 2005 and 2004 and the Company currently expects amortization expense to be approximately $150,000 for the year ending December 31, 2007 and $116,000 for the year ending December 31, 2008.

(9) Other Noncurrent Assets

Other noncurrent assets consist of the following at December 31, 2006 and 2005 (in thousands):

	2006		2005
Deposits with insurance companies	$	10,547	$	5,100
Interest in split-dollar life insurance policies.		5,973		6,181
Other deposits		2,336		2,503
Tires on tractors and trailers		2,950		2,619
Overfunded pension plans		2,473		—
Deferred financing costs		124		5,595
Other		269		837
	$	24,672	$	22,835

Deferred financing costs and the related accumulated amortization are shown below as of December 31, 2006 and 2005 (in thousands):

	2006			2005
Cost	$	345		$	7,646
Accumulated amortization		(221	)		(2,051	)
Net	$	124		$	5,595

The deferred financing costs at December 31, 2006 and December 31, 2005 represent costs related to the debtor-in-possession financing discussed in Note 11. The deferred financing costs at December 31, 2006 relate to the fifth amendment to the debtor-in-possession financing. As disclosed in Note 2, deferred financing costs at December 31, 2005 were fully amortized as interest expense as of May 18, 2006.

The Chapter 11 filing on July 31, 2005 constituted an event of default under the Senior Notes. Accordingly, during the third quarter of 2005, the Company wrote off to reorganization items the related deferred financing costs of $1.4 million. Further, based on the financial reports delivered to the lenders under the pre-petition facility on July 29, 2005, the Company was in violation of one of the financial covenants in its pre-petition facility at June 30, 2005. As a result, during the second quarter of 2005, the Company wrote off the related deferred financing costs of $4.9 million, which is included in interest expense.

Charges relating to the amortization and write-off of deferred financing costs were $5.8 million, $10.0 million and $2.8 million for the years ended December 31, 2006, 2005 and 2004, respectively. The charges for the year ended December 31, 2005 include the $4.9 million write-off related to the pre-petition facility and the $1.4 million write-off related to the Senior Notes. These charges are included in interest expense, except for the $1.4 million related to the Senior Notes, which are included in reorganization items.

(10) Equity in Joint Ventures and Other Income (Expenses)

The amount of $834,000 reported as “other, net” in the consolidated statement of operations for the year ended December 31, 2005 represents the gain on sale of the Company’s interest in Kar-Tainer International, LLC and Kar-

F-25

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Tainer Int’l (Pty) Ltd. These subsidiaries were owned by the Axis Group and were sold for $2 million in October 2005. Included in “other, net” in the statement of operations for the year ended December 31, 2004 is $191,000 related to the write off of the equity of the Company’s last remaining joint venture. Accordingly, there were no equity investments in joint ventures included in the consolidated balance sheets as of December 31, 2006 and 2005. No equity in earnings from joint ventures is included in the accompanying consolidated statements of operations for the years ended December 31, 2006, 2005 and 2004.

(11) Accounts and Notes Payable and Accrued Liabilities

The Company enters into notes payable with third parties for insurance financing arrangements. Outstanding notes payable for insurance financing arrangements as of December 31, 2006 and 2005 were $5.4 million and $33.4 million, respectively, and are included in accounts and notes payable in the consolidated balance sheets. The notes outstanding at December 31, 2006 bear interest at rates ranging between 7.99% and 8.38% and are due in monthly installments, over a period of less than one year. The weighted-average interest rate on amounts outstanding at December 31, 2006 was 8.15%.

Accrued liabilities consists of the following at December 31, 2006 and 2005 (in thousands):

	2006		2005
Wages and benefits	$	27,272	$	30,748
Claims and insurance reserves		38,786		39,602
Accrued interest		738		3,761
Accrued taxes		3,797		4,017
Purchased transportation		2,723		3,563
Other		1,123		1,626
	$	74,439	$	83,317

The Company executed activities, as part of its turnaround initiatives, to achieve significant reductions in corporate overhead, improvements in personnel quality and increases in productivity. Targeted in these strategies were workforce reductions as well as additional efforts to decrease discretionary spending and eliminate certain fixed costs. As part of the initiative for a reduction in the workforce, during the years ended December 31, 2006, 2005 and 2004, severance was paid to approximately 14, 47 and 94 terminated corporate and field employees. The following table summarizes the activity in the accrual for termination benefits for the years ended December 31, 2006, 2005 and 2004 (in thousands):

	2006			2005			2004
Beginning balance	$	459		$	434		$	808
Additions to reserve charged to salaries, wages, and fringe benefits		74			1,116			1,670
Cash payments		(173	)		(1,091	)		(2,044	)
Ending balance	$	360		$	459		$	434

Approximately $360,000 of the accrual for termination benefits is included in liabilities subject to compromise at December 31, 2006 and 2005. The remainder at December 31, 2005 was included in accrued liabilities — wages and benefits above and was paid during 2006.

(12) Claims and Insurance Reserves

For the claim year ended December 31, 2006, the Company retains liability for U.S. automobile liability claims for the first $1 million per occurrence with no aggregate limit. Claim amounts in excess of $1 million per occurrence are covered by excess insurance. In Canada, the Company retains liability up to CDN $500,000 for each auto liability claim, with no aggregate limit. Claim amounts in excess of CDN $500,000 are covered by excess insurance.

For claim year ended December 31, 2005 and 2004, the Company has three layers of coverage for automobile claims in the U.S. as follows:

• The first layer includes the first $1 million of every claim. The Company retains liability for this layer, with no aggregate limit.

F-26

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

• The second layer includes the amount by which individual claims exceed $1 million up to $5 million per occurrence. For this second layer, the Company retains liability up to an aggregate deductible of $7 million. Aggregate claim amounts in the second layer in excess of $7 million are covered by excess insurance.

• The third layer includes the amount by which individual claims exceed $5 million per occurrence. Individual claim amounts greater than $5 million are covered by excess insurance to a limit of $150 million per occurrence.

For claim years ended December 31, 2005 and 2004, the Company also has three layers of coverage for automobile claims in Canada as follows:

• The first layer includes the first CDN $500,000 of every claim. The Company retains liability for this layer, with no aggregate limit.

• The second layer includes the amount by which individual claims exceed CDN $500,000 up to CDN $1 million, per occurrence. For this second layer, the Company retains liability up to an aggregate deductible of CDN $500,000. Aggregate claim amounts in the second layer in excess of CDN 500,000 are covered by excess insurance.

• The third layer includes the amount by which individual claims exceed CDN $1 million, per occurrence. Individual claim amounts that are greater than CDN $1 million are covered by excess insurance to a limit of $150 million per occurrence.

For the claim years 2006, 2005 and 2004, the Company retains liability of up to $250,000 for each cargo damage claim in the U.S. and up to CDN $250,000 for each cargo damage claim in Canada. There is no aggregate limit. Claim amounts in excess of these amounts are covered by excess insurance.

For certain of its operating subsidiaries, the Company is qualified to self-insure against losses relating to workers’ compensation claims in the states of Florida, Georgia, Missouri and Ohio. For these states, the Company retains respective liabilities of $400,000, $500,000, $500,000 and $350,000, per occurrence. Claim amounts in excess of these amounts are covered by excess insurance.

In those states where the Company is insured for workers’ compensation claims, the majority of the risk in 2006 is covered by a fully insured program with no deductible. For the 2005 and 2004 claim years, the Company’s captive insurance subsidiary provided insurance coverage for the majority of it’s workers’ compensation losses and the deductible was $650,000 per claim. Claims in excess of that amount are covered by excess insurance.

Claims and insurance reserves are adjusted periodically, as claims develop, to reflect changes in actuarial estimates based on actual experience. During 2006, the estimated ultimate amount of claims from prior years increased approximately $8.0 million or $0.89 per share. During 2005, the estimated ultimate amount of claims from prior years increased approximately $3.2 million or $0.36 per share. During 2004, the estimated ultimate amount of claims from prior years increased approximately $5.4 million or $0.62 per share.

Workers’ compensation losses in Canada are covered by government insurance programs to which the Company makes premium payments. In certain provinces, the Company is also subject to retrospective premium adjustments based on actual claims losses compared to expected losses. The Company’s reserves include an estimate of retrospective adjustments based on historical experience and the most recently available actual claims data provided by the government. During 2006, the estimate for adjustments for prior years was reduced by approximately $1.5 million or $0.17 per share.

Prior to the fourth quarter of 2004, the estimates for workers compensation, automobile and general liability and product liability claims were discounted to their present values using the Company’s estimate of weighted-average risk-free interest rates for each claim year. The discount rate for the first three quarters of 2004 was 3.0%. However, in the fourth quarter of 2004, the Company determined that the continuing adverse development of aged claims was such that it could no longer reliably determine its self-insurance reserves on a discounted basis and in this regard, recorded a change in estimate, which resulted in a charge to expense of approximately $11.0 million in the fourth quarter of 2004, based upon the discount amounts previously recorded. This adjustment increased the Company’s

F-27

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

loss per share by approximately $1.26 and was recorded as a $10.0 million increase in salaries, wages and fringe benefits and a $1.0 million increase in insurance and claims expense.

The amounts recognized in the consolidated balance sheets as of December 31, 2006 and 2005 represent the undiscounted estimated ultimate amount of claims, net of payments, and are reflected as follows (in thousands):

	2006		2005
Accrued liabilities — current	$	38,786	$	39,602
Other long-term liabilities — noncurrent		64,307		70,040
		103,093		109,642
Liabilities subject to compromise		3,000		3,109
Total liability included in the consolidated balance sheets	$	106,093	$	112,751

Expected payouts of the aggregate amount of claims, excluding liabilities subject to compromise for which the timing of expected payouts cannot be estimated, are as follows at December 31, 2006 (in thousands):

2007	$	38,786
2008		17,213
2009		10,845
2010		7,372
2011		5,119
2012 and thereafter		23,758
	$	103,093

The majority of the Company’s pre-petition liabilities related to insurance and claims are not classified as liabilities subject to compromise since the Company received the Bankruptcy Court’s approval to maintain its existing insurance programs. Pre-petition liabilities classified as subject to compromise represent reserves for product liability claims only.

Management believes adequate provision has been made for all incurred claims, including those not reported. Favorable or unfavorable developments subsequent to December 31, 2006 could have a material impact on the consolidated financial statements.

(13) Lease Commitments

The Company leases office space, certain terminal facilities, tractors and trailers, computer equipment and other equipment under noncancelable operating lease agreements that, as of December 31, 2006, expire at various times through 2018. Rental expense under noncancelable leases was approximately $13.4 million, $14.3 million and $14.3 million for the years ended December 31, 2006, 2005, and 2004, respectively.

Included in the noncancelable leases discussed above are operating lease commitments for approximately 315 Rigs. The original lease terms relating to these operating lease commitments range between five and seven years. However, during 2006 and 2005, the Company amended certain of these lease agreements to extend them for an additional year. These operating leases expire between 2007 and 2010 and contain residual guarantees of up to 25% of the original cost of the Rigs. The residual value guarantees were included in the calculations performed to determine the proper classification of the leases. No accruals for these guarantees were considered necessary at December 31, 2006.

The Company also leases certain terminal facilities under cancelable leases. The total rental expense under cancelable building and equipment leases was approximately $2.1 million, $2.6 million and $2.9 million for the years ended December 31, 2006, 2005, and 2004, respectively.

In addition, the Company has sublease agreements with third parties for portions of one leased building. The subleases expire in 2007. Total sublease income earned during the years ended December 31, 2006, 2005, and 2004 was approximately $0.4 million, $0.4 million and $0.8 million, respectively.

Future minimum lease commitments and related sublease income for operating leases having initial or remaining noncancelable lease terms in excess of one year are as follows as of December 31, 2006 (in thousands):

F-28

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

			Sublease
	Commitments		Income
2007	$	10,043	$	465
2008		4,408		—
2009		2,845		—
2010		807		—
2011		338		—
Thereafter		526		—
Total	$	18,967	$	465

During 2006, the Company subleased certain space in its home office headquarters in Decatur, Georgia to an entity in which Robert J. Rutland, Chairman of the Board of Directors, has an equity ownership of approximately one-third. The Company believes that the rental rate charged to this entity is the fair market rate for the space based upon rental rates paid for comparable space in the area. In connection with this sublease, the Company recorded sublease income of approximately $28,000 during 2006.

(14) Debt

The Company’s debt consisted of the following at December 31, 2006 and 2005 (in thousands):

	2006		2005
Current liabilities not subject to compromise:
Original DIP Revolver	$	45,005	$	51,997
Original DIP Facility — Term Loan A		20,000		20,000
Original DIP Facility — Term Loan B		85,709		80,000
Original DIP Facility — Term Loan C		10,643		—
	$	161,357	$	151,997
Liabilities subject to compromise:
Senior Notes	$	150,000	$	150,000

Credit Facilities

In connection with the Chapter 11 Proceedings, on August 1, 2005, the Company entered into the Original DIP Facility for debtor-in-possession financing of up to $230 million. General Electric Capital Corporation and Morgan Stanley Senior Funding, Inc. served as agents for the lenders. The Original DIP Facility initially provided for aggregate financing of up to $230 million comprised of (i) a $130 million revolving credit facility (“Original DIP Revolver”), which included a swing-line credit commitment of $10 million and up to $75 million in letters of credit, (ii) a $20 million term loan (“Original DIP Facility Term Loan A”) and (iii) an $80 million term loan (“Original DIP Facility Term Loan B”). The Original DIP Revolver bore interest at an annual rate, at the Company’s option, of either an annual index rate (based on the greater of the base rate on corporate loans as published from time to time in The Wall Street Journal or the federal funds rate plus 0.50%) plus 2.00%, or LIBOR plus 3.00%. In addition, the Company was charged a letter of credit fee under the Original DIP Revolver payable monthly at a rate per annum equal to 2.75% times the amount of all outstanding letters of credit under the Original DIP Revolver. There was also a fee of 0.5% on the unused portion of the Original DIP Revolver.

During 2006, the Company continued to be impacted by liquidity constraints and violated various covenants included in the Original DIP Facility. These violations required the Company to enter into certain forbearance agreements and amendments. On June 30, 2006, the Company entered into a fifth amendment (the “Fifth Amendment”) to the Original DIP Facility to provide $30 million of additional availability through a new term loan (“Original DIP Facility Term Loan C”). The Original DIP Facility Term Loan C bore interest at an annual rate of LIBOR plus 9.5%, payable at the Company’s option in cash each month or in kind by addition to principal on a monthly basis, with interest compounded on a monthly basis. The Fifth Amendment had provided the Company with additional availability by allowing the payment of interest in kind on Original DIP Facility Term Loan B by addition to principal on a monthly basis. Accordingly, subsequent to the Fifth Amendment, the Original DIP Facility provided for debtor in possession financing of up to $260 million plus interest paid in kind. During 2006, the Company paid interest in kind by addition to principal of approximately $6.3 million. Of the $6.3 million interest

F-29

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

paid in kind, $5.7 million was added to Original DIP Facility Term Loan B and $0.6 million was added to Original DIP Facility Term Loan C. Further, the Fifth Amendment reduced the interest rate on Original DIP Facility Term Loan B from LIBOR plus 9.5% to LIBOR plus 8.5%. The interest rate on Original DIP Facility Term Loan A remained unchanged at an annual rate of LIBOR plus 5.5%. As of December 31, 2006, the interest rates on the Original DIP Revolver, Original DIP Facility Term Loan A, Original DIP Facility Term Loan B and Original DIP Facility Term Loan C were 9.14%, 10.85%, 13.85% and 14.85%, respectively. The Original DIP Revolver was scheduled to mature on March 30, 2007 and the term loans included in the Original DIP Facility were scheduled to mature on June 30, 2007.

On March 30, 2007, the Company entered into a New DIP Facility arranged by an affiliate of Goldman Sachs & Co., which provides financing of up to $315 million. The New DIP Facility, which was amended in April 2007 replaced the Original DIP Facility and subject to satisfaction of certain conditions, the New DIP Facility may be converted to a senior secured credit facility upon the Company’s emergence from Chapter 11. To the extent that the New DIP Facility is converted to a post-bankruptcy senior secured credit facility, such facility will mature five years after the effective date of the Joint Plan. If the conditions for conversion of the New DIP Facility are not satisfied or if the Company does not exercise its option to convert the New DIP Facility to a post-bankruptcy secured credit facility upon successful emergence from bankruptcy, the New DIP Facility will mature on the earlier of (i) September 30, 2007 and (ii) the effective date of the Joint Plan or the Company’s emergence from Chapter 11. The New DIP Facility includes a $230 million secured term loan facility, a $50 million synthetic senior letter of credit facility and a $35 million senior secured revolving credit facility (“New Revolver”), which includes a swing-line credit commitment of $10 million. Proceeds from the New DIP Facility of $205 million at March 30, 2007 were used to repay all amounts outstanding under the Original DIP Facility and associated fees, and to provide additional liquidity for working capital needs. In connection with the termination of the Original DIP Facility and the funding of the New DIP Facility, the Company paid fees of approximately $9.4 million, $1.3 million of which related to termination of the Original DIP Facility and $8.1 million of which related to the New DIP Facility. The fees relating to the Original DIP Facility will be expensed during the first quarter of 2007 as part of the extinguishment of debt while the fees relating to the New DIP Facility will be deferred and amortized through September 30, 2007.

The interest rates on the term loans in the New DIP Facility may vary based on either the Base Rate plus 2.50%, or Adjusted Eurodollar Rate plus 3.50%. The interest rate on the New Revolver may vary based on either the Base Rate plus 1% or Adjusted Eurodollar rate plus 2%. The swing line loans bear interest at the Base Rate plus 1.0%. Base Rate means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus ¹/2 of 1%. The Adjusted Eurodollar Rate means any Eurodollar rate Loan adjusted for any reserve requirement as regulations may be issued from time to time by the Board of Governors of the Federal Reserve System. In addition, the Company will be charged a participation fee pursuant to the letter of credit facility equal to approximately 3.80% per annum of the amount of the synthetic letter of credit facility plus a fronting fee of 0.55% of the average daily maximum amount available to be drawn under letters of credit issued under the synthetic letter of credit facility. The Company also will be obligated to pay a commitment fee equal to 0.375% per annum times the daily average undrawn portion of the New Revolver and a commitment fee of 1.75% per annum times the daily average undrawn portion of the term loan facility.

The New DIP Facility includes customary affirmative, negative, and financial covenants binding on the Company, including delivery of financial statements and other reports, maintenance of existence, and anti-hoarding of cash. The negative covenants limit the ability of the Company to, among other things, incur debt, incur liens, make investments, sell assets, or declare or pay any dividends on its capital stock. The financial covenants included in the New DIP Facility limit the amount of annual capital expenditures, set forth a maximum total leverage ratio for the Company and minimum interest coverage ratio, and require the Company to maintain minimum consolidated earnings before interest, taxes, depreciation and amortization. In addition, the New DIP Facility requires mandatory prepayment with the net cash proceeds from certain asset sales, equity offerings, and any insurance proceeds received by the Company.

The New DIP Facility includes customary events of default including events of default related to (i) failure to make payments when due under the New DIP Facility, (ii) failure to comply with the financial covenants set forth in the New DIP Facility, (iii) defaults under other agreements or instruments of indebtedness, (iv) the conversion of the Chapter 11 Cases to a chapter 7 case or appointment of a Chapter 11 trustee with enlarged powers, (v) the granting of certain other super-priority administrative expense claims or non-permitted liens or the invalidity of liens securing

F-30

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the New DIP Facility, (vi) the stay, amendment or reversal of the Bankruptcy Court orders approving the New DIP Facility, (vii) the confirmation of a plan of reorganization or entry of a dismissal order which does not provide for payment in full of the New DIP Facility, or (viii) the granting of relief from the automatic stay to holders of security interests in assets of the Company with a book value in excess of $1 million that would have a material adverse effect on the Company or (ix) following emergence from bankruptcy, the failure of Yucaipa American Alliance Fund I, L.P. and Yucaipa American Alliance (Parallel) Fund I, L.P. to elect a majority of the board of directors of the Company.

Obligations under the New DIP Facility are secured by 100% of the capital stock of the Company’s domestic and Canadian subsidiaries, 65% of the capital stock of the Company’s direct foreign subsidiaries, all of the Company’s current and after-acquired personal and real property and all intercompany debt.

The obligations under the New DIP Facility are entitled to super-priority administrative expense claim status under the Bankruptcy Code. The New DIP Facility will generally permit the ordinary course payment of professionals and administrative expenses prior to the occurrence of an event of default under the New DIP Facility or a default under the Bankruptcy Court orders approving the New DIP Facility.

As of May 3, 2007, the Company had approximately $35 million of New Revolver loans available. Approximately $41.6 million was committed under letters of credit primarily related to the settlement of insurance claims, $205 million in term loans were outstanding and approximately $25 million in term loans was available.

Canadian Revolving Credit Facility

The Company’s subsidiary, Allied Systems (Canada) Company, also has a $2.5 million revolving credit facility with a bank in Canada (the “Canadian Revolver”) for use in its Canadian operations. The Canadian Revolver bears interest at the bank’s prime lending rate plus 0.5% and is secured by a letter of credit of $2.6 million, which is included in the $41.6 million of outstanding letters of credit discussed in the paragraph above.

Rig Financing

Subsequent to December 31, 2006, the Company entered into an agreement with Yucaipa pursuant to which Yucaipa will purchase the Blue Thunder Rigs, which will then be sold to the Company at cost. The Blue Thunder Rigs range between three to five years in age. The Rig Financing, provided by Yucaipa, was approved by the Bankruptcy Court on April 6, 2007. The maximum amount financed under the Rig Financing will not exceed $15 million and includes additional funds to retrofit and make any necessary repairs to the Blue Thunder Rigs, and to pay certain costs and expenses associated with the purchase, such as registration expenses. The notes under the Rig Financing bear interest at the three month LIBOR rate plus 4%, payable quarterly by addition to principal. In addition, at the option of Yucaipa, upon the Company’s successful emergence from Chapter 11, Yucaipa may convert the Rig Financing into additional equity of the Company. As of May 3, 2007 the Company had purchased 117 of these Rigs from Yucaipa at a cost of $8.9 million.

Pre-petition Facility

The pre-petition facility provided the Company with a $90 million revolving credit facility, a $100 million term loan, a $20 million term loan and a $25 million term loan. The $100 million term loan was payable in quarterly installments of principal and interest and the $25 million and $20 million term loans were payable in full at maturity, September 4, 2007, with monthly payments of interest.

The Chapter 11 filing on July 31, 2005 constituted an event of default under the pre-petition facility and as a result, all commitments from the Company’s lenders under the pre-petition facility were automatically terminated and all debt outstanding under the pre-petition facility became automatically due and payable. On August 2, 2005, using funds received from the Original DIP Facility, the Company repaid all obligations outstanding under the pre-petition facility, which included $24.6 million due under a revolving credit facility, $113.6 million in outstanding term loans and $7.0 million in related fees and interest which includes the premium of $1.9 million due for prepayment of the facility prior to maturity. Certain events of default occurred under the pre-petition facility during 2005 prior to the Chapter 11 filing.

F-31

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Senior Notes

On September 30, 1997, the Company issued the $150 million Senior Notes through a private placement. The Senior Notes were subsequently registered with the SEC, are payable in semi-annual installments of interest only and mature on October 1, 2007.

Borrowings under the Senior Notes are general unsecured obligations of Allied Holdings, Inc. The Company’s obligations under the Senior Notes are guaranteed by substantially all of the subsidiaries of the Company (the “Guarantor Subsidiaries”). The guarantees are full and unconditional and there are no restrictions on the ability of the Guarantor Subsidiaries to make distributions to the Company. The Company owns 100% of the Guarantor Subsidiaries. The following companies (the “Nonguarantor Subsidiaries”) do not guarantee the Company’s obligations under the Senior Notes:

• Haul Insurance Ltd. ;

• Arrendadora de Equipo Para el Transporte de Automoviles, S. de R.L. de C.V. ;

• Axis Logistica, S. de R.L. de C.V. ;

• Axis Operadora Hermosillo;

• Ace Operations, LLC.

See Note 22 for combined balance sheet information, combined statement of operations information and combined statement of cash flows information for the Guarantor Subsidiaries and the Nonguarantor Subsidiaries.

The agreement governing the Senior Notes sets forth a number of negative covenants, which would limit the Company’s ability to, among other things, purchase or redeem stock, make dividend or other distributions, make investments, and incur or repay debt (with the exception of payment of interest or principal at stated maturity). One such covenant would limit the Company’s ability to incur more than $230 million of additional indebtedness beyond the $150 million that existed on the date that the Senior Notes were issued. Although the Company is not presently in compliance with some of these covenants as a result of the filing for protection under Chapter 11 of the Bankruptcy Code, any action to be taken by the holders of the Senior Notes as a result of these violations has been stayed by the Bankruptcy Court.

The filing for protection under Chapter 11 on July 31, 2005 constituted an event of default under the Senior Notes. The indenture agreement governing the Senior Notes provides that as a result of this event of default, the outstanding amount of the Senior Notes became immediately due and payable without further action by any holder of the Senior Notes or the trustee under the indenture. However, payment of the Senior Notes, including the semi-annual interest payments, is automatically stayed as of the Petition Date, absent further order of the Bankruptcy Court. As a result of the Chapter 11 Proceedings, and pursuant to SOP 90-7, the Company reclassified the outstanding balance on the Senior Notes along with the related interest accrued as of the Petition Date to liabilities subject to compromise.

(15) Other Long-Term Liabilities

Other long-term liabilities consists of the following at December 31, 2006 and 2005 (in thousands):

	2006		2005
Claims and insurance reserves	$	64,307	$	70,040
Other		962		4,056
	$	65,269	$	74,096

(16) Employee Benefits

(a) Pension and Postretirement Benefit Plans

The Company maintains the Allied Defined Benefit Pension Plan, a trusteed noncontributory defined benefit pension plan for management and office personnel in the U.S., under which benefits are paid to eligible employees upon retirement based primarily on years of service and compensation levels at retirement. Effective April 30, 2002, the Company froze employee years of service and compensation levels in the Allied Defined Benefit Pension Plan.

F-32

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contributions to the plan reflect benefits attributed to employees’ services. The Company’s funding policy is to contribute annually at a rate that is intended to fund past service benefits over a 30-year period. However, during the years ended December 31, 2006 and 2005, the Company did not fund past service benefits due to the Chapter 11 filing but it has met the minimum funding requirements.

The Company also provides certain healthcare and life insurance benefits for eligible U.S. employees who retired prior to July 1, 1993 and their dependents, and for certain U.S. employees participating in the 1999 voluntary early retirement plan. Generally, the healthcare plan pays a stated percentage of most medical expenses reduced for any deductibles and payments by government programs or other group coverage. During 2004, the Company began requiring participants to contribute to the monthly healthcare premiums. The life insurance plan pays a lump-sum death benefit based on the employee’s salary at retirement. The Company currently funds the cost of these premiums as they become due. Employees retiring after July 1, 1993 who are not participants in the 1999 voluntary early retirement plan are not entitled to any postretirement medical or life insurance benefits under this plan.

In 1997, in connection with the Ryder acquisition, the Company assumed the obligations of a postretirement benefit plan to provide retired employees with certain healthcare and life insurance benefits. Substantially all employees employed at the time of the acquisition and not covered by union-administered medical plans and who had retired as of September 30, 1997 were eligible for these benefits. Benefits were generally provided to qualified retirees under age 65 and eligible dependents. Employees retiring after September 30, 1997 are not entitled to any postretirement medical or life insurance benefits under this plan. Furthermore, in the acquisition, the Company assumed two defined benefit pension plans for employees at a certain terminal. Both plans are currently active. One of the plans provides a monthly benefit based on years of service upon retirement. The other plan provides benefits to eligible employees upon retirement based primarily on years of service and compensation levels at retirement.

In 1994, in connection with the acquisition of Auto Haulaway, a Canadian company, the Company assumed the obligations of a postretirement benefit plan to provide certain retired employees with healthcare and life insurance benefits. The benefits are provided in the form of insurance premium payments for life, medical and dental coverage. This plan has been frozen since July 1, 1995, and as a result no new retirees are being added to the plan. Prior to January 1, 2006, the obligation related to this plan was not reflected in the Company’s consolidated balance sheets. The Company recognized the obligation of $810,000 at January 1, 2006 as a cumulative-effect adjustment to accumulated deficit in accordance with SAB No. 108. The effect of initially recognizing the obligation in 2006 is included in the line “plan amendments and other” in the table below that describes the changes in the projected benefit obligation.

Effective December 31, 2006, the Company adopted the recognition and disclosure provisions of SFAS No. 158 which required the Company to initially recognize the funded status of its defined benefit pension and other postretirement benefit plans in the December 31, 2006 consolidated balance sheet and provide certain disclosures as of December 31, 2006. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation. In accordance with the transition provisions of SFAS No. 158, the balance sheet was adjusted first by applying the provisions of SFAS No. 87, Employers’ Accounting for Pensions, and SFAS No. 106, including amounts required to recognize any additional minimum pension liability, prior to applying the initial recognition provisions of SFAS No. 158. The balance sheet was then adjusted so that gains or losses and prior service costs that had not yet been recognized in expense were recognized as an adjustment of the ending balance of accumulated other comprehensive loss, net of tax.

Actuarial gains and losses and prior service costs or credits that arise in future periods that are not recognized as components of net periodic benefit cost pursuant to SFAS No. 87 or SFAS No. 106 will be recognized as a component of other comprehensive income, net of tax. Amounts recognized in accumulated other comprehensive income, including the gains or losses and prior service costs or credits are adjusted as they are subsequently recognized as components of net periodic benefit cost pursuant to the recognition and amortization provisions of those Statements.

F-33

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SFAS No. 158 also requires the measurement of defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end balance sheet for the year ending December 31, 2008. However, if the Company implements fresh-start reporting pursuant to SOP 90-7 during 2007, the measurement provisions of this Statement will be applied as of the fresh-start reporting date. The Company uses a measurement date of December 31 for the postretirement benefit plans and for the Allied Defined Benefit Pension Plan. With respect to the other two defined benefit pension plans, the Company uses a measurement date of September 30.

The adoption of SFAS No. 158 had no effect on the Company’s consolidated statements of operations for the years ended December 31, 2006. The incremental effects of applying SFAS No. 158 were as follows at December 31, 2006 (in thousands):

	Before					After
	Application of		SFAS No. 158			Application of
	SFAS No. 158		Adjustments			SFAS No. 158
Other noncurrent assets	$	40,349	$	(15,677	)	$	24,672
Total other assets		106,206		(15,677	)		90,529
Postretirement benefits other than pensions		6,396		7,831			14,227
Total long-term liabilities		73,591		7,831			81,422
Accumulated other comprehensive loss, net of tax		566		23,508			24,074
Total stockholders’ deficit		180,624		23,508			204,132

The amounts included in accumulated other comprehensive loss at December 31, 2006, that have not been recognized in net periodic benefit costs are as follows (in thousands):

	Defined Benefit		Postretirement
	Pension Plans		Benefit Plans			Total
Net actuarial losses	$	16,273	$	12,257		$	28,530
Net prior service cost (credits)		39		(3,459	)		(3,420	)
	$	16,312	$	8,798		$	25,110

The amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost for the year ending December 31, 2007 are as follows (in thousands):

	Defined Benefit		Postretirement
	Pension Plans		Benefit Plans			Total
Amortization of net actuarial losses	$	1,299	$	898		$	2,197
Amortization of net prior service cost (credits)		48		(304	)		(256	)
	$	1,347	$	594		$	1,941

The change in the projected benefit obligation of the defined benefit pension plans and the postretirement benefit plans consisted of the following for the years ended December 31, 2006, 2005 and 2004 (in thousands):

	Defined Pension Plans Benefit									Postretirement Benefit Plans
	2006			2005			2004			2006			2005			2004
Benefit obligation at beginning of year	$	54,884		$	52,942		$	43,647		$	12,503		$	15,874		$	8,610
Service cost		92			84			94			56			52			58
Interest cost		3,049			3,014			2,674			658			708			396
Plan amendments and other		—			—			—			810			—			(3,807	)
Actuarial loss (gain)		114			2,086			9,216			2,691			(2,720	)		11,920
Benefits paid		(3,007	)		(3,242	)		(2,689	)		(1,154	)		(1,411	)		(1,303	)
Benefit obligation at end of year	$	55,132		$	54,884		$	52,942		$	15,564		$	12,503		$	15,874

F-34

The accumulated benefit obligation for the defined benefit pension plans was the same as the projected benefit obligation at December 31, 2006, 2005 and 2004.

The change in plan assets of the defined benefit pension and postretirement benefit plans for the years ended December 31, 2006, 2005 and 2004 and funded status as of December 31, 2006, 2005 and 2004, consisted of the following (in thousands):

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Defined Benefit									Postretirement Benefit
	Pension Plans									Plans
	2006			2005			2004			2006			2005			2004
Change in plan assets:
Fair value of plan assets at beginning of year	$	51,761		$	50,924		$	44,836		$	—		$	—		$	—
Actual return on plan assets		7,603			3,462			4,324			—			—			—
Employer contributions		350			617			4,453			1,236			1,411			1,303
Benefits paid		(3,007	)		(3,242	)		(2,689	)		(1,236	)		(1,411	)		(1,303	)
Fair value of plan assets at end of year	$	56,707		$	51,761		$	50,924		$	—		$	—		$	—
Reconciliation of funded status:
Funded status excess (deficiency)	$	1,575		$	(3,123	)	$	(2,018	)	$	(15,564	)	$	(12,503	)	$	(15,874	)
Unrecognized actuarial loss		—			21,804			20,797			—			10,240			13,603
Unrecognized prior service cost (credits)		—			87			135			—			(3,785	)		(4,111	)
Additional minimum liability		—			(22,145	)		(3,112	)		—			—			—
Net asset (liability) recognized	$	1,575		$	(3,377	)	$	15,802		$	(15,564	)	$	(6,048	)	$	(6,382	)
Amounts recognized in the consolidated balance sheets consist of:
Noncurrent assets	$	2,473		$	—		$	18,114		$	—		$	—		$	—
Current liabilities		—			—			—			(1,337	)		(1,400	)		(1,300	)
Long-term liabilities		(898	)		(3,377	)		(2,312	)		(14,227	)		(4,648	)		(5,082	)
	$	1,575		$	(3,377	)	$	15,802		$	(15,564	)	$	(6,048	)	$	(6,382	)

Pension and postretirement benefits expected to be paid for the next five years and the aggregate amounts expected to be paid for the five fiscal years thereafter are as follows (in thousands):

	Defined Benefit		Postretirement
	Pension Plans		Benefit Plans
2007	$	2,572	$	1,337
2008		2,660		1,310
2009		2,741		1,231
2010		2,927		1,168
2011		3,120		1,154
2012-2016		17,799		5,350

Prior to the adoption of SFAS No. 158 as of December 31, 2006, SFAS No. 87 required that the Company recognize an additional minimum pension liability for the amount, if any, by which the accumulated benefit obligation exceeded the sum of the fair market value of plan assets and accrued amounts previously recorded. The additional liability could be offset by an intangible asset, to the extent of previously unrecognized prior service cost. During the year ended December 31, 2005, the Company recognized an additional minimum pension liability of $19.7 million for the Allied Defined Benefit Pension Plan. The prepaid pension asset at December 31, 2005 was $17.9 million. The increase for the additional liability was reported in other comprehensive loss, a component of stockholders’ deficit. An intangible asset related to prior service cost of the pension plans of approximately $370,000 and $480,000 was recorded as of December 31, 2005 and 2004, respectively, which was included in other noncurrent assets.

At December 31, 2006, the fair value of plan assets of the Allied Defined Benefit Pension Plan exceeded the accumulated benefit obligation by $2.1 million. Accordingly, the minimum pension liability of $19.7 million was eliminated. In addition, the additional minimum pension liability for one of the other pension plans was reduced by $0.5 million. The combined $20.2 million was reported in other comprehensive loss for 2006.

F-35

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2006, the Company had two defined benefit plans in which the fair values of plan assets exceeded the benefit obligation. The aggregate fair value of the plan assets and the aggregate benefit obligation were $51.4 million and $48.9 million, respectively. At December 31, 2005, the Company had one defined benefit plan in which the fair value of plan assets exceeded the benefit obligation. The fair value of the plan assets and the benefit obligation were $2.2 million and $2.0 million, respectively.

At December 31, 2006, the Company had one defined benefit plan in which the fair value of the plan assets was less than the benefit obligation. The fair value of the plan assets and the benefit obligation were $5.3 million and $6.2 million, respectively. At December 31, 2005, the Company had two defined benefit plans in which the fair values of the plan assets were less than the benefit obligation. The aggregate fair value of the assets and the aggregate benefit obligation were $49.5 million and $52.9 million, respectively.

The following assumptions were used in determining the actuarial present value of the projected pension benefit obligation and postretirement benefit obligation at December 31, 2006 and 2005:

	Defined Benefit						Postretirement
	Pension Plans						Benefit Plans
	2006			2005			2006			2005
Weighted-average discount rate		5.75	%		5.50	%		5.75	%		5.50	%
Weighted-average rate of compensation increase		N/A			N/A			N/A			N/A

In connection with the Medicare Prescription Drug, Improvement and Modernization Act of 2003, (the “Act”), the Company, in consultation with its actuaries, has determined that it provides retiree healthcare benefits that are at least actuarially equivalent to Medicare Part D. However, the impact of the Act is not considered to be significant with respect to the Company’s plans and was not incorporated into the Company’s December 31, 2005 measurement of its benefit obligations. The effects of the Act are incorporated into the measurement of the Company’s expense and benefit obligations for the year ended December 31, 2006.

The following assumptions were used in determining the net periodic benefit cost for the years ended December 31, 2006, 2005 and 2004:

	Defined Benefit									Postretirement
	Pension Plans									Benefit Plans
	2006			2005			2004			2006			2005			2004
Weighted-average discount rate		5.50	%		5.75	%	6.25% and 6.00%				5.50	%		5.75	%		6.25	%
Weighted-average expected long-term rate of return on assets.		8.00	%		8.50	%		8.50	%		N/A			N/A			N/A
Weighted-average rate of compensation increase		N/A			N/A			N/A			N/A			N/A			N/A

To develop the expected long-term rate of return on assets, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. The discount rate is reviewed annually and is based in part on the published yield of the Moody’s AA Corporate Bond Rate as well as an evaluation of available published guidance.

The net periodic benefit cost recognized for the defined benefit pension plans and the postretirement benefit plans includes the following components for the years ended December 31, 2006, 2005 and 2004 (in thousands):

	Defined Benefit									Postretirement Benefit
	Pension Plans									Plans
	2006			2005			2004			2006			2005			2004
Components of net periodic benefit cost:
Service cost	$	92		$	84		$	94		$	56		$	52		$	58
Interest cost		3,049			3,014			2,674			703			708			395
Expected return on plan assets		(4,056	)		(4,250	)		(3,719	)		—			—			—
Amortization of unrecognized net actuarial loss		2,095			1,866			1,070			674			643			256
Amortization of prior service cost (credits)		48			48			48			(326	)		(326	)		(326	)
Net periodic benefit cost	$	1,228		$	762		$	167		$	1,107		$	1,077		$	383

F-36

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the U.S. postretirement benefit plans, the weighted-average annual assumed rate of increase in the per capita cost of covered benefits (i.e., healthcare trend rate) for the health plans is 10.0% and 11.0% for participants prior to age 65 and after age 65, respectively, for 2006 grading to 5.5% over 3 years and 6 years, respectively. The weighted-average annual assumed rate of increase in the per capita cost of covered benefits (i.e., healthcare trend rate) for the health plans is 7.0% and 9.0% for participants prior to age 65 and after age 65, respectively, for 2005 grading to 5.5% over 3 years and 6 years, respectively. A 1% change in the assumed trend rate would have the following effect at December 31, 2006 (in thousands):

	1% Increase		1% Decrease
Accumulated postretirement benefit obligation	$	1,683	$	(1,302	)
Total of service and interest cost		108		(84	)

The weighted-average asset allocation of the pension plans is as follows at December 31, 2006 and 2005:

	Target			Actual
	Allocations			Allocations
Asset Category	2006			2006			2005
Cash		0	%		0.9	%		0.7	%
Fixed income		30			28.8			29.4
Core equity		35			35.8			41.0
Real estate investment trust		10			9.9			4.6
Small cap		15			14.6			14.2
International equity		10			10.0			10.1
Total		100	%		100.0	%		100.0	%

The Company’s investment strategy for the plans is to maximize the long-term rate of return on plan assets within an acceptable level of risk in order to secure its obligation to pay benefits to qualifying participants while minimizing and stabilizing expense and contributions. The asset allocation for each plan is reviewed periodically for balancing of the asset mix within predetermined ranges by asset category. Risk is managed for each plan through these predetermined ranges by asset category, diversification of asset classes, periodic review of the investment policies and monitoring of fund managers for compliance with policies and performance as compared to a benchmark portfolio.

During 2007, the Company expects to contribute approximately $0.4 million to its defined benefit pension plans and $1.3 million to its postretirement benefit plans.

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 $42.9 million, $43.3 million and $40.8 million for the years ended December 31, 2006, 2005, and 2004, 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 hours worked. In the event the Company reduces the level of participation in any of these plans, it could incur a withdrawal liability for a portion of the unfunded benefit obligation of the plan, if any. If a withdrawal were to occur, the liability would be the actuarially determined unfunded obligation based on factors at the time of withdrawal.

A number of proofs of claim related to pre-petition liabilities under the multiemployer pension plans to which the Company contributes were filed on or before the bar date established by the Bankruptcy Court. The majority of the claims were filed on a contingent basis, which means that no plan withdrawal liability has been asserted, but should a withdrawal occur, the Company would have an obligation related to the withdrawal. Currently, the Company has no intention of withdrawing its participation in these plans.

Two such claims totaling $15.8 million assert general unsecured claims for withdrawal liability on a noncontingent basis. While the Debtors have not validated these claims, the Company has determined that it is probable that a withdrawal had occurred in each case prior to the Petition Date and that the claim amounts asserted are reasonable estimates of the withdrawal liability. Accordingly, the amount of $15.8 million is included in liabilities subject to compromise as of December 31, 2006. A corresponding charge to salaries, wages, and fringe benefits was recorded during the year ended December 31, 2005.

F-37

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Also, 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 $40.6 million, $43.7 million and $46.5 million during the years ended December 31, 2006, 2005, and 2004, respectively, in connection with these plans. These required contributions are determined in accordance with the provisions of negotiated labor contracts.

(b) 401(k) Plan

The Company has a 401(k) plan covering all of its employees in the U.S. During 2006, 2005 and 2004, the Company made no contributions to the 401(k) plan. The Company’s discretionary contribution is based on the lower of 3% of each participant’s wage or $1,000 for the year for each nonbargaining participant in the plan. Administrative expenses for the 401(k) plan for the years ended December 31, 2006, 2005 and 2004 were paid by the plan.

(c) Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan (the “ESPP”) previously allowed eligible employees, as defined, the right to purchase its common stock on a quarterly basis at 85% of the lower of the fair market value on the first business day of the calendar quarter or on the last business day of the calendar quarter. The Company reserved 700,000 shares in 1998 and 350,000 shares in 2003 (a total of 1,050,000 shares) for issuance under the ESPP. Of the amount reserved for issuance, 850,731 shares were issued as of December 31, 2006 of which 61,176 and 102,681 shares were issued to employees during the years ended December 31, 2005 and 2004, respectively. None of these shares were issued to employees during the year ended December 31, 2006 since on June 21, 2005, the Company adopted an amendment to the Plan to immediately effect its suspension. The amendment to the Plan also eliminated the twelve calendar month holding period with respect to shares purchased under the Plan and also eliminated Plan restrictions on the transfer of shares outstanding or issued under the Plan. At December 31, 2006, 199,269 shares remained available for issuance under the ESPP.

(d) Long-term Incentive Plan

The Company has 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 2,150,000 shares of the Company’s common stock. See additional disclosure at Note 20.

Subsequent to the Company’s Chapter 11 filing, the Compensation Committee of the Board of Directors (“the Committee”) recommended that the Company implement an employee retention plan to provide certain financial incentives aimed at retaining certain employees. The Allied Holdings, Inc. Amended Severance Pay and Retention and Emergence Bonus Plan for Key Employees was approved by the Bankruptcy Court on January 6, 2006 and includes three components: a severance component, a stay bonus component and a discretionary bonus component. The expense related to the stay bonus is being recognized in reorganization items over the estimated service period which, management determined to be between December 19, 2005 and sixty days after the estimated effective date of a confirmed plan of reorganization. During the years ended December 31, 2006 and 2005, the Company recognized expenses of $2.6 million and $173,000, respectively, related to the stay and discretionary bonus components. No expenses were recognized related to the severance portions of the employee retention plan for the years ended December 31, 2006 and 2005.

On April 30, 2007, the Board of Directors notified the Company’s Chief Executive Officer that his employment would be terminated on or about May 31, 2007. As a result, the Company paid Mr. Sawyer $1,050,000, the severance amount due to him under the Retention Plan, on or about May 8, 2007. This payment will be recognized as a reorganization item in the second quarter of 2007.

(17) Income Taxes

The loss before income taxes consisted of the following (in thousands):

F-38

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2006			2005			2004
U.S.	$	(9,708	)	$	(89,842	)	$	(16,188	)
Foreign		(2,228	)		(46,714	)		(25,334	)
Total loss before income taxes	$	(11,936	)	$	(136,556	)	$	(41,522	)

The following summarizes the components of the income tax expense (benefit) for the years ended December 31, 2006, 2005 and 2004 (in thousands):

	2006			2005			2004
Current:
Federal	$	—		$	—		$	—
State		(195	)		372			(29	)
Foreign		474			58			1,115
Deferred:
Federal		4			(10,203	)		10,216
State		—			(1,059	)		1,059
Foreign		106			—			—
Total income tax expense (benefit)	$	389		$	(10,832	)	$	12,361

The income tax expense (benefit) differs from the amounts computed by applying the federal statutory rate (35%) to the reported loss before income taxes due to the following (in thousands):

	2006			2005			2004
Benefit computed at the federal statutory rate	$	(4,178	)	$	(47,795	)	$	(14,533	)
Effects of:
State income taxes, net of federal income tax effects		(864	)		(3,081	)		(1,072	)
Impairment of goodwill — tax basis differential		—			14,460			962
Nondeductible expenses		4,518			2,385			209
Valuation allowance		845			23,690			26,401
Other, net		68			(491	)		394
Total income tax expense (benefit)	$	389		$	(10,832	)	$	12,361

The tax effect of significant temporary differences representing deferred tax assets and liabilities as of December 31, 2006 and 2005 is as follows (in thousands):

	2006			2005
Deferred tax assets:
Tax carryforwards	$	42,023		$	43,303
Claims and insurance expense		38,139			39,770
Accrued compensation expense		3,609			2,129
Postretirement benefits		6,014			2,286
Pension liabilities		6,763			8,057
Other liabilities not currently deductible		881			1,152
Bad debt allowances		547			746
Other, net		2,517			2,553
Total deferred tax assets		100,493			99,996
Valuation allowance		(76,015	)		(73,436	)
Deferred tax liabilities:
Depreciation and amortization		(18,325	)		(19,378	)
Assets currently deductible		(5,946	)		(6,955	)
Other, net		(332	)		(242	)
Total deferred tax liabilities		(24,603	)		(26,575	)
Net deferred tax liabilities	$	(125	)	$	(15	)

The net changes in the valuation allowance for the years ended December 31, 2006, 2005 and 2004 were increases of $2.6 million, $31.4 million and $27.1 million, respectively.

The increase in the valuation allowance for the year ended December 31, 2006 includes $1.4 million and $0.5 million related to increases in deferred tax assets through accumulated other comprehensive loss and accumulated deficit, respectively, and a charge of $1.1 million related

F-39

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to the net loss recorded for the year ended December 31, 2006. Increases to accumulated other comprehensive loss during the year ended December 31, 2006, primarily related to defined benefit pension and postretirement plans, generated additional deferred tax assets of $1.4 million, for which the Company increased the valuation allowance through accumulated other comprehensive loss during the year. The cumulative-effect adjustment to adopt SAB No. 108 generated deferred tax assets of $0.5 million, for which the Company increased the valuation allowance as part of the cumulative-effect adjustment. The net loss for the year ended December 31, 2006, net of unfavorable permanent differences, generated additional deferred tax assets of approximately $1.1 million, for which the Company increased the valuation allowance during the year. In its evaluation of the need for a valuation allowance, the Company considers all sources of taxable income, including currently available tax-planning strategies, if any.

The increase in the valuation allowance for the year ended December 31, 2005 included a charge of $23.7 million related to the net loss recorded for the year ended December 31, 2005 and $7.7 million related to increases in deferred tax assets through other comprehensive income. The net loss recorded for the year ended December 31, 2005 generated additional deferred tax assets of approximately $23.7 million, for which the Company increased the valuation allowance during the year. Increases to accumulated other comprehensive loss during the year ended December 31, 2005, primarily related to minimum pension liabilities, generated additional deferred tax assets of approximately $7.7 million, for which the Company increased the valuation allowance through other comprehensive income during the year.

The increase in the valuation allowance for the year ended December 31, 2004 included a charge of $26.4 million to provide for additional valuation allowances against the Company’s deferred tax assets. The net loss recorded for the year ended December 31, 2004 generated additional deferred tax assets of approximately $15.1 million, for which the Company increased the valuation allowance during the year. Due to the continuing losses during the year and a worsening trend in the fourth quarter of 2004, management concluded that it was “more likely than not” that additional deferred tax assets would not be recovered and recorded an additional valuation allowance of $11.3 million at December 31, 2004.

At December 31, 2006, the Company had U.S. federal net operating loss carryforwards of $81.5 million that expire between 2021 and 2026. Included in the federal loss carryforwards are the federal taxable losses related to the Company’s Canadian operations, whose income and losses are included in the U.S. tax return as well as in the Canadian tax returns. The net operating loss carryforwards for Canadian tax filing purposes total CDN $23.7 million, which expire between 2009 and 2015. The Company had federal capital loss carryforwards of $0.3 million that expire in 2009. In addition, $7.0 million of tax credit carryforwards are available to reduce future income taxes. Of the tax credit carryforwards, $6.3 million consists of foreign tax credits that expire between 2011 and 2016 and $0.7 million consists of alternative minimum tax credits that have no expiration.

In the normal course of business, the Company is subject to audits from the federal, state, provincial and other tax authorities regarding various tax liabilities. The Company records refunds from audits when receipt is assured and records assessments when a loss is probable and estimable. These audits may alter the timing or amounts of taxable income or deductions, or the allocation of income among tax jurisdictions. The amount ultimately paid upon resolution of issues raised may differ from the amounts accrued.

(18) Commitments and Contingencies

(a) Effect of Chapter 11 Filings

As discussed in Note 1, on July 31, 2005, Allied Holdings, Inc. and substantially all of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. The Company’s Canadian subsidiaries are included among the subsidiaries that filed voluntary petitions seeking bankruptcy protection in the Bankruptcy Court and they also filed applications for creditor protection under the Companies Creditors’ Arrangement Act in Canada, which, like Chapter 11, allows for reorganization under the protection of the court system. The Company’s captive insurance company, Haul Insurance Limited, as well as its subsidiaries in Mexico and Bermuda are not included in the Chapter 11 filings.

As previously discussed, on April 6, 2007, the Bankruptcy Court approved the Disclosure Statement for the Joint Plan, filed by the Debtors, the Teamsters and Yucaipa, and authorized its use in connection with the solicitation of votes from those creditors and other parties in interest that are entitled to vote on a plan of reorganization. The Company received the votes needed, and the Bankruptcy Court confirmed the Joint Plan on May 18, 2007.

F-40

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As debtors-in-possession, the Debtors are authorized under Chapter 11 to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. As of the petition date, most pending litigation and pre-petition liabilities are stayed, and absent further order of the Bankruptcy Court, no party, subject to certain exceptions, may take any action, again subject to certain exceptions, to recover pre-petition claims against the Debtors. One exception to this stay of litigation is any action or proceeding by a governmental agency to enforce its police or regulatory power. The claims asserted in litigation and proceedings to which the stay applies may be fully and finally resolved in connection with the administration of the Chapter 11 Proceedings and, to the extent not resolved, will need to be addressed in the context of the Joint Plan. At this time, it is not possible to predict the outcome of the Chapter 11 Proceedings or its effect on the Company’s business or on outstanding legal proceedings.

(b) Customer Contracts

The Company has contracts or agreements in principle in place with substantially all of its customers with varying expiration dates up to March 2009. However, most of these contracts or agreements in principle can be terminated by either party upon a specified period of notice. These contracts and agreements in principle establish rates for the transportation of vehicles and are generally based upon a fixed rate per vehicle transported, a variable rate for each mile that a vehicle is transported plus an administrative processing fee. Certain contracts and agreements in principle provide for rate variation per vehicle depending on the size and weight of the vehicle.

The contract with DaimlerChrysler can be terminated by location for any reason or no reason based on 150 days’ notice. The contract with General Motors can be terminated by service location for failure to comply with service and quality standards set forth in the contract. The Company has 30 days to cure any such noncompliance by location and General Motors may terminate by location on 30 days notice following a failure to cure such non-compliance. The contract with Honda may be terminated by either party upon 60 days notice prior to the expiration of the current term. The Company has agreements in principle with Autogistics (in regard to Ford business) and with Toyota which contemplate termination by location for any reason or no reason based on 60 to 75 days notice.

(c) Letters of Credit

At December 31, 2006, the Company had agreements with third parties to whom it had issued $138.3 million of letters of credit primarily relating to settlement of insurance claims and reserves and support for a line of credit at one of the Company’s foreign subsidiaries. Of the $138.3 million, $40.0 million of these letters of credit were secured by available borrowings on the Original DIP Revolver and $98.3 million were issued by the Company’s wholly owned captive insurance subsidiary Haul Insurance Limited and are collateralized by $98.3 million of restricted cash, cash equivalents and other time deposits held by this subsidiary. The Company renews these letters of credit annually. The amount of letters of credit that the Company could issue under the Original DIP Revolver was based on eligible collateral and could not exceed $75.0 million. The Company had utilized $40.0 million of this availability at December 31, 2006. The remaining letter of credit availability under the Original DIP Revolver as of December 31, 2006 was $24.2 million.

(d) Litigation, Claims, and Assessments

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.

During 2003, the Company settled all outstanding litigation with Ryder System, Inc. (“Ryder”). As part of the settlement agreement with Ryder, the Company has issued a letter of credit in favor of Ryder and agreed to certain scheduled increases in the amount of the letter of credit. At December 31, 2006, the letter of credit totaled $7.5 million and is included in the $40.0 million of outstanding letters of credit noted in (c) above. The letter of credit total as of December 31, 2006 includes the previously-agreed increase of $1 million made for the first quarter of 2005. Ryder may only draw on the letter of credit if the Company fails to pay workers’ compensation and liability claims assumed by the Company in the Ryder Automotive Carrier Group acquisition. The Company has provided

F-41

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the letter of credit in favor of Ryder because Ryder has issued a letter of credit to its insurance carrier relating to the workers’ compensation and liability claims assumed by the Company. Under the agreement with Ryder, an actuarial valuation will be performed periodically to determine the remaining amount outstanding of the workers’ compensation and liability claims that the Company assumed. Based on the results of the actuarial valuation, the letter of credit will be adjusted, as appropriate. As a result of the valuation completed on January 11, 2006, the letter of credit was reduced by $2.0 million on January 20, 2006. The letter of credit totals $7.5 million as of May 3, 2007.

(e) Employment Agreements

The Company has entered into employment agreements with certain executive officers of the Company. The agreements provide for compensation to the officers in the form of annual base salaries and bonuses based on performance criteria, provided however that any of the employees who are participants in the employee retention plan may not receive bonus compensation under the employee agreements while the retention plan exists. The employment agreements also provide for severance benefits upon the occurrence of certain events, including a change in control, as defined in such agreements. However, the retention plan supersedes any severance or bonus payments that would otherwise be payable to participating employees, including any benefits payable under employment agreements with such participants.

(f) Purchase and Service Contract Commitments

In April 2001, the Company entered into a five-year commitment with IBM whereby IBM would provide the Company’s mainframe computer processing services. In December 2003, the Company and IBM amended the agreement. The amended agreement is a ten-year commitment which commenced in February 2004 for IBM to provide additional services to manage applications for the Company’s electronic data interchange, network services, technical services, and applications development and support. Payments for 2006, 2005 and 2004 were $12.0 million, $10.4 million and $10.6 million, respectively. The agreement includes outsourcing at prices defined within the agreement. The purchase commitment over the remaining life of the agreement totals $77.8 million as follows (in thousands):

2007	$	10,658
2008		10,689
2009		10,849
2010		10,917
2011		11,067
2012 — 2014		23,619
	$	77,799

The commitment amount included above does not include a pre-petition obligation to IBM of $977,000 pursuant to this agreement since the timing and amount of the payment is uncertain. The amount is included in liabilities subject to compromise on the consolidated balance sheet.

(g) Collective Bargaining Agreements

Employees of the Company’s subsidiary, Allied Systems Ltd., which represents approximately 80% of the Company’s U.S. employees, are represented by the International Brotherhood of Teamsters Union in the U.S. A collective bargaining agreement, which covers the Company’s employees represented by the Teamsters, commenced on June 1, 2003 and will expire on May 31, 2008.

On March 8, 2006, certain of the Company’s subsidiaries including Allied Systems Ltd., made a proposal to the IBT for a new collective bargaining agreement regarding its employees in the U.S. represented by the Teamsters, by modifying the existing collective bargaining agreement, which expires on May 31, 2008. This agreement covers approximately 2,900 drivers as well as yard and shop personnel employed by the Automotive Group. The proposal sought to eliminate future increases to wages, health, welfare benefits and pension contributions as contemplated by the Master Agreement, sought to reduce wages and contribution levels regarding wages, health, welfare benefits and pension contributions and sought to modify certain operational procedures.

F-42

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On February 2, 2007, the Debtors filed a motion, with the Bankruptcy Court, seeking approval to reject the Master Agreement with the Teamsters. The Company filed a consent order staying the motion on February 20, 2007 as a result of ongoing negotiations with the Teamsters. The Disclosure Statement for the Joint Plan incorporates modifications to the collective bargaining agreement with the Teamsters in the U.S. The proposed amendment, which has been ratified by the affected employees, is scheduled to take effect upon the effective date of the Joint Plan and our emergence from Chapter 11 and would be renewable three years from that date. Other significant terms of the agreement include:

• Total U.S. wage concessions of 15%, limited to $35 million per year during the three-year duration of the agreement;

• The elimination of future Teamster wage increases;

• A wage freeze relating to the salaries of management and nonbargaining employees during the three-year duration of the agreement (with a few exceptions); and

• Entitlement of the U.S. Teamsters to a portion of earnings before interest, taxes, depreciation and amortization (“EBITDA”) in excess of the EBITDA projections included in the Disclosure Statement for the Joint Plan.

The modifications to the Master Agreement remain subject to various conditions, including the Company’s emergence from Chapter 11 under the Disclosure Statement for the Joint Plan and the appointment of a new CEO reasonably acceptable to the IBT prior to the Company’s emergence from Chapter 11.

As a result of a projected liquidity shortfall that was projected to occur during 2006 and pursuant to the conditions of the fourth amendment to the Original DIP Facility, on April 13, 2006 the Company filed a motion with the Bankruptcy Court requesting a 10% reduction in wages earned under the Master Agreement during the months of May and June 2006. The Bankruptcy Court granted this motion on May 1, 2006. The order granted by the Bankruptcy Court also allowed the Company to delay to July 1, 2006, wage and cost of living increases that were previously scheduled under the Master Agreement to go into effect on June 1, 2006.

The agreement with the Teamsters Union in Eastern Canada and the Company’s subsidiary, Allied Systems (Canada) Company was extended on November 20, 2005 for a twelve month period ending on October 31, 2006. This contract covers those drivers, mechanics and yard personnel that are represented by the Teamsters Union in the provinces of Ontario and Quebec, which represents approximately 70% of the Company’s Canadian bargaining employees. The Company had begun negotiations with the Teamsters Union in Canada regarding the collective bargaining agreement However, these negotiations have been postponed and are scheduled to recommence on the Company’s emergence from Chapter 11.

(19) Industry Segment and Geographic Information

In accordance with the requirements of SFAS No. 131, Disclosure About Segments of an Enterprise and Related Information, the Company has identified two reportable segments through which it conducts its operating activities: the Allied Automotive Group and the Axis Group. These two segments reflect the internal reporting used by management to assess performance and allocate resources. Allied Automotive Group is engaged in the business of transporting automobiles, light trucks, and SUVs from manufacturing plants, ports, auctions, and railway distribution points to automobile dealerships. The Axis Group is engaged in the business of securing and managing vehicle distribution services, automobile inspections, auction and yard management services, vehicle tracking, vehicle accessorization, and dealer preparatory services for the automotive industry. The accounting policies for each segment are the same as those described in Note 2. Except for the allocation of certain corporate overhead, the costs of operating each segment as well as the assets owned are primarily maintained and recorded directly within the respective segment.

Set forth below is certain financial information related to these two segments and corporate/other for 2006, 2005 and 2004 (in thousands):

F-43

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	Years Ended December 31,
	2006			2005			2004
Revenues — unaffiliated customers:
Allied Automotive Group	$	864,576		$	865,427		$	869,507
Axis Group		29,261			27,507			25,706
Total	$	893,837		$	892,934		$	895,213
Depreciation and amortization:
Allied Automotive Group	$	27,225		$	27,160		$	38,596
Axis Group		1,397			1,609			1,938
Corporate/other		808			1,156			2,409
Total	$	29,430		$	29,925		$	42,943
Operating income (loss):
Allied Automotive Group	$	29,267		$	(93,417	)	$	2,249
Axis Group		7,153			4,306			(5,410	)
Corporate/other		(9,596	)		(5,965	)		(9,880	)
Total		26,824			(95,076	)		(13,041	)
Reconciling items:
Interest expense		(30,160	)		(39,410	)		(31,355	)
Investment income		4,807			2,813			1,136
Foreign exchange (losses) gains, net		(635	)		1,414			1,929
Other, net		—			834			(191	)
Loss before reorganization items and income taxes		836			(129,425	)		(41,522	)
Reorganization items		(12,772	)		(7,131	)		—
Loss before income taxes	$	(11,936	)	$	(136,556	)	$	(41,522	)

	December 31,
	2006		2005		2004
Total assets:
Allied Automotive Group	$	201,040	$	233,394	$	274,228
Axis Group		23,532		22,141		19,690
Corporate/other		114,196		127,581		127,614
Total	$	338,768	$	383,116	$	421,532
Capital expenditures:
Allied Automotive Group	$	34,572	$	17,789	$	21,309
Axis Group		1,109		1,505		1,097
Corporate/other		165		111		136
Total	$	35,846	$	19,405	$	22,542

During the year ended December 31, 2005, the Allied Automotive Group recorded a non-cash goodwill impairment charge of $79.2 million (See Note 8) and a $15.8 million charge for a withdrawal liability related to multiemployer pension plans to which the Company contributes (See Note 16).

During the year ended December 31, 2004, the Allied Automotive Group recorded a non-cash charge of $3.9 million related to the conclusion that the Company’s self-insurance reserves could no longer be discounted, wrote off $1.1 million of tires, revised estimated useful lives of property and equipment and recorded depreciation expense of $4.2 million. Also during 2004, goodwill on the Axis Group was reduced by $8.3 million for an impairment charge. A non-cash charge of $7.1 million related to no longer discounting insurance reserves was recorded in Corporate/other.

Geographic financial information for 2006, 2005, and 2004 are as follows (in thousands):

F-44

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Years Ended December 31,
	2006		2005		2004
Revenues:
United States	$	691,332	$	716,469	$	731,228
Canada		198,307		173,174		160,966
Other foreign operations		4,198		3,291		3,019
Total	$	893,837	$	892,934	$	895,213

	December 31,
	2006		2005		2004
Long-lived assets:
United States	$	93,805	$	86,531	$	94,395
Canada		31,431		33,681		38,014
Other foreign operations		3,995		3,692		3,226
Total	$	129,231	$	123,904	$	135,635

Revenues are attributed to the respective countries based on the terminal that provides the service and long-lived assets consist of property and equipment.

Substantially all of the Company’s revenues and receivables are generated from the automotive industry. Set forth below is certain percentage data on Allied Automotive Group’s four largest customers:

	Years Ended December 31,
	2006			2005			2004
Revenues earned from Allied Automotive Group’s four largest customers:
General Motors Corporation		36	%		34	%		35	%
Ford Motor Company		22	%		23	%		24	%
DaimlerChrysler Corporation		14	%		14	%		14	%
Toyota		8	%		11	%		9	%
		80	%		82	%		82	%

	December 31,
	2006			2005
Accounts receivable due from Allied Automotive Group’s four largest customers:
General Motors Corporation		28	%		29	%
Ford Motor Company		28	%		22	%
DaimlerChrysler Corporation		13	%		15	%
Toyota		8	%		11	%
		77	%		77	%

Revenue percentages are based on Allied Automotive Group’s revenues; the accounts receivable percentages are based on Allied Automotive Group’s accounts receivable balances.

A significant reduction in production, changes in product mix, plant closings, changes in production schedules, changes in the Automotive Group’s customers’ distribution strategies or the imposition of vendor price reductions by these manufacturers, the loss of General Motors Corporation, Ford Motor Company, DaimlerChrysler Corporation or Toyota or Honda as a customer, or a significant reduction in the services provided to any of these customers by the Automotive Group would have a material adverse effect on the Company’s operations. General Motors Corporation, DaimlerChrysler Corporation and Ford Motor Company, in particular, have publicly announced plans to significantly reduce vendor costs including those associated with transportation services. In addition, the Company’s two largest customers have recently announced plans regarding their intent to close certain production facilities, some of which the Company serves. A loss of volume would negatively impact the Company’s financial results. Also, see Note 18.

(20) Stockholders’ Equity

F-45

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company has authorized 5,000,000 shares of preferred stock with no par value. None of these shares have been issued. The Board of Directors has the authority to issue these shares, fix dividends, determine voting rights, conversion rights, redemption provisions, liquidation preferences and other rights and restrictions.

The agreements governing the Company’s New DIP Facility and its Senior Notes each contain covenants restricting the Company’s ability to pay dividends on its common stock (See Note 14). No cash dividends were declared or paid during the years ended December 31, 2006, 2005 and 2004.

During 2003, the Company reserved 225,000 shares of common stock under its 2003 Stock Issuance Plan pursuant to which, in August 2003, it awarded 250 shares of common stock to each of its full time nonbargaining U.S. employees, excluding those at the level of Senior Vice President and above. In addition, in August 2003, the Company agreed to award 250 shares of common stock to each full time nonbargaining employee in Canada as of August 1, 2003, excluding those at the level of Senior Vice President and above. The shares awarded to the U.S. and Canadian employees vested in August 2004 and totaled 147,250 shares, net of reductions for employee terminations. In connection with the shares granted, the Company recorded compensation expense of approximately $300,000 during the year ended December 31, 2004.

The Company also has a long-term incentive plan that has been approved by stockholders that allows for the issuance of grants or awards of nonqualified and incentive stock options, restricted stock, stock appreciation rights, performance units, and performance shares to employees and directors of the Company to acquire up to 2,150,000 shares of its common stock.

Prior to 2000, the Company granted restricted stock to certain of its employees. No restricted stock was granted during the years ended December 31, 2006, 2005, or 2004. During the year ended December 31, 2004, restricted shares totaling 4,195 were canceled. No shares were canceled during the years ended December 31, 2006 or 2005. Compensation expense was recorded net of forfeitures over the five-year vesting period of the restricted stock. In connection with the vesting of awards of restricted stock, the Company recorded compensation expense of approximately $100,000 for the year ended December 31, 2004. Common stock outstanding at December 31, 2006, 2005 and 2004 includes restricted stock of 114,286, 118,122 and 118,122, respectively.

The Company has also awarded nonqualified and incentive stock options under its long-term incentive plan. The vesting period for each award varies from a minimum of two years to a maximum of five years and each award vests ratably by year over the vesting period. All options expire ten years from the date of the grant if not previously exercised or forfeited. Under the Company’s incentive plan, it is authorized to issue nonqualified and incentive stock options to employees and non-employee directors to purchase a limited number of shares of the Company’s common stock, subsequent to the option’s vesting date, at a price not less than the fair market value of the shares on the date of grant. As of December 31, 2006, approximately 343,000 shares remained available for issuance out of the Company’s long-term incentive plan. Upon the issuance of stock options, shares are reserved under its long-term incentive plan, and upon stock option exercise, the Company issues new shares. Upon the consummation of a plan of reorganization, the rights and values of the Company’s current stock options could be modified significantly. As a result, the options could lose value, be rendered null and void, be replaced by new options or be otherwise impacted.

During the year ended December 31, 2006, the Company recorded stock-based compensation expense of approximately $536,000 in accordance with the provisions of SFAS No. 123(R), which increased its loss before income taxes and its net loss by $536,000. The impact on its basic and diluted loss per share for the year ended December 31, 2006 was an increase of $0.06 per share. The expense recorded represented compensation expense related to stock options that were unvested at the date of adoption of SFAS No. 123(R), based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123. No new stock options were granted during the year ended December 31, 2006, and we do not expect to grant any stock options during the Chapter 11 Proceedings. The stock-based compensation expense recorded during the year ended December 31, 2006 is included in salaries, wages and fringe benefits in the consolidated statement of operations.

At December 31, 2006, unrecognized compensation expense associated with unvested stock options was approximately $251,000 which, subject to any modifications that may occur in future periods, will be recognized at $228,000 and $23,000 during the years ending December 31, 2007 and 2008, respectively. This amount of

F - 46

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unrecognized compensation cost, the period of amortization and other parameters could be impacted by a plan of reorganization.

A summary of stock option activity for the year ended December 31, 2006 and certain stock option data as of December 31, 2006 is presented below:

						Weighted-
				Weighted-		Average	Aggregate
				Average		Remaining	Intrinsic
	Shares			Exercise Price		Contractual Life	Value
Outstanding as of December 31, 2005		1,572,667		$	3.67
Granted		—			—
Forfeited or expired		(22,500	)	$	4.47
Exercised		—			—
Outstanding as of December 31, 2006		1,550,167		$	3.66	5.51 years		—
Exercisable at year-end		1,367,835		$	3.53	5.19 years		—
Vested and expected to vest at December 31, 2006		1,527,167		$	3.65	5.47 years		—

The options had no intrinsic value at December 31, 2006, since the respective exercise price of all options exceeded the market value of a share of the Company’s common stock at December 31, 2006.

There were no stock option exercises during the years ended December 31, 2006 and 2005. The intrinsic value of options exercised during the year ended December 31, 2004 was approximately $308,000.

The per share weighted-average grant-date fair value of options granted during the years ended December 31, 2005 and 2004 was $3.07 and $4.65, respectively.

(21) Quarterly Financial Data (Unaudited)

	2006
	First			Second		Third			Fourth
	(In thousands, except per share amounts)
Revenues	$	240,828		$	245,382	$	202,151		$	205,476
Operating income (loss)		4,097			17,613		(966	)		6,080
Net (loss) income		(8,288	)		6,285		(7,198	)		(3,124	)
Net (loss) income per share:
Basic and diluted	$	(0.92	)	$	0.70	$	(0.80	)	$	(0.35	)
Average shares outstanding:
Basic and diluted		8,980			8,980		8,980			8,980

	2005
	First			Second			Third			Fourth
	(In thousands, except per share amounts)
Revenues	$	220,950		$	232,554		$	203,090		$	236,340
Operating loss		(1,881	)		(72,088	)		(5,197	)		(15,910	)
Net loss		(10,058	)		(75,050	)		(15,996	)		(24,620	)
Net loss per share:
Basic and diluted	$	(1.13	)	$	(8.36	)	$	(1.78	)	$	(2.74	)
Average shares outstanding:
Basic and diluted		8,940			8,980			8,980			8,980

F - 47

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the fourth quarter of 2006, the Company recorded a charge of approximately $4.7 million for the unfavorable development of claims from prior years and a gain of approximately $3.0 million related to the sale of a portion of land located in Ontario, Canada.

During the second quarter of 2005, Allied Automotive Group recorded a non-cash goodwill impairment charge of $79.2 million (See Note 8) and during the fourth quarter of 2005, a $15.8 million charge related to withdrawal liabilities related to multiemployer pension plans to which the Company contributes (See Note 16).

Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share will not necessarily equal the total computed for the year.

(22) Supplemental Guarantor Information

Substantially all of the subsidiaries of the Company, the Guarantor Subsidiaries, guarantee the Company’s obligations under the Senior Notes. The guarantees are full and unconditional. The Guarantors are jointly and severally liable for the Company’s obligations under the Senior Notes and there are no restrictions on the ability of the Guarantors to make distributions to the Company. The Company owns 100% of the Guarantor Subsidiaries. See Note 14 for a description of the Senior Notes and a listing of the Nonguarantor Subsidiaries.

The following consolidating balance sheet information, statement of operations information, and statement of cash flows information present the financial statement information of the parent company and the combined financial statement information of the Guarantor Subsidiaries and Nonguarantor Subsidiaries.

F - 48

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The supplemental consolidating balance sheet information as of December 31, 2006 is as follows (in thousands):

SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
December 31, 2006
(In thousands)

	Allied			Guarantor			Nonguarantor
	Holdings			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Current assets:
Cash and cash equivalents	$	—		$	189		$	2,125		$	—		$	2,314
Restricted cash, cash equivalents and other time deposits		—			—			32,436			—			32,436
Receivables, net of allowances		—			51,035			1,392						52,427
Inventories		—			4,916			—			—			4,916
Deferred income taxes		1,907			—			(21	)		21			1,907
Prepayments and other current assets		867			19,731			865						21,463
Total current assets		2,774			75,871			36,797			21			115,463
Property and equipment, net of accumulated depreciation		3,140			122,096			3,995			—			129,231
Goodwill, net		—			3,545			—			—			3,545
Other assets:
Restricted cash, cash equivalents and other time deposits		—			—			65,857			—			65,857
Other noncurrent assets		8,279			16,125			268			—			24,672
Intercompany receivables (payables)		76,868			(76,868	)		—			—			—
Investment in subsidiaries		(98,564	)		5,954			—			92,610			—
Total other assets		(13,417	)		(54,789	)		66,125			92,610			90,529
Total assets	$	(7,503	)	$	146,723		$	106,917		$	92,631		$	338,768
Current liabilities not subject to compromise:
Debtor-in-possession credit facility	$	161,357		$	—		$	—		$	—		$	161,357
Accounts and notes payable		3,269			23,039			56			—			26,364
Intercompany (receivables) payables		(133,318	)		115,309			18,009			—			—
Accrued liabilities		5,825			44,120			26,104			(1,610	)		74,439
Deferred income taxes		—			—			106						106
Total current liabilities		37,133			182,468			44,275			(1,610	)		262,266
Long-term liabilities not subject to compromise:
Postretirement benefits other than pensions		—			14,227			—			—			14,227
Deferred income taxes		1,926			—			—			—			1,926
Other long-term liabilities		60			17,879			47,330			—			65,269
Total long-term liabilities		1,986			32,106			47,330			—			81,422
Liabilities subject to compromise		157,510			41,702			—			—			199,212
Commitments and contingencies		—			—			—			—			—
Stockholders’ (deficit) equity:
Preferred stock, no par value		—			—			—			—			—
Common stock, no par value		—			—			—			—			—
Additional paid-in capital		49,081			166,130			2,488			(168,618	)		49,081
Treasury stock		(707	)		—			—			—			(707	)
(Accumulated deficit) retained earnings		(228,432	)		(253,206	)		13,039			240,167			(228,432	)
Accumulated other comprehensive loss, net of tax		(24,074	)		(22,477	)		(215	)		22,692			(24,074	)
Total stockholders’ (deficit) equity		(204,132	)		(109,553	)		15,312			94,241			(204,132	)
Total liabilities and stockholders’ (deficit) equity	$	(7,503	)	$	146,723		$	106,917		$	92,631		$	338,768

F - 49

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The supplemental consolidating balance sheet information as of December 31, 2005 is as follows (in thousands):

SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
December 31, 2005
(In thousands)

	Allied			Guarantor			Nonguarantor
	Holdings			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Current assets:
Cash and cash equivalents	$	—		$	730		$	3,387		$	—		$	4,117
Restricted cash, cash equivalents and other time deposits		—			—			32,830			—			32,830
Receivables, net of allowances		—			59,896			1,531			—			61,427
Inventories		—			5,132			—			—			5,132
Deferred income taxes		151			—			(23	)		—			128
Prepayments and other current assets		3,364			52,535			3,535			—			59,434
Total current assets		3,515			118,293			41,260			—			163,068
Property and equipment, net of accumulated depreciation		3,762			116,450			3,692			—			123,904
Goodwill, net		—			3,545			—			—			3,545
Other assets:
Restricted cash, cash equivalents and other time deposits		—			—			69,764			—			69,764
Other noncurrent assets		11,826			10,541			468			—			22,835
Intercompany receivables (payables)		76,862			(76,862	)		—			—			—
Investment in subsidiaries		(95,374	)		5,282			—			90,092			—
Total other assets		(6,686	)		(61,039	)		70,232			90,092			92,599
Total assets	$	591		$	177,249		$	115,184		$	90,092		$	383,116
Current liabilities not subject to compromise:
Debtor-in-possession credit facility	$	151,997		$	—		$	—		$	—		$	151,997
Accounts and notes payable		3,764			52,446			750			—			56,960
Intercompany (receivables) payables		(133,008	)		117,201			15,807			—			—
Accrued liabilities		5,027			50,812			27,478			—			83,317
Total current liabilities		27,780			220,459			44,035			—			292,274
Long-term liabilities not subject to compromise:
Postretirement benefits other than pensions		—			4,648			—			—			4,648
Deferred income taxes		143			—			—			—			143
Other long-term liabilities		2,521			19,608			51,967			—			74,096
Total long-term liabilities		2,664			24,256			51,967			—			78,887
Liabilities subject to compromise		157,514			41,808			—			—			199,322
Commitments and contingencies		—			—			—			—			—
Stockholders’ (deficit) equity :
Preferred stock, no par value		—			—			—			—			—
Common stock, no par value		—			—			—			—			—
Additional paid-in capital		48,545			166,130			2,488			(168,618	)		48,545
Treasury stock		(707	)		—			—			—			(707	)
(Accumulated deficit) retained earnings		(214,631	)		(261,466	)		16,694			244,772			(214,631	)
Accumulated other comprehensive loss, net of tax		(20,574	)		(13,938	)		—			13,938			(20,574	)
Total stockholders’ (deficit) equity		(187,367	)		(109,274	)		19,182			90,092			(187,367	)
Total liabilities and stockholders’ (deficit) equity	$	591		$	177,249		$	115,184		$	90,092		$	383,116

F - 50

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The supplemental consolidating statement of operations information for the year ended December 31, 2006 is as follows (in thousands):

SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Year Ended December 31, 2006
(In thousands)

	Allied			Guarantor			Nonguarantor
	Holdings			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	26,822		$	889,638		$	5,561		$	(28,184	)	$	893,837
Operating expenses:
Salaries, wages and fringe benefits		4,807			438,777			7,434			—			451,018
Operating supplies and expenses		13,766			169,214			743			—			183,723
Purchased transportation		—			115,143			66			—			115,209
Insurance and claims		19			40,698			2,296			(1,362	)		41,651
Operating taxes and licenses		276			27,783			—			—			28,059
Depreciation and amortization		808			27,982			640			—			29,430
Rents		1,517			5,624			17			—			7,158
Communications and utilities		3,349			2,847			56			—			6,252
Other operating expenses		4,525			29,891			216			(26,822	)		7,810
Gain on disposal of operating assets, net		—			(3,297	)		—			—			(3,297	)
Total operating expenses		29,067			854,662			11,468			(28,184	)		867,013
Operating (loss) income		(2,245	)		34,976			(5,907	)		—			26,824
Other income (expense):
Interest expense		(4,282	)		(25,622	)		(256	)		—			(30,160	)
Investment income		66			59			4,682			—			4,807
Foreign exchange losses, net		—			(595	)		(40	)		—			(635	)
Equity in earnings of subsidiaries		6,651			888			—			(7,539	)		—
Total other income (expense)		2,435			(25,270	)		4,386			(7,539	)		(25,988	)
(Loss) income before reorganization items and income taxes		190			9,706			(1,521	)		(7,539	)		836
Reorganization items		(12,437	)		(333	)		(2	)		—			(12,772	)
(Loss) income before income taxes		(12,247	)		9,373			(1,523	)		(7,539	)		(11,936	)
Income tax (expense) benefit		(78	)		191			(2,133	)		1,631			(389	)
Net (loss) income	$	(12,325	)	$	9,564		$	(3,656	)	$	(5,908	)	$	(12,325	)

F - 51

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The supplemental consolidating statement of operations information for the year ended December 31, 2005 is as follows (in thousands):

SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Year Ended December 31, 2005
(In thousands)

	Allied			Guarantor			Nonguarantor
	Holdings			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	31,229		$	890,884		$	40,172		$	(69,351	)	$	892,934
Operating expenses:
Salaries, wages and fringe benefits		4,955			479,686			26,948			(28,980	)		482,609
Operating supplies and expenses		13,914			166,145			422			—			180,481
Purchased transportation		—			119,412			19			—			119,431
Insurance and claims		—			36,422			14,753			(9,142	)		42,033
Operating taxes and licenses		186			29,655			—			—			29,841
Depreciation and amortization		1,156			28,216			553			—			29,925
Rents		1,537			5,950			13			—			7,500
Communications and utilities		3,284			2,769			37			—			6,090
Other operating expenses		7,860			34,983			183			(31,229	)		11,797
Impairment of goodwill		1,515			77,657			—			—			79,172
Gain on disposal of operating assets, net		—			(869	)		—			—			(869	)
Total operating expenses		34,407			980,026			42,928			(69,351	)		988,010
Operating loss		(3,178	)		(89,142	)		(2,756	)		—			(95,076	)
Other income (expense):
Interest expense		(6,301	)		(32,857	)		(252	)		—			(39,410	)
Investment income		—			40			2,773			—			2,813
Foreign exchange (losses) gains, net		(92	)		1,177			329			—			1,414
Other, net		(5,968	)		6,802			—			—			834
Equity in (losses) earnings of subsidiaries		(83,826	)		506			—			83,320			—
Total other income (expense)		(96,187	)		(24,332	)		2,850			83,320			(34,349	)
(Loss) income before reorganization items and income taxes		(99,365	)		(113,474	)		94			83,320			(129,425	)
Reorganization items		(6,505	)		(625	)		(1	)		—			(7,131	)
(Loss) income before income taxes		(105,870	)		(114,099	)		93			83,320			(136,556	)
Income tax (expense) benefit		(19,854	)		31,875			(1,189	)		—			10,832
Net loss	$	(125,724	)	$	(82,224	)	$	(1,096	)	$	83,320		$	(125,724	)

     The supplemental consolidating statement of operations information for the year ended December 31, 2004 is as follows (in thousands):

SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Year Ended December 31, 2004
(In thousands)

	Allied			Guarantor			Nonguarantor
	Holdings			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	36,209		$	893,620		$	41,126		$	(75,742	)	$	895,213
Operating expenses:
Salaries, wages and fringe benefits		6,211			470,171			22,094			(9,748	)		488,728
Operating supplies and expenses		13,527			148,459			280			—			162,266
Purchased transportation		—			111,214			—			—			111,214
Insurance and claims		—			42,343			28,263			(29,785	)		40,821
Operating taxes and licenses		173			29,631			—			—			29,804
Depreciation and amortization		2,409			40,055			479			—			42,943
Rents		2,691			5,860			5			—			8,556
Communications and utilities		3,623			2,697			22			—			6,342
Other operating expenses		6,446			39,680			207			(36,209	)		10,124
Impairment of goodwill		—			8,295			—			—			8,295
Gain on disposal of operating assets, net		—			(839	)		—			—			(839	)
Total operating expenses		35,080			897,566			51,350			(75,742	)		908,254
Operating income (loss)		1,129			(3,946	)		(10,224	)		—			(13,041	)
Other income (expense):
Interest expense		(2,226	)		(28,821	)		(308	)		—			(31,355	)
Investment income		—			40			1,096			—			1,136
Foreign exchange gain (loss)		—			1,938			(9	)		—			1,929
Other, net		—			(191	)		—			—			(191	)
Equity in (losses) earnings of subsidiaries		(41,217	)		517			—			40,700			—
Total other income (expense)		(43,443	)		(26,517	)		779			40,700			(28,481	)
Loss before income taxes		(42,314	)		(30,463	)		(9,445	)		40,700			(41,522	)
Income tax expense		(11,569	)		(286	)		(506	)		—			(12,361	)
Net loss	$	(53,883	)	$	(30,749	)	$	(9,951	)	$	40,700		$	(53,883	)

F - 52

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The supplemental consolidating statement of cash flows information for the year ended December 31, 2006 is as follows (in thousands):

SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Year Ended December 31, 2006
(In thousands)

	Allied			Guarantor			Nonguarantor
	Holdings			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(12,325	)	$	9,564		$	(3,656	)	$	(5,908	)	$	(12,325	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		808			27,982			640			—			29,430
Gain on disposal of operating assets, net		—			(3,297	)		—			—			(3,297	)
Write-off and amortization of deferred financing costs		5,817			—			—			—			5,817
Interest expense paid in kind		6,351			—			—			—			6,351
Foreign exchange gains		—			595			40			—			635
Reorganization items		12,437			333			2			—			12,772
Deferred income taxes		27			(21	)		104			—			110
Stock-based compensation expense		536			—			—			—			536
Equity in (losses) earnings of subsidiaries		(6,651	)		(888	)		—			7,539			—
Change in operating assets and liabilities:		—						—			—			—
Receivables, net of allowances		—			8,840			139			—			8,979
Inventories		—			216			—			—			216
Prepayments and other assets		2,672			27,839			2,682			—			33,193
Accounts and notes payable		(499	)		(1,043	)		(694	)		—			(2,236	)
Intercompany payables/receivables		(310	)		(1,892	)		2,202			—			—
Accrued liabilities		(483	)		(11,522	)		(6,010	)		(1,631	)		(19,646	)
Net cash provided by (used in) operating activities before payment of reorganization items		8,380			56,706			(4,551	)		—			60,535
Reorganization items paid		(10,879	)		(809	)		(2	)		—			(11,690	)
Net cash (used in) provided by operating activities		(2,499	)		55,897			(4,553	)		—			48,845
Cash flows from investing activities:
Purchases of property and equipment		(165	)		(34,711	)		(970	)		—			(35,846	)
Proceeds from sales of property and equipment		—			4,496			—			—			4,496
Decrease in restricted cash, cash equivalents and other time deposits		—			—			4,301			—			4,301
Funds deposited with insurance carriers		—			(1,856	)		—			—			(1,856	)
Funds returned from insurance carriers		—			4,512			—			—			4,512
Net cash (used in) provided by investing activities		(165	)		(27,559	)		3,331			—			(24,393	)
Cash flows from financing activities:
Repayments of debtor-in-possession revolving credit facilities, net		(6,991	)		—			—			—			(6,991	)
Additions to debtor-in-possession term debt		10,000			—			—			—			10,000
Payment of deferred financing costs		(345	)		—			—			—			(345	)
Proceeds from insurance financing arrangements		—			6,362			—			—			6,362
Repayments of insurance financing arrangements		—			(34,446	)		—			—			(34,446	)
Net cash provided by (used in) financing activities		2,664			(28,084	)		—			—			(25,420	)
Effect of exchange rate changes on cash and cash equivalents		—			(795	)		(40	)		—			(835	)
Net change in cash and cash equivalents		—			(541	)		(1,262	)		—			(1,803	)
Cash and cash equivalents at beginning of period		—			730			3,387			—			4,117
Cash and cash equivalents at end of period	$	—		$	189		$	2,125		$	—		$	2,314

F - 53

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The supplemental consolidating statement of cash flows information for the year ended December 31, 2005 is as follows (in thousands):

SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Year Ended December 31, 2005
(In thousands)

	Allied			Guarantor			Nonguarantor
	Holdings			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net loss	$	(125,724	)	$	(82,224	)	$	(1,096	)	$	83,320		$	(125,724	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		1,156			28,216			553			—			29,925
Impairment of goodwill		1,515			77,657			—			—			79,172
Gain on disposal of assets		—			(1,703	)		—			—			(1,703	)
Write-off and amortization of deferred financing costs		8,631			—			—			—			8,631
Foreign exchange losses (gains)		92			(1,177	)		(329	)		—			(1,414	)
Reorganization items		6,505			625			1			—			7,131
Deferred income taxes		21,018			(32,285	)		6			—			(11,261	)
Equity in losses (earnings) of subsidiaries		83,826			(506	)		—			(83,320	)		—
Change in operating assets and liabilities:
Receivables, net of allowances		—			(3,083	)		371			—			(2,712	)
Inventories		—			(623	)		—			—			(623	)
Prepayments and other assets		(1,846	)		(26,862	)		(3,285	)		—			(31,993	)
Accounts and notes payable		499			11,972			574			—			13,045
Intercompany payables/receivables		(1,765	)		(10,479	)		12,244			—			—
Accrued liabilities		2,809			(9,921	)		12,630			—			5,518
Net cash (used in) provided by operating activities before payment of reorganization items		(3,284	)		(50,393	)		21,669			—			(32,008	)
Reorganization items paid		(2,789	)		(149	)		(1	)		—			(2,939	)
Net cash (used in) provided by operating activities		(6,073	)		(50,542	)		21,668			—			(34,947	)
Cash flows from investing activities:
Purchases of property and equipment		(110	)		(18,416	)		(879	)		—			(19,405	)
Proceeds from sales of property and equipment		—			3,253			—			—			3,253
Proceeds from sale of equity in subsidiaries		—			2,000			—			—			2,000
Increase in restricted cash, cash equivalents and other time deposits		—			—			(19,714	)		—			(19,714	)
Funds deposited with insurance carriers		—			(9,766	)		—			—			(9,766	)
Funds returned from insurance carriers		—			5,969			—			—			5,969
Net cash used in investing activities		(110	)		(16,960	)		(20,593	)		—			(37,663	)
Cash flows from financing activities:
Addition to debtor-in-possession revolving credit facility, net		51,997			—			—			—			51,997
Repayment of pre-petition revolving credit facilities, net		—			(2,972	)		—			—			(2,972	)
Additions to debtor-in-possession term debt		100,000			—			—			—			100,000
Additions to pre-petition debt		—			25,000						—			25,000
Repayment of pre-petition debt		—			(123,266	)		—			—			(123,266	)
Payment of deferred financing costs		(7,646	)		(625	)		—			—			(8,271	)
Intercompany loan for settlement of Pre-petition Facility		(138,200	)		138,200			—			—			—
Proceeds from insurance financing arrangements		—			42,401			—			—			42,401
Repayments of insurance financing arrangements		—			(10,827	)		—			—			(10,827	)
Proceeds from issuance of common stock		124			—			—			—			124
Net cash provided by financing activities		6,275			67,911			—			—			74,186
Effect of exchange rate changes on cash and cash equivalents		(92	)		(212	)		329			—			25
Net change in cash and cash equivalents		—			197			1,404			—			1,601
Cash and cash equivalents at beginning of year		—			533			1,983			—			2,516
Cash and cash equivalents at end of year	$	—		$	730		$	3,387		$	—		$	4,117

F - 54

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Debtor-in-Possession since July 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The supplemental consolidating statement of cash flows information for the year ended December 31, 2004 is as follows (in thousands):

SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Year Ended December 31, 2004
(In thousands)

	Allied			Guarantor			Nonguarantor
	Holdings			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net loss	$	(53,883	)	$	(30,749	)	$	(9,951	)	$	40,700		$	(53,883	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		2,409			40,055			479			—			42,943
Impairment of goodwill		—			8,295			—			—			8,295
Gain on disposal of assets and other, net		—			(839	)		—			—			(839	)
Write-off and amortization of deferred financing costs		2,797			—			—			—			2,797
Foreign exchange (gain) loss, net		—			(1,938	)		9			—			(1,929	)
Deferred income taxes		11,623			(365	)		17			—			11,275
Stock-based compensation expense		321			—			—			—			321
Equity in losses (earnings) of subsidiaries		41,217			(517	)		—			(40,700	)		—
Change in operating assets and liabilities:
Receivables, net of allowances		—			(3,973	)		(754	)		—			(4,727	)
Inventories		—			414			—			—			414
Prepayments and other assets		(4,734	)		(1,622	)		3,057			—			(3,299	)
Accounts and notes payable		1,643			(3,494	)		104			—			(1,747	)
Intercompany payables		(1,144	)		9,652			(8,508	)		—			—
Accrued liabilities		(1,250	)		(3,520	)		18,630			—			13,860
Net cash (used in) provided by operating activities		(1,001	)		11,399			3,083			—			13,481
Cash flows from investing activities:
Purchases of property and equipment		(137	)		(21,677	)		(728	)		—			(22,542	)
Proceeds from sales of property and equipment		—			3,040			—			—			3,040
Increase in restricted cash, cash equivalents and other time deposits		—			—			(796	)		—			(796	)
Funds deposited with insurance carriers		—			(32,072	)		—			—			(32,072	)
Funds returned from insurance carriers		—			34,995			—			—			34,995
Net cash used in investing activities		(137	)		(15,714	)		(1,524	)		—			(17,375	)
Cash flows from financing activities:
Additions to pre-petition revolving credit facilities, net		—			2,972			—			—			2,972
Additions to pre-petition debt		—			20,000			—			—			20,000
Repayment of pre-petition debt		—			(18,234	)		—			—			(18,234	)
Payment of deferred financing costs		—			(475	)		—			—			(475	)
Proceeds from insurance financing arrangements		—			31,252			—			—			31,252
Repayments of insurance financing arrangements		—			(32,634	)		—			—			(32,634	)
Proceeds from issuance of common stock		589			—			—			—			589
Net cash provided by financing activities		589			2,881			—			—			3,470
Effect of exchange rate changes on cash and cash equivalents		—			801			(9	)		—			792
Net change in cash and cash equivalents		(549	)		(633	)		1,550			—			368
Cash and cash equivalents at beginning of year		549			1,166			433			—			2,148
Cash and cash equivalents at end of year	$	—		$	533		$	1,983		$	—		$	2,516

F - 55

ALLIED HOLDINGS, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2006, 2005 and 2004

	Balance at							Balance at
	Beginning of							End of
Classification	Year		Additions(a)		Deductions(b)			Year
	(In thousands)
Allowance for billing adjustments and doubtful accounts:
Year ended December 31, 2006	$	2,218	$	466	$	(983	)	$	1,701
Year ended December 31, 2005		2,156		486		(424	)		2,218
Year ended December 31, 2004		3,575		491		(1,910	)		2,156

(a)	Additions are recorded as reductions of revenue as they primarily represent billing adjustments.
(b)	Billing adjustments and write-off of uncollectible accounts.

S - 1

EX-4.3

Exhibit 4.3

EXECUTION VERSION

SECURED SUPER-PRIORITY DEBTOR IN POSSESSION
AND EXIT CREDIT AND GUARANTY AGREEMENT

dated as of March 30, 2007

among

ALLIED HOLDINGS, INC.

and

ALLIED SYSTEMS, LTD. (L.P.),
as Borrowers

CERTAIN SUBSIDIARIES OF

ALLIED HOLDINGS, INC.
and
ALLIED SYSTEMS, LTD. (L.P.),
as Guarantors,

VARIOUS LENDERS,

GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Lead Arranger and Syndication Agent,

and

THE CIT GROUP/BUSINESS CREDIT, INC.,
as Administrative Agent and Collateral Agent

$315,000,000 Senior Secured Credit Facilities

TABLE OF CONTENTS

			Page
SECTION 1.		DEFINITIONS AND INTERPRETATION		2
	1.1.	Definitions		2
	1.2.	Accounting Terms		39
	1.3.	Interpretation, etc.		39
SECTION 2.		LOANS AND LETTERS OF CREDIT		39
	2.1.	Term Loans		39
	2.2.	Revolving Loans		41
	2.3.	Swing Line Loans		42
	2.4.	Issuance of Letters of Credit and Purchase of Participations Therein		44
	2.5.	Pro Rata Shares; Availability of Funds		51
	2.6.	Use of Proceeds		52
	2.7.	Evidence of Debt; Register; Lenders’ Books and Records; Notes		53
	2.8.	Interest on Loans		53
	2.9.	Conversion/Continuation		55
	2.10.	Default Interest		56
	2.11.	Fees		56
	2.12.	Scheduled Payments		57
	2.13.	Voluntary Prepayments/Commitment Reductions		58
	2.14.	Mandatory Prepayments		59
	2.15.	Application of Prepayments		61
	2.16.	General Provisions Regarding Payments		61
	2.17.	Ratable Sharing		63
	2.18.	Making or Maintaining Eurodollar Rate Loans		63
	2.19.	Increased Costs; Capital Adequacy		65
	2.20.	Taxes; Withholding, etc.		67
	2.21.	Obligation to Mitigate		69
	2.22.	Defaulting Lenders		69
	2.23.	Removal or Replacement of a Lender		70
	2.24.	Super-Priority Nature of Obligations and Lenders’ Liens		71
	2.25.	Payment of Obligations		72
	2.26.	No Discharge; Survival of Claims		72
	2.27.	Waiver of any Priming Rights		72
	2.28.	Co-Borrowers		72
	2.29.	Judgment Currency		74
SECTION 3.		CONDITIONS PRECEDENT AND CONVERSION TO EXIT FACILITIES		75
	3.1.	Closing Date		75
	3.2.	Conditions to Each Credit Extension		78
	3.3.	Exit Facilities Option		79
	3.4.	Conditions to Exit Facilities Option		80
	3.5.	Conversion to Exit Facilities		85

 ii

			Page
SECTION 4.		REPRESENTATIONS AND WARRANTIES	86
	4.1.	Organization; Requisite Power and Authority; Qualification	86
	4.2.	Equity Interests and Ownership	86
	4.3.	Due Authorization	86
	4.4.	No Conflict	87
	4.5.	Governmental Consents	87
	4.6.	Binding Obligation	87
	4.7.	Historical Financial Statements	88
	4.8.	Projections	88
	4.9.	No Material Adverse Change	88
	4.10.	No Restricted Junior Payments	88
	4.11.	Adverse Proceedings, etc.	88
	4.12.	Payment of Taxes	89
	4.13.	Properties	89
	4.14.	Environmental Matters	89
	4.15.	No Defaults	90
	4.16.	Material Contracts	90
	4.17.	Governmental Regulation	90
	4.18.	Margin Stock	90
	4.19.	Employee Matters	91
	4.20.	Employee Benefit Plans	91
	4.21.	Certain Fees	92
	4.22.	Solvency	92
	4.23.	Compliance with Statutes, etc.	92
	4.24.	Disclosure	92
	4.25.	Secured, Super-Priority Obligations	93
	4.26.	Patriot Act	94
SECTION 5.		AFFIRMATIVE COVENANTS	94
	5.1.	Financial Statements and Other Reports	94
	5.2.	Existence	99
	5.3.	Payment of Taxes and Claims	99
	5.4.	Maintenance of Properties	99
	5.5.	Insurance	99
	5.6.	Books and Records; Inspections	100
	5.7.	Lenders Meetings	100
	5.8.	Compliance with Laws	100
	5.9.	Environmental	101
	5.10.	Subsidiaries	102
	5.11.	Additional Real Estate Assets	103
	5.12.	Interest Rate Protection	103
	5.13.	Further Assurances	104
	5.14.	Maintenance of Ratings	104
	5.15.	Final DIP Order	104
	5.16.	Canadian Final Order	104
	5.17.	Restructuring Advisers	104
	5.18.	Financial Plan	104

 iii

			Page
SECTION 6.		NEGATIVE COVENANTS	105
	6.1.	Indebtedness	105
	6.2.	Liens	109
	6.3.	No Further Negative Pledges	111
	6.4.	Restricted Junior Payments	111
	6.5.	Restrictions on Subsidiary Distributions	112
	6.6.	Investments	112
	6.7.	Financial Covenants	113
	6.8.	Fundamental Changes; Disposition of Assets; Acquisitions	117
	6.9.	Disposal of Subsidiary Interests	118
	6.10.	Sales and Lease-Backs	118
	6.11.	Transactions with Shareholders and Affiliates	119
	6.12.	Conduct of Business	119
	6.13.	Amendments or Waivers of Organizational Documents and Certain Agreements	119
	6.14.	Haul Insurance	119
	6.15.	Chapter 11 Claims; Adequate Protection	120
	6.16.	DIP Orders and Canadian Orders	120
	6.17.	Limitation on Prepayments of Pre-Petition Obligations	120
	6.18.	Fiscal Year	121
	6.19.	Repayment of Indebtedness	121
	6.20.	Reclamation Claims	121
	6.21.	Chapter 11 Claims	121
SECTION 7.		GUARANTY	121
	7.1.	Guaranty of the Obligations	121
	7.2.	Contribution by Guarantors	121
	7.3.	Payment by Guarantors	122
	7.4.	Liability of Guarantors Absolute	123
	7.5.	Waivers by Guarantors	124
	7.6.	Guarantors’ Rights of Subrogation, Contribution, etc.	125
	7.7.	Subordination of Other Obligations	126
	7.8.	Continuing Guaranty	126
	7.9.	Authority of Guarantors or Borrowers	126
	7.10.	Financial Condition of Borrowers	126
	7.11.	Bankruptcy, etc.	127
	7.12.	Discharge of Guaranty Upon Sale of Guarantor	127
SECTION 8.		EVENTS OF DEFAULT; CARVE-OUT EVENT	128
	8.1.	Events of Default	128
	8.2.	Carve-Out Events	133
SECTION 9.		AGENTS	133
	9.1.	Appointment of Agents	133
	9.2.	Powers and Duties	134
	9.3.	General Immunity	134
	9.4.	Agents Entitled to Act as Lender	136

 iv

			Page
	9.5.	Lenders’ Representations, Warranties and Acknowledgment	136
	9.6.	Right to Indemnity	136
	9.7.	Successor Administrative Agent, Collateral Agent and Swing Line Lender	137
	9.8.	Collateral Documents and Guaranty	138
SECTION 10.		MISCELLANEOUS	139
	10.1.	Notices	139
	10.2.	Expenses	140
	10.3.	Indemnity	141
	10.4.	Set-Off	141
	10.5.	Amendments and Waivers	142
	10.6.	Successors and Assigns; Participations	144
	10.7.	Independence of Covenants	148
	10.8.	Survival of Representations, Warranties and Agreements	148
	10.9.	No Waiver; Remedies Cumulative	148
	10.10.	Marshalling; Payments Set Aside	149
	10.11.	Severability	149
	10.12.	Obligations Several; Independent Nature of Lenders’ Rights	149
	10.13.	Headings	149
	10.14.	APPLICABLE LAW	149
	10.15.	CONSENT TO JURISDICTION	150
	10.16.	WAIVER OF JURY TRIAL	150
	10.17.	Confidentiality	151
	10.18.	Usury Savings Clause	151
	10.19.	Counterparts	153
	10.20.	Effectiveness	153
	10.21.	Patriot Act	153
	10.22.	Electronic Execution of Assignments	153
	10.23.	Post-Closing Actions	153
	10.24.	Joint and Several Liability	154
	10.25.	Limitations Act, 2002	154

 v

APPENDICES:	A-1	Term Loan Commitments
	A-2	Revolving Commitments
	A-3	LC Commitments
	B	Notice Addresses

SCHEDULES:
	4.1	Jurisdictions of Organization and Qualification
	4.2	Equity Interests and Ownership
	4.7	Contingent Liabilities
	4.13	Real Estate Assets
	4.16	Material Contracts
	4.19	Employee Matters
	4.20	Employee Benefit Plans
	4.25	Post-petition Liens
	6.1	Certain Indebtedness
	6.2	Certain Liens
	6.5	Certain Restrictions on Subsidiary Distributions
	6.6	Certain Investments
	6.8(a)	Planned Asset Sales
	6.8(b)	Restructuring Asset Sales
	6.11	Certain Affiliate Transactions
	10.23	Post-Closing Actions

EXHIBITS:	A-1	Funding Notice
	A-2	Conversion/Continuation Notice
	A-3	Issuance Notice
	B-1	Term Loan Note
	B-2	Revolving Loan Note
	B-3	Swing Line Note
	C	Compliance Certificate
	D	[Intentionally Omitted]
	E	Assignment Agreement
	F	Certificate Re Non-bank Status
	G-1	Closing Date Certificate
	G-2	Solvency Certificate
	H	Counterpart Agreement
	I	Pledge and Security Agreement
	J	Mortgage
	K	Landlord Waiver and Consent Agreement
	L	Intercompany Note
	M	Interim DIP Order
	N	Canadian Pledge and Security Agreement
	O	Affirmation Agreement

 vi

SECURED SUPER-PRIORITY DEBTOR IN POSSESSION
AND EXIT CREDIT AND GUARANTY AGREEMENT

          This SECURED SUPER-PRIORITY DEBTOR IN POSSESSION AND EXIT CREDIT AND GUARANTY AGREEMENT, dated as of March 30, 2007, is entered into by and among ALLIED HOLDINGS, INC., a Georgia corporation and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (as defined below) (“Holdings”), ALLIED SYSTEMS, LTD. (L.P.), a Georgia limited partnership and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (“Systems” and, together with Holdings, the “Borrowers”), CERTAIN SUBSIDIARIES OF BORROWERS, as Subsidiary Guarantors, the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P. (“GSCP”), as Syndication Agent (in such capacity, “Syndication Agent”), and THE CIT GROUP/BUSINESS CREDIT, INC. (“CIT”), as Administrative Agent (together with its permitted successors in such capacity, “Administrative Agent”) and as Collateral Agent (together with its permitted successor in such capacity, “Collateral Agent”).

RECITALS:

          WHEREAS, capitalized terms used in these Recitals shall have the respective meanings set forth for such terms in Section 1.1 hereof;

          WHEREAS, on July 31, 2005 (the “Petition Date”), Borrowers and each of the other Debtors filed voluntary petitions for relief (collectively, the “Cases”) under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court, which Cases have been recognized in Canada pursuant to the Canadian Stay Order;

          WHEREAS, from and after the Petition Date, Debtors are continuing to operate their respective businesses and manage their respective properties as debtors in possession under Sections 1107 and 1108 of the Bankruptcy Code;

          WHEREAS, Borrowers have requested Lenders to extend and Lenders have agreed to extend to Borrowers certain credit facilities, in an aggregate amount not to exceed $315,000,000, consisting of $230,000,000 aggregate principal amount of Term Loans, $35,000,000 aggregate principal amount of Revolving Commitments and $50,000,000 aggregate principal amount of LC Commitments, to be used (a) in the case of the Term Loans made on the Closing Date (i) to repay in full the amounts outstanding under Borrowers’ existing post-petition credit agreement, dated as of August 1, 2005, as amended (the “Existing DIP Credit Agreement”), among Borrowers, the other credit parties party thereto, the lenders party thereto and General Electric Capital Corporation, Morgan Stanley Senior Funding, Inc. and Marathon Structured Finance Fund, L.P., as agents and (ii) to pay certain other fees and expenses relating to the credit facilities established hereunder and (b) in the case of Term Loans made after the Closing Date, Revolving Loans and Letters of Credit, for general corporate purposes of Borrowers and their Subsidiaries;

          WHEREAS, Borrowers have agreed to secure all of their Obligations by granting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on substantially all of their assets, including a pledge of all of the Equity Interests of each of their respective Domestic

Subsidiaries, 100% of all the Equity Interests of each of their Canadian Subsidiaries and 65% of all the Equity Interests of each of their other respective first-tier Foreign Subsidiaries;

          WHEREAS, Guarantors have agreed to guarantee the obligations of Borrowers hereunder and to secure their respective Obligations by granting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on substantially all of their respective assets, including a pledge of all of the Equity Interests of each of their respective Domestic Subsidiaries (including Systems), 100% of all the Equity Interests of each of their respective Canadian Subsidiaries and 65% of all the Equity Interests of each of their other respective directly owned Foreign Subsidiaries.

          WHEREAS, the Lenders have agreed to grant an option to Borrowers to cause the Facilities to be converted to the Exit Facilities subject to certain terms and conditions set forth herein.

          NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

SECTION 1. DEFINITIONS AND INTERPRETATION

     1.1. Definitions. The following terms used herein, including in the preamble, recitals, exhibits and schedules hereto, shall have the following meanings:

          “Act” as defined in Section 3.1(z).

          “Adjusted Eurodollar Rate” means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (and rounding upward to the next whole multiple of 1/16 of 1%) (i) (a) the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by Administrative Agent to be the offered rate which appears on the page of the Telerate Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3740 or 3750, as applicable) for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (b) in the event the rate referenced in the preceding clause (a) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (c) in the event the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the offered quotation rate to first class banks in the London interbank market by Deutsche Bank for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan of Administrative Agent, in its capacity as a Lender, for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to such period as of approximately 11:00 a.m. (London, England time) on

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such Interest Rate Determination Date, by (ii) an amount equal to (a) one minus (b) the Applicable Reserve Requirement.

          “Administrative Agent” as defined in the preamble hereto.

          “Adverse Proceeding” means any action, suit, proceeding, hearing (whether administrative, judicial or otherwise), governmental investigation or arbitration (whether or not purportedly on behalf of Holdings or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims), whether pending or, to the knowledge of Holdings or any of its Subsidiaries, threatened against or affecting Holdings or any of its Subsidiaries or any property of Holdings or any of its Subsidiaries.

          “Affected Lender” as defined in Section 2.18(b).

          “Affected Loans” as defined in Section 2.18(b).

          “Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power (i) to vote 5% or more (or, for purposes of the definition of “Controlled Investment Affiliate”, 50% or more) of the Securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

          “Affirmation Agreement” shall mean the Affirmation Agreement substantially in the form of Exhibit O hereto.

          “Agent” means each of Administrative Agent, Syndication Agent and Collateral Agent.

          “Agent Affiliates” as defined in Section 10.1(b).

          “Aggregate Amounts Due” as defined in Section 2.17.

          “Aggregate Payments” as defined in Section 7.2.

          “Agreement” means this Secured Super-Priority Debtor in Possession and Exit Credit and Guaranty Agreement, dated as of March 30, 2007, as it may be amended, supplemented or otherwise modified from time to time.

          “AH Industries” means AH Industries Inc., an Alberta corporation.

          “Applicable Reserve Requirement” means, at any time, for any Eurodollar Rate Loan, the maximum rate, expressed as a decimal, at which reserves (including any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with

3

respect thereto against “Eurocurrency liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the applicable Adjusted Eurodollar Rate or any other interest rate of a Loan is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Rate Loans. A Eurodollar Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of interest on Eurodollar Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement.

          “Approved Electronic Communications” means any notice, demand, communication, information, document or other material that any Credit Party provides to Administrative Agent pursuant to any Credit Document or the transactions contemplated therein which is distributed to the Agents or to the lenders by means of electronic communications pursuant to Section 10.1(b).

          “Asset Sale” means a sale, lease or sub-lease (as lessor or sublessor), sale and leaseback, assignment, conveyance, exclusive license (as licensor or sublicensor), transfer or other disposition to, or any exchange of property with, any Person (other than Borrower or any Guarantor Subsidiary), in one transaction or a series of transactions, of all or any part of Holdings’ or any of its Subsidiaries’ businesses, assets or properties of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired, leased or licensed, including the Equity Interests of any of Holdings’ Subsidiaries, other than (i) inventory (or other assets) sold, leased or licensed out in the ordinary course of business (excluding any such sales, leases or licenses out by operations or divisions discontinued or to be discontinued), (ii) sales or other dispositions of obsolete or worn out rigs and (iii) sales, leases or licenses out of other assets for aggregate consideration of less than $500,000 with respect to any transaction or series of related transactions and less than $1,000,000 in the aggregate during any Fiscal Year.

          “Assignment Agreement” means an Assignment and Assumption Agreement substantially in the form of Exhibit E, with such amendments or modifications as may be approved by Administrative Agent.

          “Assignment Effective Date” as defined in Section 10.6(b).

          “Authorized Officer” means, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executive officer, president or one of its vice presidents (or the equivalent thereof), and such Person’s chief financial officer, controller, assistant controller, treasurer or assistant treasurer.

          “Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute; provided, however, that, with respect to the Cases, “Bankruptcy Code” means Title 11 of the United States Code, as in effect

4

on the Petition Date and as thereafter amended, if such amendments are made applicable to the Cases.

          “Bankruptcy Court” means the United States Bankruptcy Court for the Northern District of Georgia or any other court having competent jurisdiction over the Cases.

          “Base Fiscal Year” as defined in Section 6.7(c).

          “Base Rate” means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus ¹/2 of 1%. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

          “Base Rate Loan” means a Loan bearing interest at a rate determined by reference to the Base Rate.

          “Benchmark LIBOR Rate” as defined in Section 2.4(m).

          “Beneficiary” means each Agent, Issuing Bank, Lender and Lender Counterparty.

          “BIA” means the Bankruptcy and Insolvency Act (Canada), as now or hereafter in effect or any successor statute.

          “Blue Thunder” means Blue Thunder Auto Transport, Inc. or any of its Subsidiaries or Affiliates.

          “Blue Thunder Equipment” means rigs (including tractors, trailers and related equipment) purchased from Blue Thunder or any auctioneer acting on behalf of Blue Thunder and any replacement parts or improvements made thereto.

          “Board of Governors” means the Board of Governors of the United States Federal Reserve System, or any successor thereto.

          “Borrowers” as defined in the preamble hereto.

          “Business Day” means (i) any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close and (ii) with respect to all notices, determinations, fundings and payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, the term “Business Day” shall mean any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the London interbank market.

          “Canadian Court” means the Ontario Superior Court of Justice (Commercial List).

5

          “Canadian Confirmation Order” means an order of the Canadian Court under Section 18.6 of the CCAA, together with all extensions, modifications and amendments thereto, in each case in form and substance satisfactory to Agents, giving full effect to the Confirmation Order, which order shall specifically but not exclusively confirm the Plan and approve and authorize the transactions contemplated thereby and the granting of liens under the Credit Documents and containing a release in favor of Administrative Agent and Syndication Agent and the Lenders and their respective affiliates.

          “Canadian Credit Party” means any Credit Party incorporated, organized or otherwise established under the laws of Canada or any political subdivision of Canada.

          “Canadian DIP Order” means the Canadian Interim Order or the Canadian Final Order, as applicable.

          “Canadian Final Order” means an order of the Canadian Court under Section 18.6 of the CCAA, together with all extensions, modifications and amendments thereto, in each case in form and substance satisfactory to Agents, giving full effect to the Final DIP Order, which order shall specifically but not exclusively provide that each of the Canadian Credit Parties is authorized to enter into the Credit Documents to which it is a party, and provide, execute and deliver all such guarantees, documents, security interests and liens as are contemplated in such Credit Documents and granting to the Collateral Agent a fixed charge, mortgage, hypothec, security interest and lien in all of the Collateral in which any of the Canadian Credit Parties now or hereafter has an interest ranking in priority to all other encumbrances.

          “Canadian Insolvency Law” shall mean any of the BIA and the CCAA, and any other applicable insolvency or other similar law.

          “Canadian Interim Order” means an order of the Canadian Court under Section 18.6 of the CCAA, together with all extensions, modifications and amendments thereto, in each case in form and substance satisfactory to Agents, giving full effect to the Interim DIP Order, which order shall specifically but not exclusively provide that each of the Canadian Credit Parties is authorized to enter into the Credit Documents to which it is a party, and provide, execute and deliver all such guarantees, documents, security interests and liens as are contemplated in such Credit Documents and granting to the Collateral Agent a fixed charge, mortgage, hypothec, security interest and lien in all of the Collateral in which any of the Canadian Credit Parties now or hereafter has an interest ranking in priority to all other encumbrances.

          “Canadian Pledge and Security Agreement” means the Pledge and Security Agreement to be executed by each Canadian Credit Party substantially in the form of Exhibit N, as it may be amended, supplemented or otherwise modified from time to time.

          “Canadian PPSA” means the Personal Property Security Act (Ontario) and the Regulations thereunder, as from time to time in effect, provided, however, if the validity, perfection (or opposability), effect of perfection or of non-perfection or priority of Collateral Agent’s security interest in any Collateral are governed by the personal property security laws or

6

laws relating to movable property of any jurisdiction other than Ontario, Canadian PPSA shall mean those personal property security laws or laws relating to movable property in such other jurisdiction for the purpose of the provisions hereof relating to such validity, perfection (or opposability), effect of perfection or of non-perfection or priority and for the definitions related to such provisions.

          “Canadian Stay Order” means, collectively, the order of the Canadian Court entered on August 5, 2005 under Section 18.6 of the CCAA, together with all extensions, modifications and amendments thereto, in each case in form and substance reasonably satisfactory to the Agent, which, among other matters but not by way of limitation, recognizes the Cases and imposes a stay of proceedings against creditors and others in Canada.

          “Canadian Subsidiary” means any Subsidiary that is incorporated, organized or otherwise established under the laws of Canada or any political subdivision of Canada.

          “Capital Lease” means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person.

          “Carve-Out” means the following claims: (a) quarterly fees pursuant to 28 U.S.C. § 1930(a)(6), (b) fees payable to the clerk of the Bankruptcy Court and any agent thereof and (c) fees and disbursements incurred by the Credit Parties’ professionals (other than the Credit Parties’ ordinary course professionals) and the professionals of the Committee retained prior to the Exit Facilities Conversion Date (collectively, the “Professionals”) and allowed by order of the Bankruptcy Court in the aggregate amount not to exceed $1,500,000, in each case incurred prior to a Carve-Out Event but not yet paid to the extent such fees and expenses are approved by the Bankruptcy Court, subject to the right of Administrative Agent, the Lenders and any other party in interest to object to the award of such fees and expenses; provided, however, that the Carve-Out shall not include, apply to, or be available for any fees or expenses incurred by any party, including the Credit Parties, any Committee or any Professional in connection with the investigation, initiation or prosecution of any claims, defenses or causes of action (as described in the Interim DIP Order) against the Agents or the Lenders and as otherwise provided in the Interim DIP Order or Final DIP Order, as applicable; provided, further, prior to a Carve-Out Event the Credit Parties shall be permitted to pay compensation and reimbursement of expenses allowed and payable under Sections 328, 330 and 331 of the Bankruptcy Code or otherwise pursuant to an order of the Bankruptcy Court, as the same may be due and payable, and the same shall not reduce the Carve-Out, subject to the right of Administrative Agent, the Lenders and any other party in interest to object to such payments; provided, further, that in the event of any inconsistency in the definition of “Carve-Out” between the provisions of this Agreement and the Interim DIP Order or Final DIP Order, the provisions of the Interim DIP Order or Final DIP Order shall govern.

          “Carve-Out Event” as defined in Section 8.2.

          “Carve-Out Event Notice” as defined in Section 8.2.

          “Cases” as defined in the recitals hereto.

7

          “Cash” means money, currency or a credit balance in any demand or Deposit Account.

          “Cash Equivalents” means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or the Government of Canada or (b) issued by any agency of the United States, in each case maturing within one year after the date of acquisition; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after the date of acquisition and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s; (iii) commercial paper maturing no more than one year from the date of acquisition thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s; (iv) certificates of deposit or bankers’ acceptances maturing within one year after the date of acquisition and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (a) is at least “adequately capitalized” (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; (v) fully collateralized repurchase agreements with a term of not more than 90 days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria of clause (iv) above; and (vi) shares of any money market mutual fund that (a) has substantially all of its assets invested continuously in the types of investments referred to in clauses (i) through (v) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody’s.

          “CCAA” means Companies’ Creditors Arrangement Act (Canada), as now and hereafter in effect, or any successor statute.

          “Certificate re Non-Bank Status” means a certificate substantially in the form of Exhibit F.

          “Change of Control” means, at any time on or after the Exit Facilities Conversion Date (i) prior to a Qualified Public Offering, (a) Sponsor and its Controlled Investment Affiliates shall not beneficially own and control at least 35% on a fully diluted basis of the economic and voting interests in the Equity Interests of Holdings, (b) Sponsor and its Controlled Investment Affiliates fail to elect a majority of the members of the board of directors (or similar governing body) of Holdings or (c) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) shall at any time have acquired beneficial ownership on a fully diluted basis of the voting and/or economic interests in the Equity Interests of Holdings greater than the beneficial ownership on a fully diluted basis of the voting and/or economic interests in the Equity Interests of Holdings owned by the Sponsor and its Controlled Investment Affiliates at such time; (ii) after a Qualified Public Offering, any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) other than Sponsor and its Controlled Investment Affiliates (a) shall have acquired beneficial ownership of 35% or more on a fully diluted basis of the voting and/or economic interest in the Equity Interests of Holdings or (b) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of Holdings; (iii) Holdings shall

8

cease to beneficially own and control, directly or indirectly, 100% on a fully diluted basis of the economic and voting interest in the Equity Interests of Systems; (iv) the majority of the seats (other than vacant seats) on the board of directors (or similar governing body) of Holdings cease to be occupied by Persons who either (a) were members of the board of directors of Holdings on the Exit Facilities Conversion Date or (b) were nominated for election by the board of directors of Holdings, a majority of whom were directors on the Exit Facilities Conversion Date or whose election or nomination for election was previously approved by a majority of such directors.

          “CIT” as defined in the preamble.

          “Claim” has the meaning specified in Section 101(5) of the Bankruptcy Code.

          “Class” means with respect to Lenders, each of the following classes of Lenders: (i) Lenders having Term Loan Exposure, (ii) Lenders having Revolving Loan Exposure and (iii) Lenders having LC Deposits.

          “Closing Date” means the date on which the initial Term Loan is made.

          “Closing Date Certificate” means a Closing Date Certificate substantially in the form of Exhibit G-1.

          “Collateral” means, collectively, all of the real, personal and mixed property (including Equity Interests) in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations.

          “Collateral Agent” as defined in the preamble hereto.

          “Collateral Documents” means the Pledge and Security Agreement, Canadian Pledge and Security Agreement, the Quebec Security the Collateral Servicing Agreement, the Mortgages, the Intellectual Property Security Agreements, the Landlord Personal Property Collateral Access Agreements, if any, and all other instruments, documents and agreements delivered by any Credit Party pursuant to this Agreement or any of the other Credit Documents in order to grant to Collateral Agent, for the benefit of Secured Parties, or perfect a Lien on any real, personal or mixed property of that Credit Party as security for the Obligations.

          “Collateral Questionnaire” means a certificate in form satisfactory to Collateral Agent that provides information with respect to the personal or mixed property of each Credit Party.

          “Collateral Servicing Agreement” means a Collateral Servicing Agreement, in form and substance reasonably satisfactory to the Collateral Agent, by and among Corporation Service Company, each Credit Party (other than any Foreign Subsidiary) and the Collateral Agent.

          “Committed Capital Expenditures” as defined in Section 6.7(c).

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          “Committee” means the Official Committee of Unsecured Creditors appointed in the Cases pursuant to Section 1102 of the Bankruptcy Code, on August 5, 2005, as reconstituted from time to time.

          “Commitment” means any Revolving Commitment, LC Commitment or Term Loan Commitment.

          “Commodity Agreement” means any commodity exchange contract, commodity swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement, each of which is for the purpose of hedging the commodity risk associated with Holdings’ and its Subsidiaries’ operations and not for speculative purposes.

          “Compliance Certificate” means a Compliance Certificate substantially in the form of Exhibit C.

          “Confirmation Order” as defined in Section 3.4(g).

          “Consolidated Adjusted EBITDA” means, for any period, an amount determined for Holdings and its Subsidiaries on a consolidated basis equal to (i) Consolidated Net Income for such period, plus, to the extent deducted in determining such Consolidated Net Income, the sum, without duplication, of amounts for (a) Consolidated Interest Expense for such period; (b) consolidated income, single business, franchise, unitary or gross receipt tax expense for such period; (c) total depreciation expense for such period; (d) total amortization expense for such period; (e) the cumulative effect (whether positive or negative) of any change in accounting principles; (f) management fees and expenses paid during such period pursuant to the Management Agreement to the extent permitted hereunder; (g) Transaction Costs for such period; (h) with respect to any period (including any Fiscal Quarter) during Fiscal Year 2006 or 2007, costs and expenses resulting from administrative expenses paid with respect to the Cases for professional fees and expenses in an amount up to, but not exceeding in the aggregate for Fiscal Year 2006 and 2007, $30,000,000; (i) with respect to any period (including any Fiscal Quarter) during Fiscal Year 2006 or 2007, amounts paid as cure payments or similar costs in connection with assumptions of executory contracts assumed during the Cases or as part of the Plan in an amount up to, but not exceeding in the aggregate for Fiscal Year 2006 and 2007, $5,000,000; (j) fees and charges related to any events or transactions that are unusual in nature and infrequent in occurrence, in that it is unrelated to, or only incidentally related to, the current ordinary and typical activities of Borrowers and would not reasonably be expected to recur in a normal operating cycle in an amount up to, but not exceeding, $1,000,000 in the aggregate for any periods occurring during any Fiscal Year and, $3,000,000 in the aggregate from the Closing Date to the date of determination; (k) with respect to any period (including any Fiscal Quarter) during Fiscal Year 2007, non-recurring costs and expenses arising from or recognized in connection with the consummation and effectiveness of the Plan in an amount up to, but not exceeding in the aggregate for Fiscal Year 2007, $5,000,000; and (l) other non-Cash charges for such period (excluding any such non-Cash charge to the extent that it represents an accrual or reserve for potential Cash payment in any future period or amortization of a prepaid Cash payment that was made in a prior period), minus (ii) to the extent included in determining such Consolidated Net Income, non-Cash gains for such period (excluding any such non-Cash gain to

10

the extent it represents the reversal of an accrual or reserve for potential Cash gain in any prior period).

          “Consolidated Capital Expenditures” means, for any period, the aggregate of all expenditures of Holdings and its Subsidiaries during such period determined on a consolidated basis that, in accordance with GAAP, are or should be included in “purchase of property and equipment” or similar items reflected in the consolidated statement of cash flows of Holdings and its Subsidiaries, but excluding, however, any such expenditures made in connection with a Permitted Acquisition permitted hereunder.

          “Consolidated Cash Interest Expense” means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Holdings and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Holdings and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and net costs under Interest Rate Agreements, but excluding, however, any amount not payable in Cash and any amounts referred to in Section 2.11(f) payable on or before the Closing Date.

          “Consolidated Current Assets” means, as at any date of determination, the total assets of Holdings and its Subsidiaries on a consolidated basis that may properly be classified as current assets in conformity with GAAP, excluding Cash and Cash Equivalents.

          “Consolidated Current Liabilities” means, as at any date of determination, the total liabilities of Holdings and its Subsidiaries on a consolidated basis that may properly be classified as current liabilities in conformity with GAAP, excluding the current portion of long term debt.

          “Consolidated Excess Cash Flow” means, for any Fiscal Year, an amount (if positive) equal to: (i) the sum, without duplication, of (a) Consolidated Adjusted EBITDA for such Fiscal Year; plus (b) the Consolidated Working Capital Adjustment for such Fiscal Year; minus (ii) the sum, without duplication, of (a) scheduled repayments of Indebtedness for borrowed money (including the implied principal component of scheduled payments made on Capital Leases, but excluding repayments of Revolving Loans or Swing Line Loans except to the extent the Revolving Commitments are permanently reduced in connection with such repayments) paid in Cash during such Fiscal Year; (b) Consolidated Capital Expenditures for such Fiscal Year (net of any proceeds of (x) any related financings with respect to such expenditures, (y) any sales of assets used to finance such expenditures and (z) any Spent Committed Capital Expenditures deducted in the calculation of Consolidated Excess Cash Flow for the preceding Fiscal Year); (c) Consolidated Cash Interest Expense for such Fiscal Year; (d) with respect to Fiscal Year 2007, any amounts referred to in Section 2.11(f) paid on or before the Closing Date; (e) consolidated income, single business, franchise, unitary or gross receipt tax expense payable in cash with respect to such Fiscal Year; (f) management fees and expenses paid during such Fiscal Year pursuant to the Management Agreement to the extent permitted hereunder; (g) with respect to Fiscal Year 2007, Transaction Costs paid in Cash during such Fiscal Year; (h) with respect to Fiscal Year 2007, costs and expenses resulting from administrative expenses with respect to the Cases which are for professional fees and expenses and are paid in Cash during such Fiscal Year; (i) amounts paid in cash during such Fiscal Year as

11

cure payments or similar costs in connection with assumptions of executory contracts assumed during the Cases or as part of the Plan; (j) fees, charges and expenses related to any events or transactions that are paid in Cash during such Fiscal Year and are unusual in nature and infrequent in occurrence, in that it is unrelated to, or only incidentally related to, the current ordinary and typical activities of Borrowers and would not reasonably be expected to recur in a normal operating cycle in an amount up to, but not exceeding, in the aggregate for any periods occurring during any Fiscal Year $1,000,000 and, $3,000,000 in the aggregate from the Closing Date to the date of determination; (k) with respect to Fiscal Year 2007, non-recurring costs and expenses paid in Cash during such Fiscal Year arising from or recognized in connection with the consummation and effectiveness of the Plan; and (l) the amount of Spent Committed Capital Expenditures paid in Cash within ninety days after the end of such Fiscal Year.

          “Consolidated Interest Expense” means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Holdings and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Holdings and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and net costs under Interest Rate Agreements, but excluding, however, any amounts referred to in Section 2.11(f) payable on or before the Closing Date.

          “Consolidated Net Income” means, for any period, (i) the net income (or loss) of Holdings and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP, minus (ii) (a) the income (or loss) of any Person (other than a Subsidiary of Holdings) in which any other Person (other than Holdings or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Holdings or any of its Subsidiaries by such Person during such period, (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Holdings or is merged into or consolidated with Holdings or any of its Subsidiaries or that Person’s assets are acquired by Holdings or any of its Subsidiaries, (c) the income of any Subsidiary of Holdings to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (d) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (e) (to the extent not included in clauses (a) through (d) above) any net extraordinary gains or net extraordinary losses.

          “Consolidated Total Debt” means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Holdings and its Subsidiaries determined on a consolidated basis in accordance with GAAP.

          “Consolidated Working Capital” means, as at any date of determination, the excess of Consolidated Current Assets over Consolidated Current Liabilities.

          “Consolidated Working Capital Adjustment” means, for any period on a consolidated basis, the amount (which may be a negative number) by which Consolidated

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Working Capital as of the beginning of such period exceeds (or is less than) Consolidated Working Capital as of the end of such period.

          “Contractual Obligation” means, as applied to any Person, any provision of any Security issued by that Person or of any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

          “Contributing Guarantors” as defined in Section 7.2.

          “Controlled Foreign Corporation” shall mean a “controlled foreign corporation” as defined in the Internal Revenue Code.

          “Controlled Investment Affiliate” means any Affiliate of Sponsor which is organized primarily for making equity or debt investments in Holdings or other similar portfolio companies.

          “Conversion/Continuation Date” means the effective date of a continuation or conversion, as the case may be, as set forth in the applicable Conversion/Continuation Notice.

          “Conversion/Continuation Notice” means a Conversion/Continuation Notice substantially in the form of Exhibit A-2.

          “Counterpart Agreement” means a Counterpart Agreement substantially in the form of Exhibit H delivered by a Credit Party pursuant to Section 5.10.

          “Credit Date” means the date of a Credit Extension.

          “Credit Document” means any of this Agreement, the Notes, if any, the Collateral Documents, any documents executed by the Administrative Agent in connection with or relating to the LC Deposit Account, any documents or certificates executed by Borrowers in favor of Issuing Bank relating to Letters of Credit, and all other documents, instruments or agreements executed and delivered by a Credit Party for the benefit of any Agent, Issuing Bank or any Lender in connection herewith.

          “Credit Extension” means the making of a Loan, the issuing of a Letter of Credit or the making of an LC Deposit.

          “Credit Facilities” means the credit facilities provided by the Lenders and Issuing Bank pursuant to this Agreement.

          “Credit Party” means each Borrower and each Guarantor.

          “Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement, each of which is for the purpose of hedging the foreign currency risk associated with Holdings’ and its Subsidiaries’ operations and not for speculative purposes.

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          “Debtors” means Holdings, Systems, and certain Subsidiaries named as debtors in the Plan, each as debtor in the Cases under Chapter 11 of the Bankruptcy Code.

          “Default” means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.

          “Default Excess” means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender’s Pro Rata Share of the aggregate outstanding principal amount of Loans of all Lenders (calculated as if all Defaulting Lenders (including such Defaulting Lender) had funded all of their respective Defaulted Loans) over the aggregate outstanding principal amount of all Loans of such Defaulting Lender.

          “Default Period” means, with respect to any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates: (i) the date on which all Commitments are cancelled or terminated and/or the Obligations are declared or become immediately due and payable, (ii) the date on which (a) the Default Excess with respect to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of any Defaulted Loans of such Defaulting Lender or by the non-pro rata application of any voluntary or mandatory prepayments of the Loans in accordance with the terms of Section 2.13 or Section 2.14 or by a combination thereof) and (b) such Defaulting Lender shall have delivered to Borrowers and Administrative Agent a written reaffirmation of its intention to honor its obligations hereunder with respect to its Commitments, and (iii) the date on which Borrowers, Administrative Agent and Requisite Lenders waive all Funding Defaults of such Defaulting Lender in writing.

          “Defaulted Loan” as defined in Section 2.22.

          “Defaulting Lender” as defined in Section 2.22.

          “Deposit Account” means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit.

          “DIP Order” means the Interim DIP Order or the Final DIP Order, as applicable.

          “Disclosure Statement” means the written disclosure statement that relates to the Plan, as approved by the Bankruptcy Court pursuant to Section 1125 of the Bankruptcy Code and Rule 3017 of the Federal Rules of Bankruptcy Procedure, as such disclosure statement may be amended, modified or supplemented from time to time in accordance with applicable law.

          “Disqualified Equity Interests” means any Equity Interest which, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (i) matures or is mandatorily redeemable (other than solely for Equity Interests which are not otherwise Disqualified Equity Interests), pursuant to a sinking fund obligation or otherwise, (ii) is redeemable at the option of the holder thereof (other than solely for Equity Interests which are not otherwise Disqualified Equity Interests), in whole or in part, (iii) provides for the scheduled payments or dividends in cash, or (iv) is or becomes convertible into or exchangeable for Indebtedness or any other Equity

14

Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 91 days after the Maturity Date.

          “Dollars” and the sign “$” mean the lawful money of the United States of America.

          “Domestic Subsidiary” means any Subsidiary organized under the laws of the United States of America, any State thereof or the District of Columbia.

          “Eligible Assignee” means (i) any Lender, any Affiliate of any Lender and any Related Fund (any two or more Related Funds being treated as a single Eligible Assignee for all purposes hereof), and (ii) any commercial bank, insurance company, investment or mutual fund or other entity that is an “accredited investor” (as defined in Regulation D under the Securities Act) and which extends credit or buys loans; provided, no Affiliate of Holdings or Sponsor shall be an Eligible Assignee.

          “Employee Benefit Plan” means, in respect of any Credit Party other than a Canadian Credit Party, any “employee benefit plan” as defined in Section 3(3) of ERISA which is or was sponsored, maintained or contributed to by, or required to be contributed by, Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates, and in respect of any Canadian Credit Party, any employee benefit plan of any nature or kind that is not a Pension Plan or Multiemployer Plan and is maintained by or contributed to, or required to be maintained by or contributed to, by such Canadian Credit Party.

          “Environmental Claim” means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.

          “Environmental Laws” means any and all current or future foreign or domestic, federal, state or provincial (or any subdivision of either of them), statutes, ordinances, standards, decrees, orders-in-council, orders, rules, regulations, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage, transportation or disposal of Hazardous Materials; or (iii) occupational safety and health, industrial hygiene, land use (as it relates to Hazardous Materials) or the protection of human, plant or animal health or welfare (as it relates to Hazardous Materials) or of the environment or natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata), in any manner applicable to Holdings or any of its Subsidiaries or any Facility.

          “Equity Interests” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including partnership interests and

15

membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.

          “ERISA Affiliate” means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of Holdings or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of Holdings or any such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Holdings or such Subsidiary and with respect to liabilities arising after such period for which Holdings or such Subsidiary could be liable under the Internal Revenue Code or ERISA.

          “ERISA Event” means, only to the extent such event would not be discharged by the consummation of the Plan on the Plan Effective Date, (i) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability to Holdings, any of its Subsidiaries or any of their respective Affiliates pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefore, or the receipt by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on Holdings,

16

any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.

          “Eurodollar Rate Loan” means a Loan bearing interest at a rate determined by reference to the Adjusted Eurodollar Rate.

          “Event of Default” means each of the conditions or events set forth in Section 8.1.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

          “Executive Officer” means, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executive officer, president (or the equivalent thereof), such Person’s chief financial officer or treasurer and (except for purposes of Sections 5.2 and 6.8) such Person’s vice president of human resources and risk management.

          “Existing DIP Administrative Agent” means General Electric Capital Corporation, in its capacity as administrative agent under the Existing DIP Credit Agreement.

          “Existing DIP Credit Agreement” has the meaning specified in the recitals to this Agreement.

          “Existing DIP Credit Agreement Reserve Amount” means an amount equal to the “Reserve” under and as defined in the letter agreement, dated as of March ___, 2007, by and among each of the Debtors, General Electric Capital Corporation and Morgan Stanley Senior Funding, Inc.

          “Existing Indebtedness” means all Indebtedness and other Obligations (as defined therein) outstanding under the Existing DIP Credit Agreement and other documents related thereto.

          “Exit Facilities” means the Credit Facilities after the Exit Facilities Conversion Date.

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          “Exit Facilities Conversion Date” means the first date on which a Plan becomes effective, the Exit Facilities Option has been exercised and each of the conditions to exercising the Exit Facilities Option set forth in Section 3.4 has been satisfied or waived.

          “Exit Facilities Option” as defined in Section 3.3.

          “Facility” means any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by Holdings or any of its Subsidiaries or any of their respective predecessors or Affiliates.

          “Fair Share” as defined in Section 7.2.

          “Fair Share Contribution Amount” as defined in Section 7.2.

          “Federal Funds Effective Rate” means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, (i) if such day is not a Business Day, the Federal Funds Effective Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Effective Rate for such day shall be the average rate charged to Administrative Agent, in its capacity as a Lender, on such day on such transactions as determined by Administrative Agent.

          “Final DIP Order” means an order (in form and substance substantially similar to the Interim DIP Order and otherwise satisfactory to Syndication Agent and Administrative Agent) of the Bankruptcy Court pursuant to Section 364 of the Bankruptcy Code approving this Agreement and the other Credit Documents that (a) has not been modified or amended without the consent of Administrative Agent and Syndication Agent, or vacated, reversed, revoked, rescinded, stayed or appealed from, except as Administrative Agent and Syndication Agent may otherwise specifically consent, (b) with respect to which the time to appeal, petition for certiorari, application or motion for reversal, rehearing, reargument, stay, or modification has expired, (c) no petition, application or motion for reversal, rehearing, reargument, stay or modification thereof or for a writ of certiorari with respect thereto has been filed or granted or the order or judgment of the Bankruptcy Court has been affirmed by the highest court to which the order or judgment was appealed and (d) is no longer subject to any or further appeal or petition, application or motion for reversal, rehearing, reargument, stay or modification thereof or for any writ of certiorari with respect thereto or further judicial review in any form.

          “Financial Officer Certification” means, with respect to the financial statements for which such certification is required, the certification of the chief financial officer of Holdings that such financial statements fairly present, in all material respects, the financial condition of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments.

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          “Financial Plan” as defined in Section 5.1(i).

          “First Priority” means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that such Lien is the only Lien to which such Collateral is subject, other than any Permitted Lien.

          “Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

          “Fiscal Year” means the fiscal year of Holdings and its Subsidiaries ending on December 31 of each calendar year.

          “Flood Hazard Property” means any Real Estate Asset subject to a mortgage in favor of Collateral Agent, for the benefit of the Secured Parties, and located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards.

          “Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

          “Funding Default” as defined in Section 2.22.

          “Funding Guarantors” as defined in Section 7.2.

          “Funding Notice” means a notice substantially in the form of Exhibit A-1.

          “GAAP” means, subject to the limitations on the application thereof set forth in Section 1.2, United States generally accepted accounting principles in effect as of the date of determination thereof.

          “Governmental Acts” means any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority.

          “Governmental Authority” means any federal, state, provincial, municipal, national or other government, governmental department, commission, board, bureau, court, tribunal, agency or instrumentality or political subdivision thereof or any entity, officer or examiner exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government.

          “Governmental Authorization” means any permit, license, authorization, plan, directive, consent order or consent decree of or from any Governmental Authority.

          “Grantor” as defined in the Pledge and Security Agreement.

          “GSCP” as defined in the preamble.

          “Guaranteed Obligations” as defined in Section 7.1.

          “Guarantor” means each Domestic Subsidiary of either Borrower and (except as provided in Section 7.12) each Canadian Subsidiary of either Borrower, excluding in each case, any Inactive Subsidiary.

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          “Guarantor Subsidiary” means each Guarantor.

          “Guaranty” means the guaranty of each Guarantor set forth in Section 7.

          “Hazardous Materials” means any chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment.

          “Haul Insurance” means, collectively, (a) Haul Insurance Limited, a Cayman Islands corporation, and (b) any other captive insurance company hereafter formed by Holdings.

          “Hazardous Materials Activity” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.

          “Hedge Agreement” means an Interest Rate Agreement, a Currency Agreement or a Commodity Agreement entered into with a Lender Counterparty and reasonably satisfactory to Administrative Agent.

          “Highest Lawful Rate” means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow.

          “Historical Financial Statements” means as of the Closing Date, (i) the audited financial statements of Holdings and its Subsidiaries, for the Fiscal Years ended December 31, 2003, December 31, 2004 and December 31, 2005, consisting of balance sheets and the related consolidated statements of income, stockholders’ equity and cash flows for such Fiscal Years, (ii) the unaudited financial statements of Holdings and its Subsidiaries as at the most recent Fiscal Quarter ending 45 days or more prior to the Closing Date, consisting of a balance sheet and the related consolidated statements of income, stockholders’ equity and cash flows for the twelve month period, ending on such date, and (ii) the unaudited financial statements of Holdings and its Subsidiaries as at the most recent calendar month ending 45 days or more prior to the Closing Date, consisting of a balance sheet and the related consolidated statements of income, stockholders’ equity and cash flows for such month and, in the case of clauses (i), (ii) and (iii), certified by the chief financial officer of Holdings that they fairly present, in all material respects, the financial condition of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments.

          “Holdings” as defined in the preamble hereto.

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          “Inactive Subsidiary” means any Subsidiary of Holdings that has (i) no assets other than de minimus assets not exceeding $250,000, (ii) no revenues and (iii) no income.

          “Increased-Cost Lenders” as defined in Section 2.23.

          “Indebtedness”, as applied to any Person, means, without duplication, (i) all indebtedness for borrowed money; (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (iii) notes payable and bankers acceptances; (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person (other than a Lien on leased property (real or personal) granted by the landlord or lessor thereof) regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; (vi) the face amount of any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (vii) Disqualified Equity Interests, (viii) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation which would be Indebtedness of another; (ix) any obligation which would be Indebtedness of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; (x) any liability of such Person for an obligation which would be Indebtedness of another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (x), the primary purpose or intent thereof is as described in clause (ix) above; and (xi) all obligations which would be Indebtedness of such Person in respect of any exchange traded or over the counter derivative transaction, including any Hedge Agreement, whether entered into for hedging or speculative purposes; provided, in no event shall obligations under any Hedge Agreement be deemed “Indebtedness” for any purpose under Section 6.7.

          “Indemnified Liabilities” means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, claims (including Environmental Claims), actions, judgments, suits, costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding or hearing commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including

21

securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Credit Documents or the transactions contemplated hereby or thereby (including the Lenders’ agreement to make Credit Extensions or Issuing Bank’s agreement to issue Letters of Credit or the use or intended use of the proceeds thereof, or any enforcement of any of the Credit Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty)); (ii) the statements contained in the commitment letter delivered by any Lender to Borrowers with respect to the transactions contemplated by this Agreement; or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Holdings or any of its Subsidiaries.

          “Indemnitee” as defined in Section 10.3.

          “Interim DIP Order” means an order (in substantially the form of Exhibit M and otherwise in form and substance satisfactory to Syndication Agent and Administrative Agent) of the Bankruptcy Court pursuant to Section 364 of the Bankruptcy Code entered after an interim hearing approving this Agreement and the other Credit Documents, as to which no stay has been entered and which has not been reversed, vacated or overturned, and from which no appeal or motion to reconsider has been timely filed, or if timely filed, such appeal or motion to reconsider has been dismissed or denied unless Syndication Agent and Administrative Agent waive such requirement, and which has not been amended, supplemented or otherwise modified in any respect adverse to the Lenders without the prior written consent of Syndication Agent and Administrative Agent.

          “Initial Mortgaged Property” as defined in Section 3.4(b).

          “Installment” as defined in Section 2.12.

          “Intellectual Property” as defined in the Pledge and Security Agreement or the Canadian Pledge and Security Agreement, as applicable.

          “Intellectual Property Asset” means, at the time of determination, any interest (fee, license or otherwise) then owned by any Credit Party in any Intellectual Property.

          “Intellectual Property Security Agreements” has the meaning assigned to that term in the Pledge and Security Agreement or the Canadian Pledge and Security Agreement, as applicable.

          “Intercompany Note” means a promissory note substantially in the form of Exhibit L evidencing Indebtedness owed among the Credit Parties and their Subsidiaries.

          “Interest Coverage Ratio” means the ratio as of the last day of any Fiscal Quarter of (i) Consolidated Adjusted EBITDA for the four Fiscal Quarter period then ended to (ii) Consolidated Interest Expense for such four Fiscal Quarter period; provided that for any calculation of the Interest Coverage Ratio prior to April 1, 2008, Consolidated Interest Expense shall be (x) Consolidated Interest Expense for the period from April 1, 2007 through the end of

22

the Fiscal Quarter for which the Interest Coverage Ratio is being calculated divided by (y) the number of months included in the calculation made under clause (x) and multiplied by (z) twelve (12); provided further that for purposes of this definition, Consolidated Interest Expense shall exclude any upfront fees and ancillary costs incurred in connection with the transactions contemplated hereunder and any amortization thereof and any amortization or write down of fees relating to the financings being refinanced as part of the transactions contemplated hereunder.

          “Interest Payment Date” means with respect to (i) any Loan that is a Base Rate Loan, each January 31, April 30, July 31 and October 31 of each year, commencing on the first such date to occur after the Closing Date and the final maturity date of such Loan; and (ii) any Loan that is a Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided, in the case of each Interest Period of longer than three months “Interest Payment Date” shall also include each date that is three months, or an integral multiple thereof, after the commencement of such Interest Period.

          “Interest Period” means, in connection with a Eurodollar Rate Loan, an interest period of one-, two-, three- or six-months, as selected by Borrowers in the applicable Funding Notice or Conversion/Continuation Notice, (i) initially, commencing on the Credit Date or Conversion/Continuation Date thereof, as the case may be; and (ii) thereafter, commencing on the day on which the immediately preceding Interest Period expires; provided, (a) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day unless no further Business Day occurs in such month, in which case such Interest Period shall expire on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clauses (c) and (d), of this definition, end on the last Business Day of a calendar month; (c) no Interest Period with respect to any portion of the Term Loans shall extend beyond the Maturity Date; and (d) no Interest Period with respect to any portion of the Revolving Loans shall extend beyond the Revolving Commitment Termination Date.

          “Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement, each of which is for the purpose of hedging the interest rate exposure associated with Holdings’ and its Subsidiaries’ operations and not for speculative purposes.

          “Interest Rate Determination Date” means, with respect to any Interest Period, the date that is two Business Days prior to the first day of such Interest Period.

          “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.

          “Investment” means (i) any direct or indirect purchase or other acquisition by Holdings or any of its Subsidiaries of, or of a beneficial interest in, any of the Securities of any other Person (other than a Guarantor Subsidiary); (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Holdings from any Person (other than Holdings or any Guarantor Subsidiary), of any Equity Interests of such Person; and (iii) any direct or indirect loan, advance (other than advances to employees for

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moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contributions by Holdings or any of its Subsidiaries to any other Person (other than Holdings or any Guarantor Subsidiary), including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment.

          “Issuance Notice” means an Issuance Notice substantially in the form of Exhibit A-3.

          “Issuing Bank” means JPMorgan Chase Bank N.A. or a bank or other legally authorized Person selected by or acceptable to Administrative Agent in its sole discretion and guaranteed by Administrative Agent.

          “Joint Venture” means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided, in no event shall any corporate Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party.

          “Landlord Consent and Estoppel” means, with respect to any Leasehold Property, a letter, certificate or other instrument in writing from the lessor under the related lease, pursuant to which, among other things, the landlord consents to the granting of a Mortgage on such Leasehold Property by the Credit Party tenant, such Landlord Consent and Estoppel to be in form and substance acceptable to Collateral Agent in its reasonable discretion, but in any event sufficient for Collateral Agent to obtain a Title Policy with respect to such Mortgage.

          “Landlord Personal Property Collateral Access Agreement” means a Landlord Waiver and Consent Agreement substantially in the form of Exhibit K with such amendments or modifications as may be approved by Collateral Agent.

          “LC Commitment” means the commitment of a Lender to make LC Deposits hereunder and “LC Commitments” means such commitments of all Lenders. The amount of each Lender’s LC Commitment, if any, is set forth on Appendix A-3 or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the LC Commitments as of the Closing Date is $50,000,000.

          “LC Commitment Period” means the period from the Closing Date to but excluding the LC Commitment Termination Date.

          “LC Commitment Termination Date” means the earliest to occur of (i) April 13, 2007, if the initial Term Loans are not made on or before that date, (ii) September 30, 2007, which date shall at the option of Holdings and upon satisfaction of the conditions set forth in Section 3.4, be deemed extended to the fifth anniversary of the Exit Facilities Conversion Date, (iii) the date the LC Commitments are permanently reduced to zero pursuant to Section 2.13(b), and (iv) the date of the termination of the LC Commitments pursuant to Section 8.1.

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          “LC Deposit” means, with respect to each LC Lender, the amount of such LC Lender’s LC Commitment that such LC Lender shall deposit in such LC Lender’s Sub-Account with Administrative Agent on or after the Closing Date, and that amount shall in turn be deposited by Administrative Agent in the LC Deposit Account, as such amount may be (a) reduced or reinstated from time to time as a result of withdrawals from the LC Deposit Account debited by Administrative Agent from and payments to the LC Deposit Account credited by Administrative Agent to the Sub-Account of such LC Lender pursuant to Section 2.4, and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.6 and, “LC Deposits” mean such deposits of all LC Lenders.

          “LC Deposit Account” as defined in Section 2.4(i).

          “LC Deposit Return” shall mean the amount earned and received by the Administrative Agent from time to time on the investment of the amounts held in the LC Deposit Account in accordance with Section 2.4(m).

          “LC Depositary Bank” shall mean the Issuing Bank or such other commercial bank or its affiliates organized under the laws of the United States, or any state thereof or the District of Columbia that (a) is at least “adequately capitalized” (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000.

          “LC Disbursement” means a payment made by Issuing Bank pursuant to a Letter of Credit.

          “LC Exposure” means, with respect to any Lender, as of any date of determination, such Lender’s Pro Rata Share of the aggregate LC Deposits and LC Usage (other than the portion of such LC Usage represented by amounts available for drawing, but not yet drawn, under Letters of Credit).

          “LC Lender” means a Lender having an interest in the LC Deposit Account or an LC Commitment.

          “LC Usage” means, as of any date of determination, the sum of (i) the maximum aggregate amount which is, or at any time thereafter may become, available for drawing under all Letters of Credit then outstanding, and (ii) the aggregate amount of all LC Disbursements not theretofore reimbursed by or on behalf of Borrowers.

          “Leasehold Property” means any leasehold interest of any Credit Party as lessee under any lease of real property, other than any such leasehold interest designated from time to time by Collateral Agent in its sole discretion as not being required to be included in the Collateral.

          “Lender” means each financial institution listed on the signature pages hereto as a Lender, and any other Person that becomes a party hereto pursuant to an Assignment Agreement.

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          “Lender Counterparty” means each Lender or any Affiliate of a Lender counterparty to a Hedge Agreement (including any Person who is a Lender (and any Affiliate thereof) as of the Closing Date but subsequently, whether before or after entering into a Hedge Agreement, ceases to be a Lender and any Person who enters into a Hedge Agreement in connection with the transactions contemplated by the Credit Documents prior to the Closing Date and is a Lender as of the Closing Date), including each such Affiliate that enters into a joinder agreement with Collateral Agent.

          “Letter of Credit” means a commercial or standby letter of credit issued or to be issued by Issuing Bank pursuant to this Agreement.

          “Leverage Ratio” means the ratio as of the last day of any Fiscal Quarter of (i) Consolidated Total Debt as of such day to (ii) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period ending on such date.

          “Lien” means (i) any lien, mortgage, pledge, assignment, security interest, hypothec, deemed trust, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease or license in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of Securities, any purchase option, call or similar right of a third party with respect to such Securities.

          “Loan” means a Term Loan and a Revolving Loan.

          “Management Agreement” means any management agreement entered into on or after the Exit Facilities Conversion Date between the Sponsor or any of its Controlled Investment Affiliates and Holdings reasonably acceptable to Administrative Agent.

          “Margin Stock” as defined in Regulation U of the Board of Governors as in effect from time to time.

          “Material Adverse Effect” means (i) a material adverse effect on and/or material adverse developments with respect to the business, operations, properties, assets or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole; (ii) a material impairment of the ability of Credit Parties to fully and timely perform their Obligations; (iii) a material adverse effect on and/or material adverse developments with respect to the legality, validity, binding effect or enforceability against a Credit Party of a Credit Document to which it is a party; or (iv) a material impairment of the rights, remedies and benefits available to, or conferred upon, any Agent and any Lender or any Secured Party under any Credit Document.

          “Material Contract” means (i) any contract or other arrangement between Holdings or any of its Subsidiaries and their customers that represented 10% or more of the Consolidated Net Income of Holdings and its Subsidiaries for the most recently ended Fiscal Year and (ii) any collective bargaining agreement to which Holdings or any of its Subsidiaries is a party.

          “Material Real Estate Asset” means (i) any fee-owned Real Estate Asset having a fair market value in excess of $1,500,000 as of the date of the acquisition thereof and (ii) all

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Leasehold Properties other than those with respect to which the aggregate payments under the term of the lease are less than $500,000 per annum.

          “Maturity Date” means the earlier of (i) September 30, 2007, which date shall at the option of Holdings and upon satisfaction or waiver of the conditions set forth in Section 3.4, be deemed extended to the fifth anniversary of the Exit Facilities Conversion Date, (ii) the Plan Effective Date, if the conditions set forth in Section 3.4 have not been satisfied or waived on or prior to such date and (iii) the date that all Loans shall become due and payable in full hereunder, whether by acceleration or otherwise.

          “Moody’s” means Moody’s Investor Services, Inc.

          “Mortgage” means a Mortgage substantially in the form of Exhibit J, as it may be amended, supplemented or otherwise modified from time to time or applicable Quebec Security.

          “Multiemployer Plan” means in respect of any Credit Party other than a Canadian Credit Party, any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA and in respect of any Canadian Credit Party, any “multiemployer pension plan” as defined in subsection 1(1) of the Pension Benefits Act (Ontario) or section 2 of the Pensions Benefits Standard Act, 1985 (Canada).

          “NAIC” means The National Association of Insurance Commissioners, and any successor thereto.

          “Narrative Report” means, with respect to the financial statements for which such narrative report is required, a narrative report describing the operations of Holdings and its Subsidiaries in the form prepared for presentation to senior management thereof for the applicable Fiscal Quarter or Fiscal Year and for the period from the beginning of the then current Fiscal Year to the end of such period to which such financial statements relate.

          “Net Asset Sale Proceeds” means, with respect to any Asset Sale, an amount equal to: (i) Cash payments (including any Cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received by Holdings or any of its Subsidiaries from such Asset Sale, minus (ii) any bona fide direct costs incurred in connection with such Asset Sale, including (a) income or gains taxes payable by the seller as a result of any gain recognized in connection with such Asset Sale, (b) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale and (c) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller’s indemnities and representations and warranties to purchaser in respect of such Asset Sale undertaken by Holdings or any of its Subsidiaries in connection with such Asset Sale.

          “Net Cash Proceeds” means, (i) with respect to any Asset Sale, the Net Asset Sale Proceeds and (ii) with respect to any Recovery Event, the Net Insurance/Condemnation Proceeds.

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          “Net Insurance/Condemnation Proceeds” means, with respect to any Recovery Event, an amount equal to: (i) any Cash payments or proceeds received by Holdings or any of its Subsidiaries in connection with a Recovery Event, minus (ii) (a) any actual and reasonable costs incurred by Holdings or any of its Subsidiaries in connection with the adjustment or settlement of any claims of Holdings or such Subsidiary in respect of such Recovery Event, and (b) any bona fide direct costs incurred in connection with any sale of such assets as referred to in clause (ii) of the definition of Recovery Event, including income taxes payable as a result of any gain recognized in connection therewith.

          “Nonpublic Information” means information which has not been disseminated in a manner making it available to investors generally, within the meaning of Regulation FD.

          “Non-US Lender” as defined in Section 2.20(c).

          “Note” means a Term Loan Note, a Revolving Loan Note or a Swing Line Note.

          “Notice” means a Funding Notice, an Issuance Notice, or a Conversion/ Continuation Notice.

          “Obligations” means all obligations of every nature of each Credit Party, including obligations from time to time owed to the Agents (including former Agents), the Lenders or any of them and Lender Counterparties, under any Credit Document or Hedge Agreement with any Credit Party, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Credit Party, would have accrued on any Obligation, whether or not a claim is allowed against such Credit Party for such interest in the related bankruptcy proceeding), reimbursement of amounts drawn under Letters of Credit, payments for early termination of Hedge Agreements, fees, expenses, indemnification or otherwise.

          “Obligee Guarantor” as defined in Section 7.7.

          “Organizational Documents” means (i) with respect to any corporation, its certificate or articles of incorporation, amalgamation or organization, as amended, and its by-laws, as amended, (ii) with respect to any limited partnership, its certificate or declaration of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, (iv) with respect to any limited liability company, its articles of organization, as amended, and its operating agreement, as amended, and (v) with respect to an unlimited liability company, its memorandum and articles of association. In the event any term or condition of this Agreement or any other Credit Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such “Organizational Document” shall only be to a document of a type customarily certified by such governmental official.

          “PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

          “Pension Plan” means, in respect of any Credit Party other than any Canadian Credit Party, any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to

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Section 412 of the Internal Revenue Code or Section 302 of ERISA and in respect of any Canadian Credit Party, each pension, supplementary pension, retirement savings or other retirement income plan or arrangement of any kind, registered or non-registered, established, maintained or contributed to by such Canadian Credit Party for its employees or former employees, but does not include a Multiemployer Plan or the Canada Pension Plan or the Quebec Pension Plan that is maintained by the Government of Canada or the Province of Quebec, respectively.

          “Permitted Acquisition” means any acquisition by Holdings or any of its wholly-owned Subsidiaries after the Exit Facilities Conversion Date, whether by purchase, merger or otherwise, of all or substantially all of the assets of, all of the Equity Interests of, or a business line or unit or a division of, any Person; provided,

(i)	immediately prior to, and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom;
(ii)	all transactions in connection therewith shall be consummated, in all material respects, in accordance with all applicable laws and in conformity, in all material respects, with all applicable Governmental Authorizations;
(iii)	in the case of the acquisition of Equity Interests, all of the Equity Interests (except for any such Securities in the nature of directors’ qualifying shares required pursuant to applicable law) acquired or otherwise issued by such Person or any newly formed Subsidiary of Holdings in connection with such acquisition shall be directly or indirectly owned 100% by Holdings or a Guarantor Subsidiary thereof, and Holdings shall have taken, or caused to be taken, as of the date such Person becomes a Subsidiary of Holdings, each of the actions set forth in Sections 5.10 and/or 5.11, as applicable;
(iv)	the Interest Coverage Ratio on a pro forma basis after giving effect to such acquisition as of the last day of the Fiscal Quarter most recently ended for which financial statements have been delivered pursuant to Section 5.1(b) or (c) (as determined in accordance with Section 6.7(e)) shall be no less than the correlative ratio indicated:

Fiscal	Interest Coverage
Quarter Ending	Ratio
June 30, 2007	1.75:1.00
September 30, 2007	2.00:1.00
December 31, 2007	2.25:1.00
March 31, 2008	2.25:1.00
June 30, 2008	2.75:1.00
September 30, 2008	3.00:1.00

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Fiscal	Interest Coverage
Quarter Ending	Ratio
December 31, 2008	3.50:1.00
March 31, 2009	3.50:1.00
June 30, 2009	3.50:1.00
September 30, 2009	3.50:1.00
December 31, 2009	3.50:1.00
March 31, 2010	3.50:1.00
June 30, 2010	3.50:1.00
September 30, 2010	3.50:1.00
December 31, 2010	3.50:1.00
Thereafter	3.75:1.00

(v)      the Leverage Ratio on a pro forma basis after giving effect to such acquisition as of the last day of the Fiscal Quarter most recently ended for which financial statements have been delivered pursuant to Section 5.1(b) or (c) (as determined in accordance with Section 6.7(e)) shall be no greater than the correlative ratio indicated:

Fiscal
Quarter Ending	Leverage Ratio
June 30, 2007	6.25:1.00
September 30, 2007	5.25:1.00
December 31, 2007	4.75:1.00
March 31, 2008	4.25:1.00
June 30, 2008	3.25:1.00
September 30, 2008	3.00:1.00
December 31, 2008	2.50:1.00
March 31, 2009	2.50:1.00
June 30, 2009	2.50:1.00
September 30, 2009	2.50:1.00
December 31, 2009	2.50:1.00
March 31, 2010	2.50:1.00
June 30, 2010	2.50:1.00
September 30, 2010	2.50:1.00
December 31, 2010	2.50:1.00
Thereafter	2.25:1.00

(vi)      Holdings and its Subsidiaries shall be in compliance with the financial covenants set forth in Section 6.7 on a pro forma basis after giving effect to such acquisition as of the last day of the Fiscal Quarter most recently

30

	ended for which financial statements have been delivered pursuant to Section 5.1(b) or (c) (as determined in accordance with Section 6.7(e));
(vii)	for any proposed acquisition in excess of $5,000,000, Holdings shall have delivered to Administrative Agent (A) at least 10 Business Days prior to such proposed acquisition, (i) a Compliance Certificate evidencing compliance with Section 6.7 as required under clause (vi) above and (ii) all other relevant financial information with respect to such acquired assets, including the aggregate consideration for such acquisition and any other information required to demonstrate compliance with Section 6.7 and (B) promptly upon request by Administrative Agent, (i) a copy of the purchase agreement related to the proposed Permitted Acquisition (and any related documents reasonably requested by Administrative Agent) and (ii) quarterly and annual financial statements of the Person whose Equity Interests or assets are being acquired for the twelve month (12) month period immediately prior to such proposed Permitted Acquisition, including any audited financial statements that are available;
(viii)	any Person or assets or division as acquired in accordance herewith (y) shall be in same business or lines of business in which Holdings and/or its Subsidiaries are engaged as of the Closing Date and (z) shall have generated positive free cash flow (excluding capital expenditures) for the four quarter period most recently ended prior to the date of such acquisition;
(ix)	an Authorized Officer of Holdings shall certify that Holdings reasonably believes that, after giving effect to the Permitted Acquisition, Holdings and its Subsidiaries shall remain in compliance with Section 6.7(c);
(x)	during the 30 day period prior to the date of such proposed acquisition, the excess of (x) the aggregate Revolving Commitments over (y) the Total Utilization of the Revolving Commitments shall be no less than $20,000,000 for at least 5 consecutive Business Days at any time during such period; and
(xi)	the aggregate unused portion of the Revolving Commitments at such time (after giving effect to the consummation of the respective Permitted Acquisition and any financing thereof) shall equal or exceed $20,000,000.

          “Permitted Liens” means each of the Liens permitted pursuant to Section 6.2.

          “Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, unlimited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.

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          “Petition Date” has the meaning specified in the recitals to this Agreement.

          “Plan” means the Chapter 11 plan of reorganization with respect to the Debtors confirmed by the Bankruptcy Court.

          “Plan Effective Date” means the Effective Date as defined in the Plan.

          “Planned Asset Sales” means the Asset Sales identified on Schedule 6.8(a).

          “Platform” as defined in Section 5.1(p).

          “Pledge and Security Agreement” means the Pledge and Security Agreement to be executed by Borrowers and each Guarantor substantially in the form of Exhibit I, as it may be amended, supplemented or otherwise modified from time to time.

          “Prepetition Indebtedness” means all Indebtedness of any of Borrowers and their Subsidiaries outstanding on the Petition Date immediately prior to the filing of the Cases.

          “Prime Rate” means the rate of interest quoted in The Wall Street Journal, Money Rates Section as the Prime Rate (currently defined as the base rate on corporate loans posted by at least 75% of the nation’s thirty (30) largest banks), as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Agent or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.

          “Principal Office” means, for each of Administrative Agent, Swing Line Lender and Issuing Bank, such Person’s “Principal Office” as set forth on Appendix B, or such other office or office of a third party or sub-agent, as appropriate, as such Person may from time to time designate in writing to Borrowers, Administrative Agent and each Lender.

          “Projections” as defined in Section 4.8.

          “Pro Rata Share” means (i) with respect to all payments, computations and other matters relating to the Term Loan of any Lender, the percentage obtained by dividing (a) the Term Loan Exposure of that Lender by (b) the aggregate Term Loan Exposure of all Lenders; (ii) with respect to all payments, computations and other matters relating to the participations in Letters of Credit, the LC Deposits or the LC Disbursements, the percentage obtained by dividing (a) the LC Exposure of such Lender by (b) the aggregate LC Exposure of all Lenders; (iii) with respect to all payments, computations and other matters relating to the Revolving Commitment or Revolving Loans of any Lender or participations in Swing Line Loans purchased therein by any Lender the percentage obtained by dividing (a) the Revolving Exposure of such Lender by (b) the aggregate Revolving Exposure of all Lenders. For all other purposes with respect to each Lender, “Pro Rata Share” means the percentage obtained by dividing (A) an amount equal to the sum of the Term Loan Exposure, the LC Exposure and the Revolving Exposure of that Lender, by (B) an amount equal to the sum of the aggregate Term Loan Exposure, the aggregate LC Exposure and the aggregate Revolving Exposure of all Lenders.

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          “Public Information” means information which has been disseminated in a manner making it available to investors generally, within the meaning of Regulation FD.

          “Qualified Public Offering” shall mean an underwritten public offering of common stock of Holdings to the extent that net proceeds received by Holdings are contributed to the equity capital of Holdings pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act that results in at least $50,000,000 of net cash proceeds to Holdings and results in the listing of the common stock of Holdings on a national securities exchange or the NASDAQ National Market quotation system.

          “Quebec Security” means one or more demand debentures, pledges of debenture and deeds of hypothec, as may be required by Collateral Agent in order to grant a First Priority Lien in favor of Collateral Agent for the benefit of the Secured Parties in property or assets in which any Canadian Credit Party may have an interest and which is located in the Province of Quebec, in each case, in form and substance satisfactory to Collateral Agent and as may be amended, supplemented or otherwise modified from time to time.

          “Real Estate Asset” means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by any Credit Party in any real property.

          “Record Document” means, with respect to any Leasehold Property, (i) the lease evidencing such Leasehold Property or a memorandum thereof, executed and acknowledged by the owner of the affected real property, as lessor, or (ii) if such Leasehold Property was acquired or subleased from the holder of a Recorded Leasehold Interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Collateral Agent.

          “Recorded Leasehold Interest” means a Leasehold Property with respect to which a Record Document has been recorded in all places necessary or desirable, in Collateral Agent’s reasonable judgment, to give constructive notice of such Leasehold Property to third-party purchasers and encumbrancers of the affected real property.

          “Recovery Event” means (i) any settlement of or payment in respect of any property or casualty insurance claim in respect of a covered loss thereunder or (ii) as a result of the taking of any assets of Holdings or any of its Subsidiaries by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking.

          “Refunded Swing Line Loans” as defined in Section 2.3(b)(iv).

          “Register” as defined in Section 2.7(b).

          “Regulation D” means Regulation D of the Board of Governors, as in effect from time to time.

          “Regulation FD” means Regulation FD as promulgated by the US Securities and Exchange Commission under the Securities Act and Exchange Act as in effect from time to time.

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          “Reimbursement Date” as defined in Section 2.4(d).

          “Reinvestment Deferred Amount” means, with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by Holdings or its Subsidiaries in connection therewith that are not applied pursuant to Section 2.15(b) as a result of the delivery of a Reinvestment Notice.

          “Reinvestment Event” means any Asset Sale or Recovery Event in respect of which Holdings has delivered a Reinvestment Notice.

          “Reinvestment Notice” means a written notice executed by an Authorized Officer (i) stating that Holdings (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery Event to repair or replace the assets which were the subject of such Asset Sale or Recovery Event or to acquire or improve Useful Assets and (ii) certifying that no Default or Event of Default shall have occurred and be continuing at such time.

          “Reinvestment Prepayment Amount” means, with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to repair or replace the assets which were the subject of the relevant Asset Sale or Recovery Event or to acquire or improve Useful Assets.

          “Reinvestment Prepayment Date” means, with respect to any Reinvestment Event, the earlier of (i) the date occurring 270 days after such Reinvestment Event or if Holdings or its Subsidiaries enter into a legally binding commitment to reinvest the relevant Reinvestment Deferred Amount within 270 days after such Reinvestment Event, the date occurring 450 days after such Reinvestment Event and (ii) the date on which Holdings or its Subsidiaries shall have determined not to use all or any portion of the relevant Reinvestment Deferred Amount to repair or replace the assets which were the subject of the relevant Asset Sale or Recovery Event or to acquire or improve Useful Assets, but in the case of this clause (ii) only with respect to the portion of the applicable Reinvestment Deferred Amount as to which such determination has been made.

          “Related Fund” means, with respect to any Lender that is an investment fund, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

          “Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the air, soil, surface water or groundwater.

          “Replacement Lender” as defined in Section 2.23.

          “Requisite Lenders” means one or more Lenders having or holding Term Loan Exposure, LC Exposure and/or Revolving Exposure and representing more than 50% of the sum

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of (i) the aggregate Term Loan Exposure of all Lenders, (ii) the aggregate LC Exposure of all Lenders and (iii) the aggregate Revolving Exposure of all Lenders.

          “Restricted Junior Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Holdings now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Holdings now or hereafter outstanding; (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Holdings now or hereafter outstanding; (iv) management or similar fees payable to Sponsor or any of its Affiliates and (v) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to any Indebtedness which is subordinated in right of payment to the Obligations (other than the conversion of any of such Indebtedness to common Equity Interests of Holdings).

          “Revolving Commitment” means the commitment of a Lender to make or otherwise fund any Revolving Loan and to acquire participations in Swing Line Loans hereunder and “Revolving Commitments” means such commitments of all Lenders in the aggregate. The amount of each Lender’s Revolving Commitment, if any, is set forth on Appendix A-2 or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Revolving Commitments as of the Closing Date is $35,000,000.

          “Revolving Commitment Period” means the period from the Closing Date to but excluding the Revolving Commitment Termination Date.

          “Revolving Commitment Termination Date” means the earliest to occur of (i) April 13, 2007, if the initial Term Loans are not made on or before that date; (ii) September 30, 2007, which date shall at the option of Holdings and upon satisfaction of the conditions set forth in Section 3.4, be deemed extended to the fifth anniversary of the Exit Facilities Conversion Date, (iii) the date the Revolving Commitments are permanently reduced to zero pursuant to Section 2.13(b), and (iv) the date of the termination of the Revolving Commitments pursuant to Section 8.1.

          “Revolving Exposure” means, with respect to any Lender as of any date of determination, (i) prior to the termination of the Revolving Commitments, that Lender’s Revolving Commitment; and (ii) after the termination of the Revolving Commitments, the sum of (a) the aggregate outstanding principal amount of the Revolving Loans of that Lender, (b) in the case of Swing Line Lender, the aggregate outstanding principal amount of all Swing Line Loans (net of any participations therein by other Lenders), and (c) the aggregate amount of all participations therein by that Lender in any outstanding Swing Line Loans.

          “Revolving Loan” means a loan made by a Lender to Borrowers pursuant to Section 2.2(a).

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          “Revolving Loan Note” means a promissory note in the form of Exhibit B-2, as it may be amended, supplemented or otherwise modified from time to time.

          “S&P” means Standard & Poor’s Ratings Group, a division of The McGraw Hill Corporation.

          “Secured Parties” has the meaning assigned to that term in the Pledge and Security Agreement and the Canadian Pledge and Security Agreement, as applicable.

          “Securities” means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

          “Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute.

          “Solvency Certificate” means a Solvency Certificate of the chief financial officer of Holdings substantially in the form of Exhibit G-2.

          “Solvent” means, with respect to the Credit Parties, that as of the date of determination, both (i) (a) the sum of such Credit Parties’ debt (including contingent liabilities) does not exceed the present fair saleable value of the Credit Parties’ present assets; (b) the Credit Parties’ capital is not unreasonably small in relation to their business; and (c) the Credit Parties have not incurred and do not intend to incur, or believe (nor should they reasonably believe) that they will incur, debts beyond their ability to pay such debts as they become due (whether at maturity or otherwise); and (ii) the Credit Parties are “solvent” within the meaning given that term and similar terms under the Bankruptcy Code and applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).

          “Spent Committed Capital Expenditures” as defined in Section 6.7(d).

          “Sponsor” means, collectively, Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP.

          “Sub-Account” as defined in Section 2.4(i).

          “Subject Transaction” as defined in Section 6.7(e).

          “Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, unlimited liability company, association, joint venture or other

36

business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided, in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a “qualifying share” of the former Person shall be deemed to be outstanding.

          “Swing Line Lender” means CIT in its capacity as Swing Line Lender hereunder, together with its permitted successors and assigns in such capacity.

          “Swing Line Loan” means a Loan made by Swing Line Lender to Borrowers pursuant to Section 2.3.

          “Swing Line Note” means a promissory note in the form of Exhibit B-3, as it may be amended, supplemented or otherwise modified from time to time.

          “Swing Line Sublimit” means the lesser of (i) $10,000,000 and (ii) the aggregate unused amount of Revolving Commitments then in effect.

          “Syndication Agent” as defined in the preamble hereto.

          “Systems” as defined in the preamble hereto.

          “Tax” means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided, “Tax on the overall net income” of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person’s applicable principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office).

          “Term Loan” means a loan made by a Lender to Borrowers pursuant to Section 2.1(a).

          “Term Loan Commitment” means the commitment of a Lender to make or otherwise fund any Term Loan and “Term Loan Commitments” means such commitments of all Lenders in the aggregate. The amount of each Lender’s Term Loan Commitment, if any, is set forth on Appendix A-1 or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Term Loan Commitments as of the Closing Date is $230,000,000.

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          “Term Loan Commitment Period” means the period from the Closing Date to but excluding the Term Loan Commitment Termination Date.

          “Term Loan Commitment Termination Date” means the earliest to occur of (i) April 13, 2007, if the initial Term Loans are not made on or before that date; (ii) September 30, 2007, which date shall at the option of Holdings and upon satisfaction of the conditions set forth in Section 3.4, be deemed extended to March 30, 2008, (iii) the date the Term Loan Commitments are permanently reduced to zero pursuant to Section 2.13(b), and (iv) the date of the termination of the Term Loan Commitments pursuant to Section 8.1.

          “Term Loan Exposure” means, with respect to any Lender, as of any date of determination, the outstanding principal amount of the Term Loans of such Lender plus during the Term Loan Commitment Period, the unfunded Term Loan Commitment of such Lender; provided, at any time prior to the making of the initial Term Loans, the Term Loan Exposure of any Lender shall be equal to such Lender’s Term Loan Commitment.

          “Term Loan Funding Period” means the period from the Closing Date to and including the 6th month anniversary of the Closing Date and, upon satisfaction of the conditions set forth in Section 3.4, be deemed extended to the one year anniversary of the Closing Date.

          “Term Loan Note” means a promissory note in the form of Exhibit B-1, as it may be amended, supplemented or otherwise modified from time to time.

          “Terminated Lender” as defined in Section 2.23.

          “Title Policy” as defined in Section 3.1(b)(v).

          “Total Utilization of Revolving Commitments” means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans (other than Revolving Loans made for the purpose of repaying any Refunded Swing Line Loans, but not yet so applied) and (ii) the aggregate principal amount of all outstanding Swing Line Loans.

          “Transaction Costs” means the fees, costs and expenses payable by Borrowers, or any of Subsidiaries of Borrowers on or before the Closing Date in connection with the transactions contemplated by the Credit Documents.

          “Type of Loan” means (i) with respect to either Term Loans or Revolving Loans, a Base Rate Loan or a Eurodollar Rate Loan, and (ii) with respect to Swing Line Loans, a Base Rate Loan.

          “UCC” means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.

          “U.S. Lender” as defined in Section 2.20(c).

          “Useful Assets” means, in the case of an Asset Sale, assets useful in the business of Holdings and its Subsidiaries and, in the case of a Recovery Event, long term or otherwise

38

non-current productive assets of the general type used in the business of Holdings and its Subsidiaries.

     1.2. Accounting Terms. (a) Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Holdings to Lenders pursuant to Section 5.1(a), 5.1(b) and 5.1(c) shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in Section 5.1(f), if applicable). Subject to the foregoing, calculations in connection with the definitions, covenants and other provisions hereof shall utilize accounting principles and policies in conformity with those used to prepare the Historical Financial Statements.

     (b) If at any time the adoption of fresh-start accounting would affect the computation of any financial ratio or requirement set forth in this Agreement and either Borrowers or the Requisite Lenders shall so request, Administrative Agent and Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such adoption of fresh-start accounting (subject to the approval of the Requisite Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP, as applicable, prior to such change therein and (ii) Borrowers shall provide the reconciliation statements required by
Section 5.1(f).

     1.3. Interpretation, etc. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. References herein to any Section, Appendix, Schedule or Exhibit shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case may be, hereof unless otherwise specifically provided. The use herein of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. The terms lease and license shall include sub-lease and sub-license, as applicable.

SECTION 2. LOANS AND LETTERS OF CREDIT

     2.1. Term Loans.

          (a) Loan Commitments. Subject to the terms and conditions hereof, during the Term Commitment Period, each Lender severally agrees to make Term Loans to Borrowers in an aggregate amount up to but not exceeding such Lender’s Term Loan Commitment; provided that the amount of Term Loans made on the Closing Date shall be no less than $200,000,000 and; provided further, that after giving effect to the making of any Term Loans in no event shall the amount of Term Loans made hereunder exceed the Term Loan Commitments then in effect. Any amount borrowed under this Section 2.1(a) and subsequently repaid or

39

prepaid may not be reborrowed. Subject to Sections 2.13(a) and 2.14, all amounts owed hereunder with respect to the Term Loans shall be paid in full no later than the Maturity Date.

               (b) Borrowing Mechanics for Term Loans.

               (i) Term Loans shall be made in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount.

               (ii) Whenever any Borrower desires that Lenders make a Term Loan, such Borrower shall deliver to Administrative Agent a fully executed and delivered Funding Notice no later than 11:00 a.m. (New York City time) at least three Business Days in advance of the proposed Credit Date in the case of a Eurodollar Rate Loan, and at least one Business Day in advance of the proposed Credit Date in the case of a Revolving Loan that is a Base Rate Loan. Except as otherwise provided herein, a Funding Notice for a Term Loan that is a Eurodollar Rate Loan shall be irrevocable on and after the related Interest Rate Determination Date, and the applicable Borrower shall be bound to make a borrowing in accordance therewith.

               (iii) Notice of receipt of each Funding Notice in respect of Term Loans, together with the amount of each Lender’s Pro Rata Share thereof, if any, together with the applicable interest rate, shall be provided by Administrative Agent to each applicable Lender by telefacsimile with reasonable promptness, but (provided Administrative Agent shall have received such notice by 11:00 a.m. (New York City time)) not later than 2:00 p.m. (New York City time) on the same day as Administrative Agent’s receipt of such Notice from such Borrower.

               (iv) Each Lender shall make its Term Loan available to Administrative Agent not later than 1:00 p.m. (New York City time) on the applicable Credit Date, by wire transfer of same day funds in Dollars, at the Principal Office designated by Administrative Agent. Upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of the Term Loans available to Borrowers on the applicable Credit Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Term Loans received by Administrative Agent from Lenders to be credited to the account of Borrowers at the Principal Office designated by Administrative Agent or to such other account as may be designated in writing to Administrative Agent by Borrowers.

               (v) Notwithstanding anything to the contrary herein, Borrowers may only request the Lenders to make Term Loans on up to three occasions (including the Closing Date) during the Term Loan Funding Period.

               (vi) Unless the Term Loan Commitments have been reduced in accordance with Section 2.13(b) or terminated in accordance with Section 8.1, on the last day of the Term Loan Funding Period, Borrowers shall be deemed to have made a funding request for a final Term Loan in an aggregate amount equal to the excess of (A) the Term Loan Commitments and (B) the aggregate principal amount of Term Loans previously made by the Lenders hereunder. The Credit Date for such final Term Loan

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shall be three Business Days after the last day of the Term Loan Funding Period. Administrative Agent shall deliver notice to each Lender with a Term Loan Commitment of such request in accordance with paragraph (ii) above.

     2.2. Revolving Loans.

               (a) Revolving Commitments. During the Revolving Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make Revolving Loans to Borrowers in an aggregate amount up to but not exceeding such Lender’s Revolving Commitment; provided, that after giving effect to the making of any Revolving Loans in no event shall the Total Utilization of Revolving Commitments exceed the Revolving Commitments then in effect. Amounts borrowed pursuant to this Section 2.2(a) may be repaid and reborrowed during the Revolving Commitment Period. Each Lender’s Revolving Commitment shall expire on the Revolving Commitment Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and the Revolving Commitments shall be paid in full no later than such date.

               (b) Borrowing Mechanics for Revolving Loans.

               (i) Except pursuant to 2.4(d), Revolving Loans that are Base Rate Loans shall be made in an aggregate minimum amount of $1,000,000 and integral multiples of $250,000 in excess of that amount, and Revolving Loans that are Eurodollar Rate Loans shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $250,000 in excess of that amount.

               (ii) Whenever any Borrower desires that Lenders make Revolving Loans, such Borrower shall deliver to Administrative Agent a fully executed and delivered Funding Notice no later than 11:00 a.m. (New York City time) at least three Business Days in advance of the proposed Credit Date in the case of a Eurodollar Rate Loan, and at least one Business Day in advance of the proposed Credit Date in the case of a Revolving Loan that is a Base Rate Loan. Except as otherwise provided herein, a Funding Notice for a Revolving Loan that is a Eurodollar Rate Loan shall be irrevocable on and after the related Interest Rate Determination Date, and the applicable Borrower shall be bound to make a borrowing in accordance therewith.

               (iii) Notice of receipt of each Funding Notice in respect of Revolving Loans, together with the amount of each Lender’s Pro Rata Share thereof, if any, together with the applicable interest rate, shall be provided by Administrative Agent to each applicable Lender by telefacsimile with reasonable promptness, but (provided Administrative Agent shall have received such notice by 11:00 a.m. (New York City time)) not later than 2:00 p.m. (New York City time) on the same day as Administrative Agent’s receipt of such Notice from such Borrower.

               (iv) Each Lender shall make the amount of its Revolving Loan available to Administrative Agent not later than 1:00 p.m. (New York City time) on the applicable Credit Date by wire transfer of same day funds in Dollars, at the Principal Office designated by Administrative Agent. Except as provided herein, upon satisfaction

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or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of such Revolving Loans available to Borrowers on the applicable Credit Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Revolving Loans received by Administrative Agent from Lenders to be credited to the account of Borrowers at the Principal Office designated by Administrative Agent or such other account as may be designated in writing to Administrative Agent by Borrowers.

     2.3. Swing Line Loans.

               (a) Swing Line Loans Commitments. During the Revolving Commitment Period, subject to the terms and conditions hereof, Swing Line Lender hereby agrees to make Swing Line Loans to Borrowers in the aggregate amount up to but not exceeding the Swing Line Sublimit; provided, that after giving effect to the making of any Swing Line Loan, in no event shall the Total Utilization of Revolving Commitments exceed the Revolving Commitments then in effect. Amounts borrowed pursuant to this Section 2.3 may be repaid and reborrowed during the Revolving Commitment Period. Swing Line Lender’s Revolving Commitment shall expire on the Revolving Commitment Termination Date and all Swing Line Loans and all other amounts owed hereunder with respect to the Swing Line Loans and the Revolving Commitments shall be paid in full no later than such date.

               (b) Borrowing Mechanics for Swing Line Loans.

               (i) Swing Line Loans shall be made in an aggregate minimum amount of $100,000 and integral multiples of $50,000 in excess of that amount.

               (ii) Whenever any Borrower desires that Swing Line Lender make a Swing Line Loan, such Borrower shall deliver to Administrative Agent a Funding Notice no later than 12:00 p.m. (New York City time) on the proposed Credit Date.

               (iii) Swing Line Lender shall make the amount of its Swing Line Loan available to Administrative Agent not later than 2:00 p.m.(New York City time) on the applicable Credit Date by wire transfer of same day funds in Dollars, at Administrative Agent’s Principal Office. Except as provided herein, upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of such Swing Line Loans available to the applicable Borrower on the applicable Credit Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Swing Line Loans received by Administrative Agent from Swing Line Lender to be credited to the account of Borrowers at Administrative Agent’s Principal Office, or to such other account as may be designated in writing to Administrative Agent by Borrowers.

               (iv) With respect to any Swing Line Loans which have not been voluntarily prepaid by Borrowers pursuant to Section 2.13, Swing Line Lender may at any time in its sole and absolute discretion, deliver to Administrative Agent (with a copy to Borrowers), no later than 11:00 a.m. (New York City time) at least one Business Day in advance of the proposed Credit Date, a notice (which shall be deemed to be a Funding Notice given by Borrowers, but Borrowers shall not be deemed to have made any

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representations and warranties in connection with such deemed Funding Notice) requesting that each Lender holding a Revolving Commitment make Revolving Loans that are Base Rate Loans to Borrowers on such Credit Date in an amount equal to the amount of such Swing Line Loans (the “Refunded Swing Line Loans”) outstanding on the date such notice is given which Swing Line Lender requests Lenders to prepay. Anything contained in this Agreement to the contrary notwithstanding, (1) the proceeds of such Revolving Loans made by the Lenders other than Swing Line Lender shall be immediately delivered by Administrative Agent to Swing Line Lender (and not to Borrowers) and applied to repay a corresponding portion of the Refunded Swing Line Loans and (2) on the day such Revolving Loans are made, Swing Line Lender’s Pro Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by Swing Line Lender to Borrowers, and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans and shall no longer be due under the Swing Line Note of Swing Line Lender but shall instead constitute part of Swing Line Lender’s outstanding Revolving Loans to Borrowers and shall be due under the Revolving Loan Note issued by Borrowers to Swing Line Lender. Borrowers hereby authorize Administrative Agent and Swing Line Lender to charge Borrowers’ accounts with Administrative Agent and Swing Line Lender (up to the amount available in each such account) in order to immediately pay Swing Line Lender the amount of the Refunded Swing Line Loans to the extent the proceeds of such Revolving Loans made by Lenders, including the Revolving Loans deemed to be made by Swing Line Lender, are not sufficient to repay in full the Refunded Swing Line Loans. If any portion of any such amount paid (or deemed to be paid) to Swing Line Lender should be recovered by or on behalf of Borrowers from Swing Line Lender in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders in the manner contemplated by Section 2.17.

               (v) If for any reason Revolving Loans are not made pursuant to Section 2.3(b)(iv) in an amount sufficient to repay any amounts owed to Swing Line Lender in respect of any outstanding Swing Line Loans on or before the third Business Day after demand for payment thereof by Swing Line Lender, each Lender holding a Revolving Commitment shall be deemed to, and hereby agrees to, have purchased a participation in such outstanding Swing Line Loans, and in an amount equal to its Pro Rata Share of the applicable unpaid amount together with accrued interest thereon. Upon one Business Day’s notice from Swing Line Lender, each Lender holding a Revolving Commitment shall deliver to Swing Line Lender an amount equal to its respective participation in the applicable unpaid amount in same day funds at the Principal Office of Swing Line Lender. In order to evidence such participation each Lender holding a Revolving Commitment agrees to enter into a participation agreement at the request of Swing Line Lender in form and substance reasonably satisfactory to Swing Line Lender. In the event any Lender holding a Revolving Commitment fails to make available to Swing Line Lender the amount of such Lender’s participation as provided in this paragraph, Swing Line Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon for three Business Days at the rate customarily used by Swing Line Lender for the correction of errors among banks and thereafter at the Base Rate, as applicable.

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               (vi) Notwithstanding anything contained herein to the contrary, (1) each Lender’s obligation to make Revolving Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to the second preceding paragraph and each Lender’s obligation to purchase a participation in any unpaid Swing Line Loans pursuant to the immediately preceding paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Swing Line Lender, any Credit Party or any other Person for any reason whatsoever; (B) the occurrence or continuation of a Default or Event of Default; (C) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Credit Party; (D) any breach of this Agreement or any other Credit Document by any party thereto; or (E) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that such obligations of each Lender are subject to the condition that Swing Line Lender believed in good faith that all conditions under Section 3.2 to the making of the applicable Refunded Swing Line Loans or other unpaid Swing Line Loans, were satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line Loans were made, or the satisfaction of any such condition not satisfied had been waived by the Requisite Lenders prior to or at the time such Refunded Swing Line Loans or other unpaid Swing Line Loans were made; and (2) Swing Line Lender shall not be obligated to make any Swing Line Loans (A) if it has elected not to do so after the occurrence and during the continuation of a Default or Event of Default or (B) at a time when a Funding Default exists unless Swing Line Lender has entered into arrangements satisfactory to it and Borrowers to eliminate Swing Line Lender’s risk with respect to the Defaulting Lender’s participation in such Swing Ling Loan, including by cash collateralizing such Defaulting Lender’s Pro Rata Share of the outstanding Swing Line Loans.

     2.4. Issuance of Letters of Credit and Purchase of Participations Therein

          (a) Letters of Credit. During the LC Commitment Period, subject to the terms and conditions hereof, Administrative Agent agrees to cause the Issuing Bank to issue Letters of Credit for the account of Borrowers in the aggregate amount up to but not exceeding the aggregate LC Commitments; provided, (i) each Letter of Credit shall be denominated in Dollars; (ii) the stated amount of each Letter of Credit shall not be less than $100,000 or such lesser amount as is acceptable to Issuing Bank; (iii) after giving effect to such issuance, in no event shall the LC Usage exceed the amount in the LC Deposit Account; (iv) in no event shall any standby Letter of Credit have an expiration date later than the earlier of (1) after the Exit Facilities Conversion Date, the second Business Day prior to the LC Commitment Termination Date and (2) the date which is one year from the date of issuance of such standby Letter of Credit; and (v) in no event shall any commercial Letter of Credit (x) have an expiration date later than the earlier of (1) after the Exit Facilities Conversion Date, the second Business Day prior to the LC Commitment Termination Date and (2) the date which is 180 days from the date of issuance of such commercial Letter of Credit or (y) be issued if such commercial Letter of Credit is otherwise unacceptable to Issuing Bank in its reasonable discretion.

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          (b) Notice of Issuance. Whenever any Borrower desires the issuance, amendment, renewal or extension of a Letter of Credit, it shall deliver to Administrative Agent an Issuance Notice no later than 1:00 p.m. (New York City time) at least three Business Days (in the case of standby letters of credit) or five Business Days (in the case of commercial letters of credit), or in each case such shorter period as may be agreed to by Administrative Agent and Issuing Bank in any particular instance, in advance of the proposed date of issuance. Upon satisfaction or waiver of the conditions set forth in Section 3.2, Administrative Agent shall cause Issuing Bank to issue the requested Letter of Credit and such Letter of Credit shall be issued only in accordance with Issuing Bank’s standard operating procedures. Upon receiving notice of the issuance of any Letter of Credit or amendment or modification to a Letter of Credit, Administrative Agent shall promptly notify each LC Lender of such issuance, which notice shall be accompanied by a copy of such Letter of Credit or amendment or modification to a Letter of Credit and the amount of such Lender’s respective participation in such Letter of Credit pursuant to Section 2.4(e).

          (c) Responsibility of Issuing Bank With Respect to Requests for Drawings and Payments. In determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, Issuing Bank shall be responsible only to examine the documents delivered under such Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in accordance with the terms and conditions of such Letter of Credit. As between Borrowers, Administrative Agent and Issuing Bank, Borrowers assume all risks of the acts and omissions of, or misuse of the Letters of Credit issued by Issuing Bank, by the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, neither Administrative Agent nor Issuing Bank shall be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of Issuing Bank, including any Governmental Acts; none of the above shall affect or impair, or prevent the vesting of, any of Issuing Bank’s rights or powers hereunder. Without limiting the foregoing and in furtherance thereof, any action taken or omitted by Administrative Agent or Issuing Bank under or in connection with the Letters of Credit or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not give rise to any liability on the part of Administrative Agent or Issuing Bank to Borrowers. Notwithstanding anything to the contrary contained in this Section 2.4(c), Borrowers shall retain any and all rights they may have against Administrative Agent and Issuing Bank for any liability arising solely out of the gross negligence or willful misconduct of such respective Person.

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          (d) Reimbursement by Borrowers of Amounts Drawn or Paid Under Letters of Credit. Upon receiving notice that the Issuing Bank has determined to honor a drawing under a Letter of Credit, Administrative Agent shall immediately notify the applicable Borrower, and such Borrower shall reimburse such LC Disbursement by paying to Administrative Agent on or before the Business Day immediately following the date of notice to such Borrower of such LC Disbursement (the “Reimbursement Date”) an amount in Dollars and in same day funds equal to the amount of such LC Disbursement. Promptly following receipt by Administrative Agent of any payment from such Borrower pursuant to this paragraph in respect of any LC Disbursement, Administrative Agent shall distribute such payment to Issuing Bank or, to the extent payments have been made from the LC Deposit Account pursuant to paragraph (e) below, to the LC Deposit Account for allocation by Administrative Agent among the Sub-Accounts of the LC Lenders in accordance with their Pro Rata Shares. Without limiting in any way the foregoing and notwithstanding anything to the contrary contained herein or in any separate application for any Letter of Credit, each Borrower hereby acknowledges and agrees that it shall be obligated to reimburse Administrative Bank (on behalf of the Issuing Bank) upon each LC Disbursement, and it shall be deemed to be the obligor for purposes of each such Letter of Credit issued hereunder.

          (e) Lenders’ Purchase of Participations in Letters of Credit. (i) Immediately upon the issuance of each Letter of Credit, each LC Lender shall be deemed to have purchased, and hereby agrees to irrevocably purchase, from Administrative Agent a participation in all outstanding obligations incurred by Administrative Agent in connection with the issuance of Letters of Credit by Issuing Bank and any related LC Disbursement made by Issuing Bank thereunder in an amount equal to such Lender’s Pro Rata Share (with respect to the LC Commitments) of the maximum amount which is or at any time may become available to be drawn thereunder. In the event that any Borrower shall fail for any reason to reimburse Issuing Bank in respect of an LC Disbursement as provided in Section 2.4(d), Administrative Agent shall promptly notify each LC Lender of the unreimbursed amount of such LC Disbursement, and Administrative Agent shall pay to Issuing Bank, from the LC Deposit Account, for the account of each LC Lender, an amount equal to such LC Lender’s Pro Rata Share of such LC Disbursement, in Dollars and in same day funds, at the office of Issuing Bank specified in such notice, not later than 1:00 p.m. (New York City time) on the first business day (under the laws of the jurisdiction in which such office of Issuing Bank is located) after the date notified by Issuing Bank. In the event that the LC Deposit Account is charged by Administrative Agent to reimburse Issuing Bank pursuant to this Section 2.4(e), the applicable Borrower shall pay over to Administrative Agent in reimbursement of the applicable LC Disbursement an amount equal to the amount so charged, as provided in paragraph (d) above, and such payment shall be deposited by Administrative Agent in the LC Deposit Account. Each LC Lender irrevocably authorizes Administrative Agent to apply, or to permit the LC Depositary Bank to apply, amounts of its LC Deposit held in the LC Deposit Account as provided in this Section 2.4(e). Any payment made from the LC Deposit Account, pursuant to this paragraph to reimburse Issuing Bank for any LC Disbursement shall not constitute a Loan and shall not relieve any Borrower of its obligation to reimburse such LC Disbursement.

          (f) Obligations Absolute. The obligation of Borrowers to reimburse Issuing Bank for LC Disbursements made by it, the obligation of Borrowers to reimburse each LC Lender for any payments made to Issuing Bank from the LC Deposit Account to reimburse Issuing Bank for any LC Disbursement and the obligations of LC Lenders under Section 2.4(e)

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shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms hereof under all circumstances including any of the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which Borrowers or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), Issuing Bank, Lender or any other Person or, in the case of a Lender, against Borrowers, whether in connection herewith, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Borrowers or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); (iii) any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by Issuing Bank to the beneficiary or as otherwise required by law under any Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit; (v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Holdings or any of its Subsidiaries; (vi) any breach hereof or any other Credit Document by any party thereto; (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; (viii) the fact that an Event of Default or a Default shall have occurred and be continuing; or (ix) the return of the LC Deposits; provided, in each case, that payment by Issuing Bank under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of Issuing Bank under the circumstances in question.

          (g) Indemnification. Without duplication of any obligation of Borrowers under Section 10.2 or 10.3, in addition to amounts payable as provided herein, each Borrower hereby agrees to protect, indemnify, pay and save harmless Administrative Agent and Issuing Bank from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and reasonable allocated costs of internal counsel) which Administrative Agent or Issuing Bank may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by Issuing Bank, other than, with respect to the Issuing Bank only, as a result of (1) the gross negligence or willful misconduct of Issuing Bank or (2) the wrongful dishonor by Issuing Bank of a proper demand for payment made under any Letter of Credit issued by it, or (ii) the failure of Issuing Bank to honor a drawing under any such Letter of Credit as a result of any Governmental Act.

          (h) Issuing Bank Reports. Unless otherwise agreed by Administrative Agent, Administrative Agent shall cause Issuing Bank to report in writing to Administrative Agent (i) on or prior to each Business Day on which Issuing Bank issues, amends, renews or extends any Letter of Credit, the date of such issuance, amendment, renewal or extension, and the aggregate face amount of the Letters of Credit issued, amended, renewed or extended by it and outstanding after giving effect to such issuance, amendment, renewal or extension (and whether the amount thereof has changed), it being understood that Issuing Bank shall not affect the issuance, renewal, extension or amendment resulting in an increase in the amount of any Letter of Credit without first obtaining written confirmation from Administrative Agent that such increase is then permitted under this Agreement, (ii) on each Business Day on which Issuing Bank makes an LC Disbursement, the date and amount of such LC Disbursement, (iii) on any Business Day on which any Borrower fails to reimburse an LC Disbursement required to be reimbursed to Issuing

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Bank on such day, the date of such failure and the amount of such LC Disbursement and (iv) on any other Business Day, such other information as Administrative Agent shall reasonably request as to the Letters of Credit issued by Issuing Bank and outstanding on such Business Day.

          (i) Establishment of LC Deposit Account and Sub-Accounts. On or prior to the Closing Date, Administrative Agent shall establish a deposit account (the “LC Deposit Account”) of Administrative Agent at the LC Depositary Bank with the title “Allied Holdings 2007 Credit Agreement LC Deposit Account”. Administrative Agent shall maintain records enabling it to determine at any time the amount of the interest of each LC Lender in the LC Deposit Account (the interest of each LC Lender in the LC Deposit Account, as evidenced by such records, being referred to as such LC Lender’s “Sub-Account”). Administrative Agent shall establish such additional Sub-Accounts for assignee LC Lenders as shall be required pursuant to Section 10.6(g). No Person (including any LC Lender) shall have the right to make any withdrawal from the LC Deposit Account or to exercise any other right or power with respect thereto except as expressly provided in paragraph (l) below or in Section 10.6(g). Without limiting the generality of the foregoing, each party hereto acknowledges and agrees that the amounts on deposit in the LC Deposit Account are and will at all times be property of Administrative Agent acting for the benefit of the LC Lenders, and that no amount on deposit at any time in the LC Deposit Account shall be the property of any of the Credit Parties, constitute “Collateral” under the Credit Documents or otherwise be available in any manner to satisfy any Obligations of any of the Credit Parties under the Credit Documents. Each LC Lender agrees that its right, title and interest in and to the LC Deposit Account shall be limited to the right, acting through Administrative Agent, to require amounts in its Sub-Account to be applied as provided in paragraph (l) below and that it will have no right to require the return of its portion of the amounts in the LC Deposit Account other than as expressly provided in such paragraph (l) (each LC Lender hereby acknowledging (i) that its portion of the amounts in the LC Deposit Account constitutes payment for its participations in Letters of Credit issued or to be issued hereunder, (ii) that its portion of amounts in the LC Deposit Account and any investments made therewith shall secure its obligations to Administrative Agent hereunder in respect of Letters of Credit (each LC Lender hereby granting to Administrative Agent a security interest in such LC Lender’s portion of the amounts in the LC Deposit Account to secure such obligations) and (iii) that Administrative Agent shall cause the Issuing Bank to issue, amend, renew and extend Letters of Credit in reliance on the availability of such LC Lender’s portion of the amounts in the LC Deposit Account to discharge such LC Lender’s obligations in accordance with Section 2.4(e) in connection with any LC Disbursement thereunder). The funding of the LC Deposits, the establishment and funding of the LC Deposit Account and the agreements with respect thereto set forth in this Agreement constitute arrangements among Administrative Agent, Issuing Bank and the LC Lenders with respect to the funding obligations of the LC Lenders under this Agreement, and the amounts in the LC Deposit Account do not constitute a loan or extension of credit to any Credit Party. Except as otherwise set forth herein, no Credit Party shall have any responsibility or liability to the LC Lenders, the Agents or any other Person in respect of the establishment, maintenance, administration or misappropriation of the LC Deposit Account (or any Sub-Account) or with respect to the investment of amounts held therein, including pursuant to paragraph (n) below. Administrative Agent hereby waives (and shall use its commercially reasonable efforts to cause the LC Depositary Bank to waive) any right of setoff against the LC Deposit Account that it may have under applicable law or otherwise with respect to amounts owed to it by LC Lenders (it being agreed that such waiver shall not reduce the rights of

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Administrative Agent to apply or require the application of the amounts in the LC Deposit Account in accordance with the provisions of this Agreement).

               (j) Funding of LC Deposits.

               (i) Subject to the terms and conditions hereof, each LC Lender severally agrees to make a deposit in such LC Lender’s Sub-Account with Administrative Agent on the Closing Date in an aggregate amount up to but not exceeding such LC Lender’s LC Commitment.

               (ii) Each LC Lender shall make the amount of its LC Deposit available to Administrative Agent not later than 1:00 p.m. (New York City time) on the Closing Date by wire transfer of same day funds in Dollars, at the Principal Office designated by Administrative Agent. Except as provided herein, upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall deposit the proceeds of such LC Deposits into the LC Deposit Account.

               (iii) LC Deposits shall be available, on the terms and subject to the conditions set forth herein, for application pursuant to Section 2.4(e) to reimburse such LC Lender’s Pro Rata Share of LC Disbursements that are not reimbursed by Borrowers. The obligations of LC Lenders to make the deposits required by this Section 2.4(j) are several, and no LC Lender shall be responsible for any other LC Lender’s failure to make its deposit as so required.

               (k) LC Deposits in LC Deposit Account. The following amounts will be deposited in the LC Deposit Account at the following times:

               (i) Each LC Lender shall make such LC Lender’s LC Deposits available to Administrative Agent in accordance with Section 2.4(j). Thereafter, the LC Deposits shall be available, on the terms and subject to the conditions set forth herein, for application pursuant to Section 2.4(e) to reimburse Issuing Bank for such LC Lender’s Pro Rata Share of LC Disbursements that are not reimbursed by Borrowers.

               (ii) On any date prior to the LC Commitment Termination Date on which Administrative Agent or Issuing Bank receives any reimbursement payment from Borrowers in respect of an LC Disbursement with respect to which amounts were withdrawn from the LC Deposit Account to reimburse Issuing Bank, subject to subparagraph (iii) below, Administrative Agent shall deposit, or Issuing Bank shall transfer to Administrative Agent, which shall deposit, in the LC Deposit Account, and Administrative Agent shall credit to the Sub-Accounts of the LC Lenders, the portion of such reimbursement payment to be deposited therein, in accordance with Section 2.4(e).

               (iii) If at any time when any amount is required to be deposited in the LC Deposit Account under subparagraph (ii) above the sum of such amount and the amount held in the LC Deposit Account at such time would exceed the total LC Deposits, then such excess shall not be deposited in the LC Deposit Account and shall instead be paid to Administrative Agent, which shall pay to each LC Lender its Pro Rata Share of such excess.

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          (iv) Concurrently with the effectiveness of any assignment by any LC Lender of all or any portion of its LC Deposit, Administrative Agent shall transfer into the Sub-Account of the assignee the corresponding portion of the amount on deposit in the assignor’s Sub-Account in accordance with Section 10.6(g).

          (l) Withdrawals From and Closing of LC Deposit Account. Amounts on deposit in the LC Deposit Account shall be withdrawn and distributed (or transferred, in the case of subparagraph (iv) below) as follows:

          (i) On each date on which Issuing Bank is to be reimbursed by the LC Lenders pursuant to Section 2.4(e) for any LC Disbursement made by Issuing Bank, Administrative Agent shall withdraw from the LC Deposit Account the amount of such unreimbursed LC Disbursement (and Administrative Agent shall debit the Sub-Account of each LC Lender in the amount of such LC Lender’s Pro Rata Share of such unreimbursed LC Disbursement) and apply such amount to reimburse Issuing Bank for such LC Disbursement (if such Issuing Bank shall be the LC Depositary Bank) or transfer such amount to Administrative Agent, which shall apply the amount so transferred to reimburse Issuing Bank (if Issuing Bank shall not be the LC Depositary Bank), all in accordance with Section 2.4(e).

          (ii) Concurrently with each voluntary reduction of the total LC Commitments pursuant to and in accordance with Section 2.13 or 2.15, Administrative Agent shall withdraw from the LC Deposit Account and pay to each LC Lender such LC Lender’s Pro Rata Share of any amount by which the LC Deposits, after giving effect to such reduction of the total LC Commitments, would exceed the greater of the total LC Commitments and the total LC Usage (and the LC Depositary Bank agrees to pay over such amounts in the LC Deposit Account to Administrative Agent).

          (iii) Concurrently with any reduction of the total LC Commitments to zero pursuant to and in accordance with Section 2.13, 2.15 or Section 8, Administrative Agent shall withdraw from the LC Deposit Account and pay to each LC Lender such LC Lender’s Pro Rata Share of the excess at such time of the aggregate amount of the LC Deposits over the LC Usage (and the LC Depositary Bank agrees to pay over such amounts in the LC Deposit Account to Administrative Agent).

          (iv) Concurrently with the effectiveness of any assignment by any LC Lender of all or any portion of its LC Deposit, the corresponding portion of the assignor’s Sub-Account shall be transferred on the records of Administrative Agent from the assignor’s Sub-Account to the assignee’s Sub-Account in accordance with Section 10.6(g) and, if required by Section 10.6(g), Administrative Agent shall close such assignor’s Sub-Account.

          (v) Upon the reduction of each of the total LC Commitments and the LC Usage to zero, Administrative Agent shall withdraw from the LC Deposit Account and pay to each LC Lender the entire remaining amount of such LC Lender’s LC Deposit, and shall close the LC Deposit Account (and the LC Depositary Bank agrees to pay over such amounts in the LC Deposit Account to Administrative Agent).

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Each LC Lender irrevocably and unconditionally agrees that its LC Deposit may be applied or withdrawn from time to time as set forth in this paragraph (l).

          (m) Investment of Amounts in LC Deposit Account. Administrative Agent shall use its commercially reasonable efforts to invest, or cause to be invested, the amounts held from time to time in the LC Deposit Account so as to earn for the account of Administrative Agent, acting on behalf of each LC Lender, a return thereon for each day at a rate per annum equal to (i) the one month LIBOR rate as determined by Administrative Agent on such day (or if such day was not a Business Day, the first Business Day immediately preceding such day) based on rates for deposits in dollars (as set forth by Bloomberg L.P.-page BTMM or any other comparable publicly available service as may be selected by Administrative Agent) (the “Benchmark LIBOR Rate”) minus (ii) 0.15% per annum (based on a 365/366 day year). The Benchmark LIBOR Rate will be reset on the first Business Day of each month. The LC Deposit Return accrued through and including the first day of January, April, July and October of each year shall be paid by the LC Depositary Bank to Administrative Agent, for payment to each LC Lender, on the third Business Day following such last day, commencing on the first such date to occur after the Closing Date, and on the date on which each of the total LC Deposits and the LC Usage shall have been reduced to zero. Neither Administrative Agent nor any other Person guarantees any rate of return on the investment of amounts held in the LC Deposit Account and, for the avoidance of doubt, Administrative Agent shall not be limited to making investments that by their terms are expressly based upon or related to an underlying LIBOR rate.

          (n) Sufficiency of LC Deposits to Provide for Undrawn/ Unreimbursed Letters of Credit. Notwithstanding any other provision of this Agreement, including Sections 2.1 and 2.4, Administrative Agent shall not cause any Letter of Credit to be issued or increased as to its stated amount if, after giving effect to such issuance or increase, the aggregate amount of the LC Deposits would be less than the LC Usage.

          (o) Satisfaction of LC Lender Funding Obligations. Borrowers, Issuing Bank and Administrative Agent each acknowledge and agree that, notwithstanding any other provision contained in this Agreement, the deposits by Administrative Agent, on behalf of each LC Lender, in the LC Deposit Account on the Closing Date of funds equal to such LC Lender’s LC Commitment will fully discharge the obligation of such LC Lender to reimburse such LC Lender’s Pro Rata Share of LC Disbursements that are not reimbursed by Borrowers pursuant to Section 2.4(d), and that no other or further payments shall be required to be made by any LC Lender in respect of any such reimbursement obligations.

     2.5. Pro Rata Shares; Availability of Funds.

          (a) Pro Rata Shares. All Loans and LC Deposits shall be made, and all participations purchased, by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender’s obligation to make a Loan or LC Deposit requested hereunder or purchase a participation required hereby nor shall any Term Loan Commitment, LC Commitment or any Revolving Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender’s obligation to make a Loan requested hereunder or purchase a participation required hereby.

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          (b) Availability of Funds. Unless Administrative Agent shall have been notified by any Lender prior to the applicable Credit Date that such Lender does not intend to make available to Administrative Agent the amount of such Lender’s Loan or LC Deposit requested on such Credit Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Credit Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Borrowers a corresponding amount on such Credit Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Credit Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent’s demand therefor, (i) in the case of Loans, Administrative Agent shall promptly notify Borrowers and Borrowers shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Credit Date until the date such amount is paid to Administrative Agent, at the rate payable hereunder for the applicable Loans and (ii) in the case of LC Deposits, Administrative Agent may withdraw from the LC Deposit Account such corresponding amount together with interest thereon, for each day from such Credit Date until the date of such withdrawal by Administrative Agent, at the rate for LC Deposits provided in Section 2.4(m). Nothing in this Section 2.5(b) shall be deemed to relieve any Lender from its obligation to fulfill its LC Commitment, Term Loan Commitments and Revolving Commitments hereunder or to prejudice any rights that Borrowers may have against any Lender as a result of any default by such Lender hereunder.

     2.6. Use of Proceeds. The proceeds of the Term Loans made on the Closing Date shall be applied by Borrowers to (i) pay in full Existing Indebtedness and (ii) pay certain other fees and expenses relating to the credit facilities established hereunder. The proceeds of the Terms Loans, Revolving Loans, Swing Line Loans and Letters of Credit made after the Closing Date shall be applied by Borrowers for working capital and general corporate purposes of Holdings and its Subsidiaries. No portion of the proceeds of any Credit Extension shall be used in any manner that causes or might cause such Credit Extension or the application of such proceeds to violate Regulation T, Regulation U or Regulation X of the Board of Governors or any other regulation thereof or to violate the Exchange Act. Nothing herein shall in any way prejudice or prevent any Agent or the Lenders from objecting, for any reason, to any requests, motions, or applications made in the Bankruptcy Court, including any application of final allowances of compensation for services rendered or reimbursement of expenses incurred under Sections 105(a), 330 or 331 of the Bankruptcy Code, by any party in interest. Prior to the Exit Facilities Conversion Date, Holdings and its Subsidiaries shall not use the proceeds of the Loans or the Letters of Credit (i) for any purpose that is prohibited under the Bankruptcy Code or (ii) to commence or prosecute or join in any action against any Agent, Lender or Issuing Bank seeking (x) to avoid, subordinate or recharacterize the Obligations or any of the Collateral Agent’s Liens, (y) any monetary, injunctive or other affirmative relief against any Agent, Lender or Issuing Bank or their Collateral in connection with the Credit Documents, or (z) to prevent or restrict the exercise by any Agent, Lender or Issuing Bank of any of their respective rights or remedies under the Credit Documents.

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     2.7. Evidence of Debt; Register; Lenders’ Books and Records; Notes.

          (a) Lenders’ Evidence of Debt. Each Lender shall maintain on its internal records an account or accounts evidencing the Obligations of Borrowers to such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof. Any such recordation shall be conclusive and binding on Borrowers, absent manifest error; provided, that the failure to make any such recordation, or any error in such recordation, shall not affect any Lender’s Revolving Commitments or Borrowers’ Obligations in respect of any applicable Loans; and provided further, in the event of any inconsistency between the Register and any Lender’s records, the recordations in the Register shall govern.

          (b) Register. Administrative Agent (or its agent or sub-agent appointed by it) shall maintain at the Principal Office a register for the recordation of the names and addresses of Lenders, the Revolving Commitments and Loans of each Lender and the LC Commitments and LC Deposits of each Lender from time to time (the “Register”). The Register shall be available for inspection by Borrowers or any Lender (with respect to any entry relating to such Lender’s Loans or LC Deposits) at any reasonable time and from time to time upon reasonable prior notice. Administrative Agent shall record, or shall cause to be recorded, in the Register the Revolving Commitments and the Loans of each Lender and the LC Commitments and the LC Deposits of each Lender, each in accordance with the provisions of Section 10.6, and each repayment or prepayment in respect of the principal amount of the Loans and each withdrawal from LC Deposit Account, and any such recordation shall be conclusive and binding on Borrowers and each Lender, absent manifest error; provided, failure to make any such recordation, or any error in such recordation, shall not affect any Lender’s Revolving Commitments or LC Commitments or Borrowers’ Obligations in respect of any Loan or LC Deposit. Borrowers hereby designate CIT to serve as Borrowers’ agent solely for purposes of maintaining the Register as provided in this Section 2.7, and Borrowers hereby agree that, to the extent CIT serves in such capacity, CIT and its officers, directors, employees, agents, sub-agents and affiliates shall constitute “Indemnitees.”

          (c) Notes. If so requested by any Lender by written notice to Borrowers (with a copy to Administrative Agent) at least two Business Days prior to the Closing Date, or at any time thereafter, Borrowers shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to Section 10.6) on the Closing Date (or, if such notice is delivered after the Closing Date, promptly after Borrower’s receipt of such notice) a Note or Notes to evidence such Lender’s Term Loan, Revolving Loan or Swing Line Loan, as the case may be.

     2.8. Interest on Loans.

          (a) Except as otherwise set forth herein, each Loan shall bear interest on the unpaid principal amount thereof from the date made through repayment (whether by acceleration or otherwise) thereof as follows:

               (i) in the case of Term Loans and Revolving Loans:

               (1) if a Base Rate Loan, at the Base Rate plus 2.50%; or

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               (2) if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus 3.50% and

               (ii) in the case of Swing Line Loans, at the Base Rate plus 2.50%.

          (b) The basis for determining the rate of interest with respect to any Loan (except a Swing Line Loan which can be made and maintained as Base Rate Loans only), and the Interest Period with respect to any Eurodollar Rate Loan, shall be selected by Borrowers and notified to Administrative Agent and Lenders pursuant to the applicable Funding Notice or Conversion/Continuation Notice, as the case may be; provided, until the earlier of (x) the date 75 days following the Closing Date and (y) the date that Syndication Agent notifies Borrowers that the primary syndication of the Loans, LC Commitments, Term Loan Commitments and Revolving Commitments has been completed, as determined by Syndication Agent, the Term Loans shall be maintained as either (1) Eurodollar Rate Loans having an Interest Period of no longer than one month or (2) Base Rate Loans. If on any day a Loan is outstanding with respect to which a Funding Notice or Conversion/Continuation Notice has not been delivered to Administrative Agent in accordance with the terms hereof specifying the applicable basis for determining the rate of interest, then for that day such Loan shall be a Base Rate Loan.

          (c) In connection with Eurodollar Rate Loans there shall be no more than five (5) Interest Periods outstanding at any time. In the event Borrowers fail to specify between a Base Rate Loan or a Eurodollar Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, such Loan (if outstanding as a Eurodollar Rate Loan) will be automatically converted into a Base Rate Loan on the last day of the then-current Interest Period for such Loan (or if outstanding as a Base Rate Loan will remain as, or (if not then outstanding) will be made as, a Base Rate Loan). In the event Borrowers fail to specify an Interest Period for any Eurodollar Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, Borrowers shall be deemed to have selected an Interest Period of one month. As soon as practicable after 11:00 a.m. (New York City time) on each Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrowers and each Lender.

          (d) Interest payable pursuant to Section 2.8(a) shall be computed (i) in the case of Base Rate Loans on the basis of a 365-day or 366-day year, as the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Term Loan, the last Interest Payment Date with respect to such Term Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the

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case may be, shall be excluded; provided, if a Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Loan.

          (e) Except as otherwise set forth herein, interest on each Loan (i) shall accrue on a daily basis and shall be payable in arrears on each Interest Payment Date with respect to interest accrued on and to each such payment date; (ii) shall accrue on a daily basis and shall be payable in arrears upon any prepayment of that Loan, whether voluntary or mandatory, to the extent accrued on the amount being prepaid; and (iii) shall accrue on a daily basis and shall be payable in arrears at maturity of the Loans, including final maturity of the Loans; provided, however, with respect to any voluntary prepayment of a Base Rate Loan, accrued interest shall instead be payable on the applicable Interest Payment Date.

          (f) Borrowers agrees to pay to Administrative Agent, for the account of Issuing Bank and the LC Lenders as described in paragraph (g) below, with respect to any LC Disbursement, interest on the amount paid by Issuing Bank in respect of each such LC Disbursement from the date of such LC Disbursement to but excluding the date such amount is reimbursed by or on behalf of Borrowers at a rate equal to (i) for the period from the date of such LC Disbursement to but excluding the applicable Reimbursement Date, the rate of interest otherwise payable hereunder with respect to Revolving Loans that are Base Rate Loans, and (ii) thereafter, a rate which is 2% per annum in excess of the rate of interest otherwise payable hereunder with respect to Revolving Loans that are Base Rate Loans.

          (g) Interest payable pursuant to Section 2.8(f) shall be computed on the basis of a 365/366-day year for the actual number of days elapsed in the period during which it accrues, and shall be payable on demand or, if no demand is made, on the date on which the related LC Disbursement is reimbursed in full by or on behalf of Borrowers. Interest accrued pursuant to paragraph (f) shall be for the account of Administrative Agent, except that interest accrued on and after the date of the application of the LC Deposits by Administrative Agent pursuant to Section 2.4(e) to reimburse Issuing Bank for the applicable LC Disbursement shall be for the account of the LC Lenders to the extent of such payment and, upon receipt of such amounts, Administrative Agent shall promptly distribute to each LC Lender (other than a Defaulting Lender) such Lender’s Pro Rata Share of such payments.

          (h) For purposes of disclosure pursuant to the Interest Act (Canada), the annual rates of interest or fees to which the rates of interest or fees provided in this Agreement and the other Credit Documents (and stated herein or therein, as applicable, to be computed on the basis of a period of time less than a calendar year) are equivalent are the rates so determined multiplied by the actual number of days in the applicable calendar year and divided by the number of days in such period of time.

     2.9. Conversion/Continuation.

          (a) Subject to Section 2.18 and so long as no Default or Event of Default shall have occurred and then be continuing, Borrowers shall have the option:

          (i) to convert at any time all or any part of any Term Loan or Revolving Loan equal to $1,000,000 and integral multiples of $250,000 in excess of that

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amount from one Type of Loan to another Type of Loan; provided, a Eurodollar Rate Loan may only be converted on the expiration of the Interest Period applicable to such Eurodollar Rate Loan unless Borrowers shall pay all amounts due under Section 2.18 in connection with any such conversion; or

          (ii) upon the expiration of any Interest Period applicable to any Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $1,000,000 and integral multiples of $250,000 in excess of that amount as a Eurodollar Rate Loan.

          (b) Borrowers shall deliver a Conversion/Continuation Notice to Administrative Agent no later than 11:00 a.m. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). Except as otherwise provided herein, a Conversion/Continuation Notice for conversion to, or continuation of, any Eurodollar Rate Loans (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Borrowers shall be bound to effect a conversion or continuation in accordance therewith.

     2.10. Default Interest. The principal amount of all Loans outstanding and not paid when due and, to the extent permitted by applicable law, any interest payments on the Loans or any fees or other amounts owed hereunder and not paid when due, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate that is 2% per annum in excess of the interest rate otherwise payable hereunder with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans that are Revolving Loans); provided, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this Section 2.10 is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender.

     2.11. Fees.

          (a) Borrowers agree to pay to Lenders having Revolving Exposure commitment fees equal to (1) the average of the daily difference between (a) the Revolving Commitments and (b) the aggregate principal amount of all outstanding Revolving Loans times (2) 0.50%. All fees referred to in this Section 2.11(a) shall be paid to Administrative Agent at its Principal Office and upon receipt, Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereof.

          (b) Borrowers agree to pay to Lenders having LC Deposits letter of credit fees equal to (i) sum of the Adjusted Eurodollar Rate plus 3.50% per annum plus 0.15% per annum times (ii) the average daily amount of total LC Deposits (it being understood that the LC Deposit

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Return paid to Administrative Agent on behalf of the LC Lenders pursuant to Section 2.4(m) during the applicable period referred to in Section 2.11(d) shall be credited towards payment of the fees referred to in this Section 2.11(b) for such period). All fees referred to in this Section 2.11(b) shall be paid to Administrative Agent at its Principal Office and upon receipt, Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereof.

          (c) Borrowers agree to pay to Lenders having a Term Loan Commitment ticking fees equal to (1) the average of the daily difference between (a) the Term Loan Commitments and (b) the aggregate of the Term Loans previously made hereunder times (2) 1.75%. All fees referred to in this Section 2.11(c) shall be paid to Administrative Agent at its Principal Office and upon receipt, Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereof.

          (d) (i) Borrowers agree to pay (x) to Administrative Agent, for its own account, a fronting fee equal to .55% per annum times the average aggregate daily maximum amount available to be drawn under all Letters of Credit (determined as of the close of business on any date of determination), and (y) to Administrative Agent, for the account of the Issuing Bank, such documentary and processing charges (other than fronting fees) for any issuance, amendment, transfer or payment of a Letter of Credit as are in accordance with Issuing Bank’s standard schedule for such charges and as in effect at the time of such issuance, amendment, transfer or payment, as the case may be; and (ii) Administrative Agent agrees to pay to Issuing Bank a fronting fee in such amount as may be agreed to by Issuing Bank and Administrative Agent from time to time.

          (e) All fees referred to in Section 2.11(a), 2.11(b), 2.11(c) and 2.11(d)(i) shall be calculated on the basis of a 360-day year and the actual number of days elapsed and shall be payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year during the Revolving Commitment Period, commencing on the first such date to occur after the Closing Date, and on the Revolving Commitment Termination Date.

          (f) In addition to any of the foregoing fees, Borrowers agree to pay to Agents such other fees in the amounts and at the times separately agreed upon.

     2.12. Scheduled Payments.

          (a) Prior to the Exit Facilities Conversion Date, the principal amount of the Term Loans, together with all other amounts owed hereunder with respect thereto, shall be paid in full no later than the Maturity Date.

          (b) Following the Exit Facilities Conversion Date, the principal amount of the Term Loans shall be repaid in consecutive quarterly installments (each, an “Installment”) of 0.25% of the original aggregate principal amount thereof, each on the first day of each calendar quarter of each year commencing on the first day of the calendar quarter following the Exit Facilities Conversion Date. Notwithstanding the foregoing, (x) such Installments shall be reduced in connection with any voluntary or mandatory prepayments of the Term Loans, in accordance with Sections 2.13, 2.14 and 2.15, as applicable; and (y) the Term Loans, together

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with all other amounts owed hereunder with respect thereto, shall, in any event, be paid in full no later than the Maturity Date.

     2.13. Voluntary Prepayments/Commitment Reductions.

          (a) Voluntary Prepayments.

          (i) Any time and from time to time:

          (1) with respect to Base Rate Loans, Borrowers may prepay any such Loans on any Business Day in whole or in part, in an aggregate minimum amount of $1,000,000 and integral multiples of $250,000 in excess of that amount;

          (2) with respect to Eurodollar Rate Loans, Borrowers may prepay any such Loans on any Business Day in whole or in part in an aggregate minimum amount of $1,000,000 and integral multiples of $250,000 in excess of that amount; and

          (3) with respect to Swing Line Loans, Borrowers may prepay any such Loans on any Business Day in whole or in part in an aggregate minimum amount of $100,000, and in integral multiples of $50,000 in excess of that amount.

          (ii) All such prepayments shall be made:

          (1) upon not less than one Business Day’s prior written or telephonic notice in the case of Base Rate Loans;

          (2) upon not less than three Business Days’ prior written or telephonic notice in the case of Eurodollar Rate Loans; and

          (3) upon written or telephonic notice on the date of prepayment, in the case of Swing Line Loans;

in each case given to Administrative Agent or Swing Line Lender, as the case may be, by 12:00 p.m. (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent (and Administrative Agent will promptly transmit such telephonic or original notice for Term Loans or Revolving Loans, as the case may be, by telefacsimile or telephone to each Lender) or Swing Line Lender, as the case may be. Upon the giving of any such notice, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein; provided that if specified in such notice that such prepayment is being made with the proceeds of another transaction, such prepayment may be contingent on the closing of such other transaction; provided further, that Borrowers shall pay any amounts payable pursuant to Section 2.18(c) upon the failure of Borrowers to make such prepayment on the date specified in such notice. Any such voluntary prepayment shall be applied as specified in Section 2.15(a).

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          (b) Voluntary Commitment Reductions.

          (i) Borrowers may, upon not less than three Business Days’ prior written or telephonic notice confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each applicable Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Commitments in an amount up to the amount by which the Revolving Commitments exceed the Total Utilization of Revolving Commitments at the time of such proposed termination or reduction; provided, any such partial reduction of the Revolving Commitments shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $250,000 in excess of that amount.

          (ii) Borrowers may, upon not less than three Business Days’ prior written or telephonic notice confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each applicable Lender), at any time and from time to time permanently reduce in part, without premium or penalty, the Term Loan Commitments; provided, any such reduction of the Term Loan Commitments shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $250,000 in excess of that amount.

          (iii) Borrowers may, upon not less than three Business Days’ prior written or telephonic notice confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each applicable Lender and Issuing Bank), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the LC Commitments in an amount up to the amount by which the LC Commitments exceed the LC Usage at the time of such proposed termination or reduction; provided, any such partial reduction of the LC Commitments shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $250,000 in excess of that amount.

          (iv) Any Borrower’s notice to Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Revolving Commitments, Term Loan Commitments or LC Commitments shall be effective on the date specified in such Borrower’s notice and shall reduce the Revolving Commitment, Term Loan Commitment or LC Commitments of each Lender proportionately to its Pro Rata Share thereof.

  2.14. Mandatory Prepayments.

          (a) Asset Sales; Insurance/Condemnation Proceeds. If on any date Holdings or any of its Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or Recovery Event, then such Net Cash Proceeds shall be applied not later than on the third Business Day following the receipt of such Net Cash Proceeds as set forth in Section 2.15(b) unless (i) a Reinvestment Notice shall be delivered in respect thereof, (ii) the aggregate Net Cash Proceeds from the Closing Date through the applicable date of determination do not exceed $10,000,000

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and (iii) no Event of Default shall have occurred and be continuing at such time; provided that, notwithstanding the foregoing, on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied as set forth in Section 2.15(b).

          (b) Issuance of Equity Securities. Prior to the end of the Business Day on which Holdings or its Subsidiaries receive of any Cash proceeds from a capital contribution to, or the issuance of any Equity Interests of, Holdings or any of their Subsidiaries (other than (i) in accordance with the implementation of the Plan, (ii) pursuant to any employee stock or stock option compensation plan, (iii) to Sponsor or any of its Controlled Investment Affiliates or (iv) to Holdings or any Subsidiary of Holdings) an aggregate amount equal to (A) 100% of such proceeds prior to the Exit Facilities Conversion Date and (B) 50% of such proceeds on and after the Exit Facilities Conversion Date, in each case, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses, shall be applied by Borrowers as set forth in Section 2.15(b).

          (c) Issuance of Debt. Prior to the end of the Business Day on which Holdings or any of its Subsidiaries receives any Cash proceeds from the incurrence of any Indebtedness of Holdings or any of its Subsidiaries (other than with respect to any Indebtedness permitted to be incurred pursuant to Section 6.1), an aggregate amount equal to 100% of such proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses, shall be applied by Borrowers as set forth in Section 2.15(b).

          (d) Consolidated Excess Cash Flow. In the event that there shall be Consolidated Excess Cash Flow for any Fiscal Year (commencing with the Fiscal Year ending December 31, 2007), an aggregate amount equal to (i) 75% of such Consolidated Excess Cash Flow minus (ii) voluntary repayments of the Loans (excluding repayments of Revolving Loans or Swing Line Loans except to the extent the Revolving Commitments are permanently reduced in connection with such repayments), shall be applied by Borrowers as set forth in Section 2.15(b) no later than ninety days after the end of such Fiscal Year.

          (e) Revolving Loans and Swing Loans. Borrowers shall from time to time prepay first, the Swing Line Loans, and second, the Revolving Loans to the extent necessary so that the Total Utilization of Revolving Commitments shall not at any time exceed the Revolving Commitments then in effect.

          (f) Prepayment Certificate. Concurrently with any prepayment of the Loans and/or reduction of the Revolving Commitments pursuant to Sections 2.14(a) through 2.14(d), Holdings shall deliver to Administrative Agent a certificate of an Authorized Officer demonstrating the calculation of the amount of the applicable net proceeds or Consolidated Excess Cash Flow, as the case may be. In the event that Holdings shall subsequently determine that the actual amount received exceeded the amount set forth in such certificate, Holdings shall promptly make an additional prepayment of the Loans and/or the Revolving Commitments shall be permanently reduced in an amount equal to such excess, and Holdings shall concurrently therewith deliver to Administrative Agent a certificate of an Authorized Officer demonstrating the derivation of such excess.

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     2.15. Application of Prepayments.

          (a) Application of Voluntary Prepayments by Type of Loans. Any prepayment of any Loan pursuant to Section 2.13(a) shall be applied as specified by Borrowers in the applicable notice of prepayment; provided, in the event Borrowers fail to specify the Loans to which any such prepayment shall be applied, such prepayment shall be applied as follows:

          first, to repay outstanding Swing Line Loans to the full extent thereof;

          second, to repay outstanding Revolving Loans to the full extent thereof; and

          third, to prepay the Term Loans on a pro rata basis to reduce the scheduled remaining Installments of principal of the Term Loans.

          (b) Application of Mandatory Prepayments. Subject to Section 2.16(h), any amount required to be paid pursuant to Sections 2.14(a) through 2.14(d) shall be applied as follows:

          first, to prepay the Swing Line Loans to the full extent thereof;

          second, to prepay the Revolving Loans (without any corresponding reduction of the Revolving Commitments) and pay any outstanding reimbursement obligations with respect to Letters of Credit, in each case to the full extent thereof, on a pro rata basis (in accordance with the outstanding principal amount of the Revolving Loans and amount of outstanding reimbursement obligations with respect to Letters of Credit);

          third, to prepay the next four scheduled Installments of principal of the Term Loans in direct order of maturity;

          fourth, to prepay the Term Loans on a pro rata basis to reduce the scheduled remaining Installments of principal of the Term Loans; and

          fifth, to cash collateralize, on a pro rata basis, outstanding Letters of Credit and reduce the LC Commitments by the amount of such cash collateralization.

          (c) Application of Prepayments of Loans to Base Rate Loans and Eurodollar Rate Loans. Considering each Class of Loans being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Borrowers pursuant to Section 2.18(c).

     2.16. General Provisions Regarding Payments.

          (a) All payments by Borrowers of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00

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p.m. (New York City time) on the date due at the Principal Office designated by Administrative Agent for the account of Lenders; for purposes of computing interest and fees, funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Borrowers on the next succeeding Business Day.

          (b) All payments in respect of the principal amount of any Loan (other than voluntary prepayments of Revolving Loans) shall be accompanied by payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest then due and payable before application to principal.

          (c) Administrative Agent (or its agent or sub-agent appointed by it) shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender’s applicable Pro Rata Share of all payments and prepayments of principal and interest due hereunder, together with all other amounts due thereto, including all fees payable with respect thereto, to the extent received by Administrative Agent.

          (d) Notwithstanding the foregoing provisions hereof, if any Conversion/ Continuation Notice is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter.

          (e) Subject to the provisos set forth in the definition of “Interest Period” as they may apply to Revolving Loans, whenever any payment to be made hereunder with respect to any Loan shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and, with respect to Revolving Loans only, such extension of time shall be included in the computation of the payment of interest hereunder or of the Revolving Commitment fees hereunder.

          (f) Borrowers hereby authorize Administrative Agent to charge each Borrower’s accounts with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose).

          (g) Administrative Agent shall deem any payment by or on behalf of Borrowers hereunder that is not made in same day funds prior to 12:00 p.m. (New York City time) to be a non-conforming payment. Any such payment shall not be deemed to have been received by Administrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next Business Day. Administrative Agent shall give prompt telephonic notice to Borrowers and each applicable Lender (confirmed in writing) if any payment is non-conforming. Any non-conforming payment may constitute or become a Default or Event of Default in accordance with the terms of Section 8.1(a). Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding applicable Business Day) at the rate determined pursuant to Section 2.10 from the date such amount was due and payable until the date such amount is paid in full.

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          (h) If an Event of Default shall have occurred and not otherwise been waived and the maturity of the Obligations shall have been accelerated pursuant to Section 8.1, or any Event of Default under Section 8.1(f) or (g) shall have occurred, or as to any mandatory prepayments under Section 2.14 at any time after an Event of Default shall have occurred and not otherwise been waived in accordance with the terms hereof, then, in each case, all payments or proceeds received by Agents hereunder in respect of any of the Obligations, shall be applied in accordance with the application arrangements described in Section 7.2 of the Pledge and Security Agreement.

     2.17. Ratable Sharing. Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms hereof), through the exercise of any right of set-off or banker’s lien, by counterclaim or cross action or by the enforcement of any right under the Credit Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Letters of Credit, fees and other amounts then due and owing to such Lender hereunder or under the other Credit Documents (collectively, the “Aggregate Amounts Due” to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (a) notify Administrative Agent and each other Lender of the receipt of such payment and (b) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided, if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of any Borrower or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Each Borrower expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker’s lien, set-off or counterclaim with respect to any and all monies owing by Borrowers to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder.

     2.18. Making or Maintaining Eurodollar Rate Loans.

          (a) Inability to Determine Applicable Interest Rate. In the event that Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Borrowers and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Administrative Agent notifies Borrowers and Lenders that the circumstances giving rise to such notice no longer exist, and (ii) any Funding

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Notice or Conversion/Continuation Notice given by Borrowers with respect to the Loans in respect of which such determination was made shall be deemed to be a Funding Notice for or Conversion/Continuation Notice into Base Rate Loans.

          (b) Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Borrowers and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful), or (ii) has become impracticable, as a result of contingencies occurring after the date hereof which materially and adversely affect the London interbank market or the position of such Lender in that market, then, and in any such event, such Lender shall be an “Affected Lender” and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Borrowers and Administrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Lender). Thereafter (1) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (2) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Borrower pursuant to a Funding Notice or a Conversion/Continuation Notice, the Affected Lender shall make such Loan as (or continue such Loan as or convert such Loan to, as the case may be) a Base Rate Loan, (3) the Affected Lender’s obligation to maintain its outstanding Eurodollar Rate Loans (the “Affected Loans”) shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (4) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by any Borrower pursuant to a Funding Notice or a Conversion/Continuation Notice, such Borrower shall have the option, subject to the provisions of Section 2.18(c), to rescind such Funding Notice or Conversion/Continuation Notice as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Administrative Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this Section 2.18(b) shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms hereof.

          (c) Compensation for Breakage or Non-Commencement of Interest Periods. Borrowers shall compensate each Lender, upon written request by such Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid by such Lender to Lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or re-employment of such funds but excluding loss of anticipated profits) which such Lender may sustain: (i) if for any reason (other than a default by such Lender or a rescission pursuant to Section 2.18(b)) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Funding Notice or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not

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occur on a date specified therefor in a Conversion/Continuation Notice or a telephonic request for conversion or continuation; (ii) if any prepayment or other principal payment of, or any conversion of, any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan; or (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by any Borrower.

          (d) Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of such Lender.

          (e) Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this Section 2.18 and under Section 2.19 shall be made as though such Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of such Lender to a domestic office of such Lender in the United States of America; provided, however, each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.18 and under Section 2.19.

     2.19. Increased Costs; Capital Adequacy.

          (a) Compensation For Increased Costs and Taxes. Subject to the provisions of Section 2.20 (which shall be controlling with respect to the matters covered thereby), in the event that any Lender (which term shall include Issuing Bank for purposes of this Section 2.19(a)) shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or Governmental Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of the other Credit Documents or any of its obligations hereunder or thereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate); or (iii) imposes any

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other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder participating in, issuing or maintaining Letters of Credit or LC Deposits hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Borrowers shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Lender shall deliver to Borrowers (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this Section 2.19(a), which statement shall be conclusive and binding upon all parties hereto absent manifest error.

          (b) Capital Adequacy Adjustment. In the event that any Lender (which term shall include Issuing Bank for purposes of this Section 2.19(b)) shall have determined that the adoption, effectiveness, phase-in or applicability after the Closing Date of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender’s Loans, Revolving Commitments, LC Deposits or Letters of Credit, or participations therein or other obligations hereunder with respect to the Loans or the Letters of Credit to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Borrowers from such Lender of the statement referred to in the next sentence, Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction. Such Lender shall deliver to Borrowers (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to Lender under this Section 2.19(b), which statement shall be conclusive and binding upon all parties hereto absent manifest error.

          (c) Notice. Failure or delay on the part of any Lender or the Issuing Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that Borrowers shall not be under any obligation to compensate any Lender or the Issuing Bank under paragraph (a) or (b) of this Section 2.19 with respect to increased costs or reductions with respect to any period prior to the date that is 180 days prior to the date of the delivery of the statement required pursuant to paragraph (a) or (b); provided further that the foregoing limitation shall not apply to any increased costs or reductions

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arising out of the retroactive application of any change in any law, treaty, governmental rule, regulation or order within such 180-day period.

     2.20. Taxes; Withholding, etc.

          (a) Payments to Be Free and Clear. All sums payable by any Credit Party hereunder and under the other Credit Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or by or within any other jurisdiction from or to which a payment is made by or on behalf of any Credit Party or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment.

          (b) Withholding of Taxes. If any Credit Party or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by any Credit Party to or for the benefit of Administrative Agent or any Lender (which term shall include Issuing Bank for purposes of this Section 2.20(b)) under any of the Credit Documents: (i) Borrowers shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Borrowers become aware of it; (ii) Borrowers shall pay or cause to be paid any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on any Credit Party) for its own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender; (iii) the sum payable by such Credit Party in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and (iv) within thirty days after paying any sum from which it is required by law to make any deduction or withholding, and within thirty days after the due date of payment of any Tax which it is required by clause (ii) above to pay, Borrowers shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided, no such additional amount shall be required to be paid to any Lender under clause (iii) above except to the extent that any change after the date hereof (in the case of each Lender listed on the signature pages hereof on the Closing Date) or after the effective date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date hereof or at the date of such Assignment Agreement, as the case may be, in respect of payments to such Lender.

          (c) Evidence of Exemption From U.S. Withholding Tax. Each Lender that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes (a “Non-US Lender”) shall deliver to Administrative Agent for transmission to Borrowers, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof on the Closing Date) or on or prior to the date

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of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Borrowers or Administrative Agent (each in the reasonable exercise of its discretion), (i) two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by Borrowers to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Credit Documents, or (ii) if such Lender is not a “bank” or other Person described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver either Internal Revenue Service Form W-8ECI pursuant to clause (i) above, a Certificate re Non-Bank Status together with two original copies of Internal Revenue Service Form W-8BEN (or any successor form), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by Borrowers to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of interest payable under any of the Credit Documents. Each Lender that is a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for United States federal income tax purposes (a “U.S. Lender”) shall deliver to Administrative Agent and Borrowers on or prior to the Closing Date (or, if later, on or prior to the date on which such Lender becomes a party to this Agreement) two original copies of Internal Revenue Service Form W-9 (or any successor form), properly completed and duly executed by such Lender, certifying that such U.S. Lender is entitled to an exemption from United States backup withholding tax, or otherwise prove that it is entitled to such an exemption. Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to this Section 2.20(c) hereby agrees, from time to time after the initial delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly deliver to Administrative Agent for transmission to Borrowers two new original copies of Internal Revenue Service Form W-8BEN or W-8ECI , or a Certificate re Non-Bank Status and two original copies of Internal Revenue Service Form W-8BEN (or any successor form), as the case may be, properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by Borrowers to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Credit Documents, or notify Administrative Agent and each Borrower of its inability to deliver any such forms, certificates or other evidence. Borrowers shall not be required to pay any additional amount to any Non-US Lender under Section 2.20(b)(iii) if such Lender shall have failed (1) to deliver the forms, certificates or other evidence referred to in the second sentence of this Section 2.20(c), or (2) to notify Administrative Agent and Borrowers of its inability to deliver any such forms, certificates or other evidence, as the case may be; provided, if such Lender shall have satisfied the requirements of the first sentence of this Section 2.20(c) on the Closing Date or on the date of the Assignment Agreement pursuant to which it became a Lender, as applicable, nothing in this last sentence of Section 2.20(c) shall relieve each Borrower of its obligation to pay any additional amounts pursuant this Section 2.20 in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the

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interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described herein.

     2.21. Obligation to Mitigate. Each Lender (which term shall include Issuing Bank for purposes of this Section 2.21) agrees that, as promptly as practicable after the officer of such Lender responsible for administering its Loans or Letters of Credit, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under Section 2.18, 2.19 or 2.20, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts to (a) make, issue, fund or maintain its Credit Extensions, including any Affected Loans, through another office of such Lender, or (b) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to Section 2.18, 2.19 or 2.20 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Revolving Commitments, Loans or Letters of Credit through such other office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Revolving Commitments, Loans or Letters of Credit or the interests of such Lender; provided, such Lender will not be obligated to utilize such other office pursuant to this Section 2.21 unless each Borrower agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other office as described above. A certificate as to the amount of any such expenses payable by Borrowers pursuant to this Section 2.21 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Borrowers (with a copy to Administrative Agent) shall be conclusive absent manifest error.

     2.22. Defaulting Lenders. Anything contained herein to the contrary notwithstanding, in the event that any Lender, other than at the direction or request of any regulatory agency or authority, defaults (a “Defaulting Lender”) in its obligation to fund (a “Funding Default”) any Revolving Loan or make an LC Deposit under Section 2.3(b)(iv) or 2.4(j) (in each case, a “Defaulted Loan”), then (a) during any Default Period with respect to such Defaulting Lender, such Defaulting Lender shall be deemed not to be a “Lender” for purposes of voting on any matters (including the granting of any consents or waivers) with respect to any of the Credit Documents; (b) to the extent permitted by applicable law, until such time as the Default Excess with respect to such Defaulting Lender shall have been reduced to zero, (i) any voluntary prepayment of the Revolving Loans shall, if any Borrower so directs at the time of making such voluntary prepayment, be applied to the Revolving Loans of other Lenders as if such Defaulting Lender had no Revolving Loans outstanding and the Revolving Exposure of such Defaulting Lender were zero, and (ii) any mandatory prepayment of the Revolving Loans shall, if any Borrower so directs at the time of making such mandatory prepayment, be applied to the Revolving Loans of other Lenders (but not to the Revolving Loans of such Defaulting Lender) as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender, it being understood and agreed that Borrowers shall be entitled to retain any portion of any mandatory prepayment of the Revolving Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (b); (c) such Defaulting Lender’s Revolving Commitment and outstanding Revolving Loans shall be excluded for purposes of calculating the

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Revolving Commitment fee payable to Lenders in respect of any day during any Default Period with respect to such Defaulting Lender, and such Defaulting Lender shall not be entitled to receive any Revolving Commitment fee pursuant to Section 2.11 with respect to such Defaulting Lender’s Revolving Commitment in respect of any Default Period with respect to such Defaulting Lender; and (d) the Total Utilization of Revolving Commitments and the aggregate LC Exposure of all Lenders as at any date of determination shall be calculated as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender. No Revolving Commitment or LC Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this Section 2.22, performance by each Borrower of its obligations hereunder and the other Credit Documents shall not be excused or otherwise modified as a result of any Funding Default or the operation of this Section 2.22. The rights and remedies against a Defaulting Lender under this Section 2.22 are in addition to other rights and remedies which Borrower may have against such Defaulting Lender with respect to any Funding Default and which Administrative Agent or any Lender may have against such Defaulting Lender with respect to any Funding Default.

     2.23. Removal or Replacement of a Lender. Anything contained herein to the contrary notwithstanding, in the event that: (a) (i) any Lender (an “Increased-Cost Lender”) shall give notice to Borrowers that such Lender is an Affected Lender or that such Lender is entitled to receive payments under Section 2.18, 2.19 or 2.20, (ii) the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments shall remain in effect, and (iii) such Lender shall fail to withdraw such notice within five Business Days after Borrowers’ request for such withdrawal; or (b) (i) any Lender shall become a Defaulting Lender, (ii) the Default Period for such Defaulting Lender shall remain in effect, and (iii) such Defaulting Lender shall fail to cure the default as a result of which it has become a Defaulting Lender within five Business Days after Borrower’s request that it cure such default; or (c) in connection with any proposed amendment, modification, termination, waiver or consent with respect to any of the provisions hereof as contemplated by Section 10.5(b), the consent of Requisite Lenders shall have been obtained but the consent of one or more of such other Lenders (each a “Non-Consenting Lender”) whose consent is required shall not have been obtained; then, with respect to each such Increased-Cost Lender, Defaulting Lender or Non-Consenting Lender (the “Terminated Lender”), Borrowers may, by giving written notice to Administrative Agent and any Terminated Lender of their election to do so, elect to cause such Terminated Lender (and such Terminated Lender hereby irrevocably agrees) to assign its outstanding Loans, its Revolving Commitments and its LC Commitments and LC Deposit, if any, in full to one or more Eligible Assignees (each a “Replacement Lender”) in accordance with the provisions of Section 10.6 and Borrowers shall pay or cause to be paid the fees, if any, payable thereunder in connection with any such assignment from an Increased Cost Lender or a Non-Consenting Lender and the Defaulting Lender shall pay the fees, if any, payable thereunder in connection with any such assignment from such Defaulting Lender; provided, (1) on the date of such assignment, the Replacement Lender shall pay to Terminated Lender an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Terminated Lender, (B) an amount equal to the LC Deposit of such Terminated Lender, together with all accrued LC Deposit Return thereon, (C) an amount equal to all unreimbursed LC Disbursements that have been funded by such Terminated Lender, together with all then unpaid interest with respect thereto at such time and (D) an amount equal to all accrued, but theretofore unpaid fees owing to such Terminated Lender pursuant to Section 2.11 and all other

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amounts owing to such Terminated Lender pursuant to any other provision of any Credit Document; (2) on the date of such assignment, Borrowers shall pay any amounts payable to such Terminated Lender pursuant to Section 2.18(c), 2.19 or 2.20; or otherwise as if it were a prepayment and (3) in the event such Terminated Lender is a Non-Consenting Lender, each Replacement Lender shall consent, at the time of such assignment, to each matter in respect of which such Terminated Lender was a Non-Consenting Lender; provided, Borrowers may not make such election with respect to any Terminated Lender that is also an Issuing Bank unless, prior to the effectiveness of such election, Borrowers shall have caused each outstanding Letter of Credit issued thereby to be cancelled. Upon the prepayment of all amounts owing to any Terminated Lender and the termination of such Terminated Lender’s Revolving Commitments and LC Commitments, if any, such Terminated Lender shall no longer constitute a “Lender” for purposes hereof; provided, any rights of such Terminated Lender to indemnification hereunder shall survive as to such Terminated Lender.

     2.24. Super-Priority Nature of Obligations and Lenders’ Liens. Until the Exit Facilities Conversion Date:

          (a) The priority of Collateral Agents’ and Lenders’ Liens on the Collateral owned by the Credit Parties shall be set forth in the Interim DIP Order, the Final DIP Order, the Canadian Interim Order and the Canadian Final Order.

          (b) All Obligations shall constitute administrative expenses of the Credit Parties in the Cases, with administrative priority and senior secured status under Sections 364(c)(1), 364(c)(2) and 364(c)(3) of the Bankruptcy Code. Subject to the Carve-Out, such administrative claim shall have priority over all other costs and expenses of the kinds specified in, or ordered pursuant to, Sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c), 726, 1113, 1114 or any other provision of the Bankruptcy Code or otherwise, and shall at all times be senior to the rights of the Credit Parties, the estates of the Credit Parties, and any successor trustee or estate representative in the Chapter 11 Cases or any subsequent proceeding or case under the Bankruptcy Code or any Canadian Insolvency Law. The Liens granted to Lenders on the Collateral owned by the Credit Parties, and the priorities accorded to the Obligations shall have the priority and senior secured status afforded by Sections 364(c)(1), 364(c)(2) and 364(c)(3) of the Bankruptcy Code (all as more fully set forth in the Interim DIP Order and Final DIP Order), and the Canadian Court (as more fully set forth in the Canadian Interim Order and the Canadian Final Order) senior to all claims and interests other than the Carve-Out, Permitted Liens (to the extent provided for in the DIP Orders and Candian DIP Orders) and claims of the lenders and agents under the Existing DIP Credit Agreement to the Existing DIP Credit Agreement Reserve Amount.

          (c) Collateral Agent’s Liens on the Collateral owned by the Credit Parties and Administrative Agent’s, Collateral Agent’s and Lenders’ respective administrative claims under Sections 364(c)(1), 364(c)(2) and 364(c)(3) of the Bankruptcy Code afforded the Obligations shall also have priority over any claims arising under Section 506(c) of the Bankruptcy Code subject and subordinate only to the Carve-Out and the Existing DIP Credit Agreement Reserve Amount. Except as set forth herein or in the Interim DIP Order, the Final DIP Order, the Canadian Interim Order or the Canadian Final Order, no other claim having a priority superior or pari passu to that granted to Administrative Agent and Lenders by the Interim DIP Order, the

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Final DIP Order, the Canadian Interim Order and the Canadian Final Order shall be granted or approved while any Obligations under this Agreement remain outstanding. Except for the Carve Out, no costs or expenses of administration shall be imposed against Administrative Agent, Lenders or any of the Collateral under Section 105 or 506(c) of the Bankruptcy Code, or otherwise, and each of the Credit Parties hereby waives for itself and on behalf of its estate in bankruptcy, any and all rights under Section 105 or 506(c), or otherwise, to assert or impose or seek to assert or impose, any such costs or expenses of administration against Administrative Agent or the Lenders.

     2.25. Payment of Obligations. Subject to Section 8.1 hereof, upon the maturity (whether by acceleration or otherwise) of any of the Obligations under this Agreement or any of the other Credit Documents, Lenders shall be entitled to immediate payment of such Obligations without further application to or order of the Bankruptcy Court or the Canadian Court.

     2.26. No Discharge; Survival of Claims. The Credit Parties agree that (a) (i) the Obligations hereunder shall not be discharged by the entry of an order confirming a plan of reorganization in any Case (and Credit Parties pursuant to Section 1141(d)(4) of the Bankruptcy Code, hereby waive any such discharge) or under Canadian Insolvency Law, (ii) converting any of the Cases to a chapter 7 case, (iii) dismissing any of the Cases, or (iv) terminating any of the proceedings under the CCAA in respect of any of the Canadian Credit Parties or the appointment of any monitor, trustee in bankruptcy, interim receiver, receiver or receiver-manager or similar officer or agent with respect to any of the Canadian Credit Parties and (b) the super-priority administrative claim granted to Administrative Agent and Lenders pursuant to the Interim DIP Order and the Final DIP Order and the Liens granted to Administrative Agent pursuant to the Interim DIP Order, the Final DIP Order, the Canadian Interim Order and the Canadian Final Order shall not be affected in any manner by the entry of an order confirming a plan of reorganization in any Case or under Canadian Insolvency Law.

     2.27. Waiver of any Priming Rights. Upon the Closing Date, and on behalf of themselves and their estates, and for so long as any Obligations shall be outstanding, Credit Parties hereby irrevocably waives any right, pursuant to Sections 364(c) or 364(d) of the Bankruptcy Code or otherwise, to grant any Lien of equal or greater priority than the Liens securing the Obligations, or to approve a claim of equal or greater priority than the Obligations, except as expressly permitted under the Interim DIP Order or the Final DIP Order.

     2.28. Co-Borrowers.

          (a) Joint and Several Liability. All Obligations of Borrowers under this Agreement and the other Credit Documents shall be joint and several Obligations of each Borrower. Anything contained in this Agreement and the other Credit Documents to the contrary notwithstanding, the Obligations of each Borrower hereunder, solely to the extent that such Borrower did not receive proceeds of Loans from any borrowing hereunder, shall be limited to a maximum aggregate amount equal to the largest amount that would not render its Obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code, 11 U.S.C. § 548, or any applicable provisions of comparable state law (collectively, the “Fraudulent Transfer Laws”), in each case after giving effect to all other liabilities of such Borrower, contingent or otherwise, that are relevant under the

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Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Borrower in respect of intercompany Indebtedness to any other Credit Party or Affiliates of any other Credit Party to the extent that such Indebtedness would be discharged in an amount equal to the amount paid by such Credit Party hereunder) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation or contribution of such Borrower pursuant to (i) applicable law or (ii) any agreement providing for an equitable allocation among such Borrower and other Affiliates of any Credit Party of Obligations arising under Guaranties by such parties.

          (b) Subrogation. Until the Obligations (other than contingent indemnification obligations for which no claim has been made) shall have been paid in full in Cash, each Borrower shall withhold exercise of any right of subrogation, contribution or any other right to enforce any remedy which it now has or may hereafter have against the other Borrower or any other guarantor of the Obligations. Each Borrower further agrees that, to the extent the waiver of its rights of subrogation, contribution and remedies as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any such rights such Borrower may have against the other Borrower, any collateral or security or any such other guarantor, shall be junior and subordinate to any rights Collateral Agent may have against the other Borrower, any such collateral or security, and any such other guarantor. Borrowers under this Agreement and the other Credit Documents together desire to allocate among themselves, in a fair and equitable manner, their Obligations arising under this Agreement and the other Credit Documents. Accordingly, in the event any payment or distribution is made on any date by any Borrower under this Agreement and the other Credit Documents (a “Funding Borrower”) that exceeds its Obligation Fair Share (as defined below) as of such date, that Funding Borrower shall be entitled to a contribution from the other Borrower in the amount of such other Borrowers’ Obligation Fair Share Shortfall (as defined below) as of such date, with the result that all such contributions will cause Borrowers’ Obligation Aggregate Payments (as defined below) to equal its Obligation Fair Share as of such date. “Obligation Fair Share” means, with respect to a Borrower as of any date of determination, an amount equal to (i) the ratio of (X) the Obligation Fair Share Contribution Amount (as defined below) with respect to such Borrower to (Y) the aggregate of the Obligation Fair Share Contribution Amounts with respect to all Borrowers, multiplied by (ii) the aggregate amount paid or distributed on or before such date by all Funding Borrowers under this Agreement and the other Credit Documents in respect of the Obligations guarantied. “Obligation Fair Share Shortfall” means, with respect to a Borrower as of any date of determination, the excess, if any, of the Obligation Fair Share of such Borrower over the Obligation Aggregate Payments of such Borrower. “Obligation Fair Share Contribution Amount” means, with respect to a Borrower as of any date of determination, the maximum aggregate amount of the Obligations of such Borrower under this Agreement and the other Credit Documents that would not render its Obligations hereunder or thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any comparable applicable provisions of state law; provided that, solely for purposes of calculating the Obligation Fair Share Contribution Amount with respect to any Borrower for purposes of this Section 2.28, any assets or liabilities of such Credit Party arising by virtue of any rights to subrogation, reimbursement or indemnification or any rights to or Obligations of contribution hereunder shall not be considered as assets or liabilities of such Borrower. “Obligation Aggregate Payments” means, with respect to a Borrower as of any date of determination, an amount equal to (i) the aggregate amount of all payments and distributions

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made on or before such date by such Borrower in respect of this Agreement and the other Credit Documents (including in respect of this Section 2.28) minus (ii) the aggregate amount of all payments received on or before such date by such Borrower from the other Borrower as contributions under this Section 2.28. The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Borrower. The allocation among Borrowers of their Obligations as set forth in this Section 2.28 shall not be construed in any way to limit the liability of any Borrower hereunder or under any Credit Document.

          (c) Representative of Borrowers. Systems hereby appoints Holdings as its agent, attorney-in-fact and representative for the purpose of (i) making any borrowing requests or other requests required under this Agreement, (ii) the giving and receipt of notices by and to Borrowers under this Agreement, (iii) the delivery of all documents, reports, financial statements and written materials required to be delivered by Borrowers under this Agreement, and (iv) all other purposes incidental to any of the foregoing. Systems agrees that any action taken by Holdings as the agent, attorney-in-fact and representative of Systems shall be binding upon Systems to the same extent as if directly taken by Systems.

          (d) Allocation of Loans. All Loans shall be made to Holdings as borrower unless a different allocation of the Loans as between Holdings and Systems with respect to any borrowing hereunder is included in the applicable Funding Notice.

     2.29. Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from any Credit Party hereunder in the currency expressed to be payable herein (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures Administrative Agent could purchase the specified currency with such other currency at Administrative Agent’s main New York City office on the Business Day preceding that on which final, non appealable judgment is given. The obligations of each Credit Party in respect of any sum due to any Lender or Administrative Agent hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender or Administrative Agent (as the case may be) may in accordance with normal, reasonable banking procedures purchase the specified currency with such other currency. If the amount of the specified currency so purchased is less than the sum originally due to such Lender or Administrative Agent, as the case may be, in the specified currency, each Credit Party agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Lender or Administrative Agent, as the case may be, in the specified currency and (b) any amounts shared with other Lenders as a result of allocations of such excess as a disproportionate payment to such Lender under Section 2.18, such Lender or Administrative Agent, as the case may be, agrees to remit such excess to such Credit Party.

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SECTION 3. CONDITIONS PRECEDENT AND CONVERSION TO EXIT FACILITIES

     3.1. Closing Date. The obligation of each Lender to make a Credit Extension on the Closing Date is subject to the satisfaction, or waiver in accordance with Section 10.5, of the following conditions on or before the Closing Date:

          (a) Credit Documents. Administrative Agent shall have received sufficient copies of each Credit Document originally executed and delivered by each applicable Credit Party for each Lender.

          (b) Interim DIP Order, Canadian DIP Order and Other Bankruptcy Court Filings. The Bankruptcy Court shall have entered the Interim DIP Order, which shall be certified by the Clerk of the Bankruptcy Court as having been duly entered, and the Interim DIP Order shall be in full force and effect, shall not be subject to a motion for reconsideration and shall not have been vacated, reversed, modified, amended or stayed without the written consent of the Requisite Lenders and, if the Interim DIP Order is the subject of a pending appeal or motion for reconsideration in any respect, neither the making of the Loans nor the performance by the Credit Parties of their respective obligations under the Credit Documents shall be the subject of a presently effective stay pending appeal. The Credit Parties shall have complied in full with the notice and all other requirements as provided for under the Interim DIP Order. The Canadian Court shall have entered the Canadian Interim Order, which shall be certified by the Clerk of the Canadian Court as having been duly entered, and the Canadian Interim Order shall be in full force and effect, shall not be subject to a motion for reconsideration and shall not have been vacated, reversed, modified, amended or stayed without the written consent of the Requisite Lenders and, if the Canadian Interim Order is the subject of a pending appeal or motion for reconsideration in any respect, neither the making of the Loans nor the performance by the Credit Parties of their respective obligations under the Credit Documents shall be the subject of a presently effective stay pending appeal. All orders entered by the Bankruptcy Court pertaining to cash management and adequate protection shall and all other motions and documents filed or to be filed with, and submitted to, the Bankruptcy Court in connection therewith shall be in form and substance reasonably satisfactory to Syndication Agent and Administrative Agent.

          (c) Organizational Documents; Incumbency. Administrative Agent shall have received (i) sufficient copies of each Organizational Document executed and delivered by each Credit Party, as applicable, and, to the extent applicable, certified as of a recent date by the appropriate governmental official, each dated the Closing Date or a recent date prior thereto; (ii) signature and incumbency certificates of the officers of such Person executing the Credit Documents to which it is a party; (iii) resolutions of the Board of Directors or similar governing body of each Credit Party approving and authorizing the execution, delivery and performance of this Agreement and the other Credit Documents to which it is a party or by which it or its assets may be bound as of the Closing Date, certified as of the Closing Date by its secretary or an assistant secretary as being in full force and effect without modification or amendment; (iv) a good standing certificate or equivalent from the applicable Governmental Authority of each Credit Party’s jurisdiction of incorporation, organization or formation, each dated a recent date prior to the Closing Date; and (v) such other documents as Administrative Agent may reasonably request.

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          (d) Existing Indebtedness. On the Closing Date, Holdings and its Subsidiaries shall have (i) repaid in full all Existing Indebtedness (other than (x) any contingent obligations which by their terms survive the termination of the Existing DIP Credit Agreement and the other documents executed in connection therewith and (y) outstanding letters of credit issued under the Existing DIP Credit Agreement which are either cash collateralized or secured by a Letter of Credit issued hereunder), (ii) terminated any commitments to lend or make other extensions of credit thereunder, (iii) delivered to Administrative Agent and Syndication Agent all documents or instruments necessary (including a pay-off letter in form and substance reasonably satisfactory to Administrative Agent) to release all Liens securing Existing Indebtedness or other obligations of Holdings and its Subsidiaries thereunder being repaid on the Closing Date, and (iv) made arrangements reasonably satisfactory to Administrative Agent and Syndication Agent with respect to the cancellation or cash collateralization of any letters of credit outstanding thereunder or the issuance of Letters of Credit to support the obligations of Holdings and its Subsidiaries with respect thereto. On the Closing Date, after giving effect to the repayment of the Existing Indebtedness, Holdings and its Subsidiaries will have no Indebtedness other than (A) the Obligations, (B) letters of credit outstanding under the Existing DIP Credit Agreement and (C) other Indebtedness described in Schedule 6.1.

          (e) Transaction Costs. On or prior to the Closing Date, Borrowers shall have delivered to Administrative Agent Borrower’s reasonable best estimate of the Transaction Costs (other than fees payable to any Agent).

          (f) Governmental Authorizations and Consents. Each Credit Party shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Credit Documents to occur on or before the Closing Date and each of the foregoing shall be in full force and effect and in form and substance reasonably satisfactory to Administrative Agent and Syndication Agent.

          (g) Personal Property Collateral. In order to create in favor of Collateral Agent, for the benefit of Secured Parties, a valid, perfected First Priority security interest in the personal property Collateral, the Credit Parties shall have delivered to Collateral Agent:

          (i) evidence reasonably satisfactory to Collateral Agent of the compliance by each Credit Party of their obligations under the Pledge and Security Agreement, the Canadian Pledge and Security Agreement and the Quebec Security and the other Collateral Documents to execute, deliver and file or publish UCC and Canadian PPSA financing statements and other evidence of registration or publication and delivery of originals of securities, instruments and chattel paper along with necessary stock powers or endorsements;

          (ii) a completed Collateral Questionnaire dated the Closing Date and executed by an Authorized Officer of each Credit Party, together with all attachments contemplated thereby together with (A) the results of a recent search, by a Person satisfactory to Collateral Agent, of all effective UCC and Canadian PPSA financing statements (or equivalent filings) made with respect to any personal or mixed property of any Credit Party in the jurisdictions specified in the Collateral Questionnaire, together

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with copies of all such filings disclosed by such search, and (B) UCC and Canadian PPSA termination statements (or similar documents) duly authorized and, if applicable, executed by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC or Canadian PPSA financing statements (or equivalent filings) disclosed in such search (other than any such financing statements in respect of Permitted Liens);

          (iii) a list setting forth the vehicle identification numbers for each vehicle owned by each Canadian Credit Party;

          (iv) evidence reasonably satisfactory to Collateral Agent that Borrowers have retained, at its sole cost and expense, a service provider acceptable to Collateral Agent for the tracking of all of UCC or Canadian PPSA financing statements (or equivalent filings) of Borrowers and the Guarantors and that will provide notification to Collateral Agent of, among other things, the upcoming lapse or expiration thereof.

          (h) Environmental Reports. Administrative Agent and Syndication Agent shall have received reports and other information, in form, scope and substance satisfactory to Administrative Agent and Syndication Agent, regarding environmental matters relating to the Facilities, which reports shall include copies of any and all existing Phase I Environmental Site Assessment Reports for each of the Facilities.

          (i) Financial Statements; Projections. Lenders shall have received from Holdings (i) the Historical Financial Statements, (ii) pro forma consolidated balance sheets of Holdings and its Subsidiaries as at the Closing Date, and reflecting the consummation of the refinancing of the Existing Indebtedness, the related financings and the other transactions contemplated by the Credit Documents to occur on or prior to the Closing Date, which pro forma balance sheet shall be in form and substance reasonably satisfactory to Administrative Agent and Syndication Agent, and (iii) the Projections.

          (j) Evidence of Insurance. Collateral Agent shall have received a certificate from Borrower’s insurance broker or other evidence reasonably satisfactory to it that all insurance required to be maintained pursuant to Section 5.5 is in full force and effect, together with endorsements naming the Collateral Agent, for the benefit of Secured Parties, as additional insured and loss payee thereunder to the extent required under Section 5.5.

          (k) Opinions of Counsel to Credit Parties. Lenders and their respective counsel shall have received originally executed copies of the favorable written opinions of (i) Troutman Sanders LLP, counsel for the credit parties and (ii) Gowling Lafleur Henderson LLP, special Canadian counsel for the Credit Parties, in each case as to such matters as Administrative Agent or Syndication Agent may reasonably request, dated as of the Closing Date and otherwise in form and substance reasonably satisfactory to Administrative Agent and Syndication Agent (and each Credit Party hereby instructs such counsel to deliver such opinions to Agents and Lenders).

          (l) Fees. Borrowers shall have paid to Agents the fees payable on the Closing Date referred to in Section 2.11(f).

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          (m) Closing Date Certificate. Borrowers shall have delivered to Administrative Agent and Syndication Agent an originally executed Closing Date Certificate, together with all attachments thereto.

          (n) Closing Date. Lenders shall have made the initial Term Loans to Borrowers on or before April 13, 2007.

          (o) No Litigation. There shall not exist any action, suit, investigation, litigation, proceeding, hearing (other than the Cases) or other legal or regulatory developments, pending or threatened in any court or before any arbitrator or Governmental Authority that, in the reasonable opinion of Administrative Agent and Syndication Agent, singly or in the aggregate, materially impairs the transactions contemplated by the Credit Documents, or that could reasonably be expected to have a Material Adverse Effect.

          (p) Letter of Direction. Administrative Agent shall have received a duly executed letter of direction from Borrowers addressed to GSCP and Administrative Agent, on behalf of itself and Lenders, directing the disbursement on the Closing Date of the proceeds of the Loans made on such date.

          (q) Liquidity. After giving effect to the initial borrowings hereunder, the Syndication Agent shall be satisfied that on the Closing Date (i) the excess of (x) the aggregate Revolving Commitments over (y) the Total Utilization of the Revolving Commitments shall be no less than $35,000,000 and (ii) the amount of available unrestricted Cash and Cash Equivalents of Borrowers and the other Credit Parties on such date shall not be less than (x) the aggregate amount of the Term Loans made on the Closing Date less (y) $205,000,000.

          (r) Patriot Act. At least 5 Business Days prior to the Closing Date, the Syndication Agent shall have received all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the U.S.A. Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”).

     3.2. Conditions to Each Credit Extension.

          (a) Conditions Precedent. The obligation of each Lender to make any Loan, or Administrative Agent to cause Issuing Bank to issue any Letter of Credit, on any Credit Date, including the Closing Date, are subject to the satisfaction, or waiver in accordance with Section 10.5, of the following conditions precedent:

          (i) Administrative Agent shall have received a fully executed and delivered Funding Notice or Issuance Notice, as the case may be;

          (ii) after making the Credit Extensions requested on such Credit Date, (i) the aggregate amount of Term Loans made hereunder shall not exceed the Term Loan Commitments then in effect and (ii) the Total Utilization of Revolving Commitments shall not exceed the Revolving Commitments then in effect;

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          (iii) after making the Credit Extensions requested on such Credit Date, the total LC Usage shall not exceed the total LC Deposits;

          (iv) as of such Credit Date, the representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects on and as of that Credit Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date;

          (v) as of such Credit Date, no event shall have occurred and be continuing or would result from the consummation of the applicable Credit Extension that would constitute an Event of Default or a Default;

          (vi) as of such Credit Date, to the extent such Credit Date occurs on or after the Exit Facilities Conversion Date, each Credit Party represents and warrants that such Credit Party is and, upon the incurrence of any Obligation by such Credit Party on such Credit Date, will be, Solvent;

          (vii) on or before the date of issuance of any Letter of Credit, Administrative Agent shall have received all other information required by the applicable Issuance Notice, and such other documents or information as Issuing Bank may reasonably require in connection with the issuance of such Letter of Credit; and

          (viii) after giving effect to each Revolving Loan and the use of proceeds thereof the aggregate Cash and Cash Equivalents of Holdings and its Subsidiaries will not exceed $15,000,000.

On or after the Exit Facilities Conversion Date, any Agent or Requisite Lenders shall be entitled, but not obligated to, request and receive, prior to the making of any Credit Extension, additional information reasonably satisfactory to the requesting party confirming the satisfaction of any of the foregoing if, in the good faith judgment of such Agent or Requisite Lender such request is warranted under the circumstances.

          (b) Notices. Any Notice shall be executed by an Authorized Officer in a writing delivered to Administrative Agent. In lieu of delivering a Notice, Borrowers may give Administrative Agent telephonic notice by the required time of any proposed borrowing, conversion/continuation or issuance of a Letter of Credit, as the case may be; provided each such notice shall be promptly confirmed in writing by delivery of the applicable Notice to Administrative Agent on or before the applicable date of borrowing, continuation/conversion or issuance. Neither Administrative Agent nor any Lender shall incur any liability to Borrowers in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized on behalf of Borrowers or for otherwise acting in good faith.

     3.3. Exit Facilities Option. The Lenders hereby grant Holdings the option (the “Exit Facilities Option”) to cause the Credit Facilities to be converted to Exit Facilities in accordance

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with Section 3.5 upon the Plan Effective Date, such option being irrevocable but subject to the satisfaction of the conditions set forth in Section 3.4 of this Agreement.

     3.4. Conditions to Exit Facilities Option. On and after the Exit Facilities Conversion Date, the obligations of each Lender to continue to make or hold Loans (or of Administrative Agent to cause Issuing Bank to issue any Letter of Credit on and after the Exit Facilities Conversion Date) and to extend the maturity thereof, as respectively set forth in the definitions of “Revolving Commitment Termination Date”, “LC Commitment Termination Date” and “Term Loan Commitment Termination Date” are subject to the satisfaction, or waiver in accordance with Section 10.5, of the following conditions on or before the Exit Facilities Conversion Date:

          (a) Outside Conversion Date. The Exit Facilities Conversion Date shall occur not later than September 30, 2007.

          (b) Real Estate Collateral. In order to create in favor of Collateral Agent, for the benefit of Secured Parties, a valid and, subject to any filing and/or recording referred to herein, perfected First Priority security interest in certain Real Estate Assets, Collateral Agent shall have received from Borrowers and each applicable Guarantor:

          (i) fully executed and notarized Mortgages, in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering each Material Real Estate Asset (each, an “Initial Mortgaged Property”);

          (ii) an opinion of counsel (which counsel shall be reasonably satisfactory to Collateral Agent) in each jurisdiction in which an Initial Mortgaged Property is located with respect to the enforceability of the form(s) of Mortgages to be recorded in such state and such other matters as Collateral Agent may reasonably request, in each case in form and substance reasonably satisfactory to Collateral Agent;

          (iii) in the case of each Leasehold Property that is an Initial Mortgaged Property, (1) a Landlord Consent and Estoppel and (2) evidence that such Leasehold Property is a Recorded Leasehold Interest;

          (iv) in the case of each Leasehold Property that is not an Initial Mortgaged Property and that is, in the reasonable opinion of the Collateral Agent, material to the operations of Holdings, Borrowers shall use commercially reasonable efforts to obtain a fully executed and notarized Subordination, Non-Disturbance and Attornment Agreement in form and substance reasonably satisfactory to the Collateral Agent;

          (v) (a) ALTA (or equivalent) mortgagee title insurance policies or unconditional commitments therefor issued by one or more title companies reasonably satisfactory to Collateral Agent with respect to each Initial Mortgaged Property (each, a “Title Policy”), in amounts not less than the fair market value of each Initial Mortgaged Property, together with a title report issued by a title company with respect thereto, dated not more than thirty days prior to the Exit Facilities Conversion Date and copies of all recorded documents listed as exceptions to title or otherwise referred to therein, each in form and substance reasonably satisfactory to Collateral Agent and (b) evidence

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satisfactory to Collateral Agent that such Credit Party has paid to the title company or to the appropriate governmental authorities all expenses and premiums of the title company and all other sums required in connection with the issuance of each Title Policy and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in connection with recording the Mortgages for each Initial Mortgaged Property in the appropriate real estate records;

          (vi) evidence of flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors, in form and substance reasonably satisfactory to Collateral Agent; and

          (vii) to the extent necessary to permit the issuance by the title company of a lender’s policy of title insurance without a survey exception, an ALTA (or equivalent) land title survey of all Initial Mortgaged Properties which are not Leasehold Properties, certified to the Collateral Agent and the title company and dated not more than sixty days prior to the Exit Facilities Conversion Date or such other date as Administrative Agent and the title company may approve.

Notwithstanding the foregoing, with respect to any Leasehold Property, if compliance with the provisions of this Section 3.4(b) requires the consent of or other action by the landlord with respect to such Leasehold Property and Borrowers and the applicable Subsidiaries of Borrowers have exercised commercially reasonable efforts (which shall not in any case require any Credit Party to agree to any concessions) to obtain such consent or other action but are unable to do so, then such compliance shall not be required as a condition to the conversion of the Credit Facilities to the Exit Facilities.

          (c) Personal Property Collateral. In order to create in favor of Collateral Agent, for the benefit of Secured Parties, a valid, perfected First Priority security interest in the personal property Collateral, Collateral Agent shall have received:

          (i) evidence reasonably satisfactory to Collateral Agent of the compliance by each Credit Party of their obligations under the Pledge and Security Agreement, the Canadian Pledge and Security Agreement and the Quebec Hypothec and the other Collateral Documents (including, without limitation, their obligations to authorize, execute (if applicable), deliver and file or publish UCC and Canadian PPSA financing statements and other evidence of registration or publication, originals of securities, instruments and chattel paper and any agreements governing deposit and/or securities accounts to the extent required therein);

          (ii) a completed updated Collateral Questionnaire dated the Exit Facilities Conversion Date and executed by an Authorized Officer of each Credit Party, together with all attachments contemplated thereby together with (A) the results of a recent search, by a Person satisfactory to Collateral Agent, of all effective UCC and Canadian PPSA financing statements (or equivalent filings) made with respect to any personal or mixed property of any Credit Party in the jurisdictions specified in the Collateral Questionnaire, together with copies of all such filings disclosed by such search,

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and (B) UCC and Canadian PPSA termination statements (or similar documents) duly authorized and, if applicable, executed by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC and Canadian PPSA financing statements (or equivalent filings) disclosed in such search (other than any such financing statements in respect of Permitted Liens);

          (iii) fully executed and notarized Intellectual Property Security Agreements, in proper form for filing or recording in all appropriate places in all applicable jurisdictions, memorializing and recording the encumbrance of the Intellectual Property Assets listed in Schedule 4.7 to the Pledge and Security Agreement;

          (iv) evidence that each Credit Party shall have executed and delivered any intercompany notes evidencing Indebtedness permitted to be incurred pursuant to Section 6.1(b) and made or caused to be made any other filing and recording (other than as set forth herein) reasonably required by Collateral Agent;

          (v) opinions of counsel (which counsel shall be reasonably satisfactory to Collateral Agent) with respect to the creation and perfection of the security interests in favor of Collateral Agent in such Collateral and such other matters governed by the laws of each jurisdiction in which any Credit Party or any personal property Collateral is located as Collateral Agent may reasonably request; and

          (vi) evidence that each Credit Party shall have taken or caused to be taken any other action, executed and delivered or caused to be executed and delivered any other agreement, document and instrument (including without limitation, (i) a Landlord Personal Property Collateral Access Agreement executed by the landlord of any Leasehold Property and by the applicable Credit Party and (ii) any intercompany notes evidencing Indebtedness permitted to be incurred pursuant to Section 6.1(b)) and made or caused to be made any other filing and recording (other than as set forth herein) reasonably required by Collateral Agent.

Notwithstanding the foregoing, with respect to any Leasehold Property, if compliance with the provisions of this Section 3.4(c) requires the consent of or other action by the landlord with respect to such Leasehold Property and Borrowers and the applicable Subsidiaries of Borrowers have exercised commercially reasonable efforts (which shall not in any case require any Credit Party to agree to any concessions) to obtain such consent or other action but are unable to do so, then such compliance shall not be required as a condition to the conversation of the Credit Facilities to the Exit Facilities.

          (d) Payment of Fees. Borrowers shall have paid to the Agents all properly documented fees and expenses (including reasonable fees and expenses of counsel payable hereunder) due and payable on or before the Exit Facilities Conversion Date (including all such fees referred to in Section 2.11(f)).

          (e) Plan Conditions. The following events or transactions shall have occurred, in each case on terms and conditions reasonably satisfactory to Administrative Agent:

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          (i) The Plan and all documents executed in connection with the implementation of the Plan shall be reasonably satisfactory in form and substance to Administrative Agent and Syndication Agent (it being understood that the plan of reorganization filed with the Bankruptcy Court on March 2, 2007 is reasonably satisfactory to Administrative Agent and Syndication Agent);

          (ii) The capitalization of Holdings and its Subsidiaries and the sources and uses of the funds of Holdings and its Subsidiaries on the Plan Effective Date and in connection with the implementation of the Plan shall be consistent in all material respects with the pro forma financial statements and other information delivered to Lenders prior to the date of this Agreement;

          (iii) All conditions precedent to the effectiveness of the Plan shall have been met (or waived), the Plan Effective Date and substantial consummation of the Plan shall have occurred (or shall be scheduled to occur upon conversion of the Credit Facilities to the Exit Facilities on the Exit Facilities Conversion Date), and the Plan shall be in full force and effect;

          (iv) The Bankruptcy Court shall have entered an order in form and substance satisfactory to Administrative Agent and Syndication Agent confirming the Plan and approving and authorizing the transactions contemplated thereby and the granting of liens under the Credit Documents and containing a release in favor of Administrative Agent and the Syndication Agent and the Lenders and their respective affiliates (the “Confirmation Order”) and such Confirmation Order shall be final, valid, subsisting and continuing and shall not have been reversed, amended, stayed or otherwise modified and shall not be subject to a motion to stay and shall be in full force and effect;

          (v) there shall be no motion to revoke confirmation of the Plan pending and there shall be no petition for rehearing or certiorari pending in respect of such motion;

          (vi) all appeal periods relating to the Confirmation Order shall have expired, and there shall be no petition for rehearing or certiorari pending in respect of the Confirmation Order which could reasonably be expected, in the reasonable judgment of Administrative Agent, to adversely affect the Plan; and

          (vii) the Canadian Court shall have entered the Canadian Confirmation Order; the Canadian Confirmation Order shall be in full force and effect, shall not have been reversed, vacated or stayed and shall not have been amended, supplemented, varied or otherwise modified without the prior written consent of the Requisite Lenders; and all appeal periods relating to the Canadian Confirmation Order shall have expired and no motion or application for leave to appeal shall have been made and notice of appeal shall have been filed in respect of the Canadian Confirmation Order.

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          (f) Sponsor Ownership. On the Plan Effective Date, (i) Sponsor and its Controlled Investment Affiliates shall beneficially own and control at least 35% on a fully diluted basis of the economic and voting interests in the Equity Interests of Holdings, (ii) Sponsor and its Controlled Investment Affiliates shall have elected a majority of the members of the post-effective board of directors (or similar governing body) of Holdings and (iii) no Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) shall beneficially own on a fully diluted basis voting and/or economic interests in the Equity Interests of Holdings greater than the beneficial ownership on a fully diluted basis of the voting and/or economic interests in the Equity Interests of Holdings owned by the Sponsor and its Controlled Investment Affiliates on such date;

          (g) Financial Statements. Administrative Agent shall have received a pro forma consolidated balance sheet and any other applicable financial statements of Holdings and its Subsidiaries as at the Exit Facilities Conversion Date and reflecting the consummation of the Plan and the other transactions contemplated by the Plan to occur on or prior to the Exit Facilities Conversion Date, together with a Financial Officer Certification of Holdings certifying that such balance sheet and other financial statements accurately present the financial position of Holdings and its Subsidiaries, in accordance with GAAP, as of such date.

          (h) Business Plan. Administrative Agent shall have received an updated business plan showing pro forma compliance with the financial covenants set forth in Section 6.7 through the Maturity Date.

          (i) Legal Opinions. Lenders and their respective counsel shall have received originally executed copies of the favorable written opinions of Latham & Watkins LLP, Troutman Sanders LLP or other counsel for the Credit Parties and Gowling Lafleur Henderson LLP, special Canadian counsel for the Credit Parties, in each case as to such matters as Administrative Agent or Syndication Agent may reasonably request and dated as of the Exit Facilities Conversion Date (and each Credit Party hereby instructs such counsel to deliver such opinions to Agents and Lenders).

          (j) Ratings. The Credit Facilities, after giving effect to the Exit Facilities Conversion Date, shall have been assigned updated credit ratings by Moody’s and S&P.

          (k) Notice of Conversion. Holdings shall have given the Lenders not less than ten Business Days’ prior written notice of the exercise of the Exit Facilities Option.

          (l) Solvency Certificate. Administrative Agent and Syndication Agent shall have received a Solvency Certificate from Holdings and in form, scope and substance reasonably satisfactory to Administrative Agent and Syndication Agent, and demonstrating that after giving effect to the consummation of the transactions contemplated by the Plan, the borrowings hereunder and any rights of contribution, Holdings and its Subsidiaries, taken as a whole, are and will be Solvent.

          (m) Officer’s Certificate. Borrowers shall have delivered to Administrative Agent and Syndication Agent an originally executed officer’s certificate certifying as to the matters set forth in Sections 3.4(e)(iii), (f), (p)(i), (q), (r) and (s).

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          (n) Collateral Servicing Agreement. Administrative Agent shall have received the Collateral Servicing Agreement, executed and delivered by Corporation Service Company and each Credit Party.

          (o) Affirmation Agreement. Administrative Agent shall have received the Affirmation Agreement, executed and delivered in accordance with Section 3.5(a).

          (p) Customer Contracts. Syndication Agent and Administrative Agent shall be reasonably satisfied that (i) the Credit Parties shall have entered into written contracts with the five largest customers of the Credit Parties (based on Fiscal Year ended December 31, 2006) and that such contracts are in full force and effect on the Exit Facilities Conversion Date and (ii) in the reasonable opinion of the Syndication Agent and Administrative Agent, the terms and conditions of such contracts, taken as a whole (including customer concessions), are not materially worse than the terms and conditions in the contracts with such material customers in effect on March 16, 2007, taken as a whole.

          (q) Governmental Authorizations and Consents. Each Credit Party shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary in connection with the Plan and each of the foregoing shall be in full force and effect. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose materially adverse conditions on the transactions contemplated by or the effectiveness of the Plan and no action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired.

          (r) Yucaipa Indebtedness. Any Indebtedness incurred pursuant to Section 6.1(w) shall have been converted to common equity of Holdings.

          (s) Representations and Warranties. As of the Exit Facilities Conversion Date, the representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects on and as of the Exit Facilities Conversion Date to the same extent as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date.

          (t) No Default. As of the Exit Facilities Conversion Date, no event shall have occurred and be continuing or would result from the exercise by Holdings of the Exit Facilities Option that would constitute an Event of Default or a Default.

     3.5. Conversion to Exit Facilities.

          (a) In the event that Holdings exercises the Exit Facilities Option and upon (x) the execution and delivery of the Affirmation Agreement by the Credit Parties in favor of Administrative Agent, Collateral Agent and the Lenders and (y) the satisfaction (or waiver in accordance with the terms of this Agreement) of the other conditions precedent set forth in Section 3.4:

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          (i) Each of the Credit Parties, as reorganized companies under the Bankruptcy Code, shall have the same respective rights, obligations and liabilities as prior to the Exit Facilities Conversion Date and each such Credit Party shall remain a party hereto as a “Borrower” or as a “Guarantor”, as applicable; and

          (ii) Administrative Agent, the Collateral Agent, the Lenders and the Issuing Bank shall retain the same rights, remedies and obligations among themselves as they would have had prior to the Exit Facilities Conversion Date.

SECTION 4. REPRESENTATIONS AND WARRANTIES

     In order to induce Lenders to enter into this Agreement and to make each Credit Extension to be made thereby and Administrative Agent to cause Issuing Bank to issue Letters of Credit, each Credit Party represents and warrants to each Lender and Administrative Agent, on the Closing Date and on each Credit Date, that the following statements are true and correct (it being understood and agreed that the representations and warranties made on the Closing Date are deemed to be made concurrently with the consummation of the transactions contemplated hereby):

   4.1. Organization; Requisite Power and Authority; Qualification. Each of Holdings and its Subsidiaries (other than Inactive Subsidiaries) (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as identified in Schedule 4.1, (b) subject to the entry of the DIP Order and the Canadian DIP Order by the Bankruptcy Court and the Canadian Court, respectively, has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Credit Documents to which it is a party and to carry out the transactions contemplated thereby, and (c) is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had, and could not be reasonably expected to have, a Material Adverse Effect.

   4.2. Equity Interests and Ownership. The Equity Interests of each of Holdings and its Subsidiaries has been duly authorized and validly issued and is fully paid and non-assessable. Except as set forth on Schedule 4.2, as of the date hereof, there is no existing option, warrant, call, right, commitment or other agreement to which Holdings or any of its Subsidiaries is a party requiring, and there is no membership interest or other Equity Interests of any of Holdings’ Subsidiaries outstanding which upon conversion or exchange would require, the issuance by any of Holdings’ Subsidiaries of any additional membership interests or other Equity Interests of any of Holdings’ Subsidiaries or other Securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase, a membership interest or other Equity Interests of any of Holdings’ Subsidiaries. Schedule 4.2 correctly sets forth the ownership interest of Holdings and each of its Subsidiaries in their respective Subsidiaries as of the Closing Date.

   4.3. Due Authorization. Upon the entry of the DIP Order and the Canadian DIP Order by the Bankruptcy Court and the Canadian Court, respectively, the execution, delivery and

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performance of the Credit Documents have been duly authorized by all necessary action on the part of each Credit Party that is a party thereto.

     4.4. No Conflict. Subject to entry of the DIP Order and the Canadian DIP Order by the Bankruptcy Court and the Canadian Court, respectively, the execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties, the consummation of the Plan, and the consummation of the transactions contemplated by the Credit Documents do not and will not (a) violate (i) any provision of any law or any governmental rule or regulation applicable to Holdings or any of its Subsidiaries, (ii) any of the Organizational Documents of Holdings or any of its Subsidiaries, or (iii) any order, judgment or decree of any court or other agency of government binding on Holdings or any of its Subsidiaries; (b) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Holdings or any of its Subsidiaries except to the extent such conflict, breach or default could not reasonably be expected to have a Material Adverse Effect; (c) result in or require the creation or imposition of any Lien upon any of the properties or assets of Holdings or any of its Subsidiaries (other than any Liens created under any of the Credit Documents in favor of Collateral Agent, on behalf of Secured Parties or Liens granted by the Plan); or (d) require any approval of stockholders, members or partners or any approval or consent of any Person under any Contractual Obligation of Holdings or any of its Subsidiaries, except for (i) such approvals or consents which will be obtained on or before the Closing Date, (ii) prior to the Exit Facilities Conversion Date, the confirmation of the Plan in accordance with the provisions of the Bankruptcy Code and (iii) any such approvals or consents the failure of which to obtain could not reasonably be expected to have a Material Adverse Effect.

     4.5. Governmental Consents. Upon the entry of the DIP Order and the Canadian DIP Order by the Bankruptcy Court and the Canadian Court, respectively, the execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Plan and the Credit Documents do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority except (i) as required by the DIP Order or the Canadian DIP Order or as otherwise set forth in the Plan, (ii) in the case of consummation of the Plan, as required by the Bankruptcy Code, (iii) for filings and recordings with respect to the Collateral to be made, or otherwise delivered to Collateral Agent for filing and/or recordation, on or prior to the Exit Facilities Conversion Date and (iv) any registration, consent, approval, notice or action to the extent that the failure to undertake or obtain such registration, consent, approval, notice or action could not reasonably be expected to have a Material Adverse Effect. No Credit Party’s accounts or receivables are subject to any of the requirements or proceedings applicable to assignments of accounts under the Financial Administration Act (Canada) or any other similar law.

     4.6. Binding Obligation. Each Credit Document has been duly executed and delivered by each Credit Party that is a party thereto and, subject to the entry of the DIP Order and the Canadian DIP Order by the Bankruptcy Court and the Canadian Court, respectively, is the legally valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

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     4.7. Historical Financial Statements. The Historical Financial Statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position, on a consolidated basis, of the Persons described in such financial statements as at the respective dates thereof and the results of operations and cash flows, on a consolidated basis, of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments and completion of financial statement footnotes. As of the Closing Date, except as set forth on Schedule 4.7, neither Holdings nor any of its Subsidiaries has any contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the Historical Financial Statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Holdings and any of its Subsidiaries taken as a whole.

     4.8. Projections. On and as of the Closing Date, the projections of Holdings and its Subsidiaries for the period of Fiscal Year 2007 through and including Fiscal Year 2012 (the “Projections”) are based on good faith estimates and assumptions made by the management of Holdings; provided, the Projections are not to be viewed as facts and that actual results during the period or periods covered by the Projections may differ from such Projections and that the differences may be material; provided further, as of the Closing Date, management of Holdings believed that the Projections were reasonable.

     4.9. No Material Adverse Change. Since December 31, 2005, no event, circumstance or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, other than (w) as described in the Disclosure Statement, (x) the commencement of the Cases and the events typically resulting from the commencement of the Cases, (y) on and after the Plan Effective Date, such changes and developments that are contemplated by the Plan and (z) such events, circumstances or changes that have been publicly disclosed by Holdings or its Subsidiaries.

     4.10. No Restricted Junior Payments. Since the Closing Date, neither Holdings nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment or agreed to do so except (i) Restricted Junior Payments made pursuant to the Plan and (ii) Restricted Junior Payments as permitted pursuant to Section 6.4.

     4.11. Adverse Proceedings, etc. Except for the Cases, there are no Adverse Proceedings, individually or in the aggregate, that could reasonably be expected to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries (a) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (b) is subject to or in default with respect to any final judgments, orders, writs, injunctions, decrees, rules or regulations of any court or any federal, state, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate with respect to clause (a) or (b), could reasonably be expected to have a Material Adverse Effect. On and after the Plan Effective Date, there are no pre-petition or administrative claims or pre-petition Liens other than those expressly contemplated by the Plan to be paid in connection with the consummation of the Plan or to survive the Plan Effective Date.

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     4.12. Payment of Taxes. Except as otherwise permitted under Section 5.3, all federal income and all other material tax returns and reports of Holdings and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all other material assessments, fees and other governmental charges upon Holdings and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. Holdings knows of no proposed tax assessment against Holdings or any of its Subsidiaries which is not being actively contested by Holdings or such Subsidiary in good faith and by appropriate proceedings; provided, such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor.

     4.13. Properties.

          (a) Title. Each of Holdings and its Subsidiaries has (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), (iii) valid licensed rights in (in the case of licensed interests in intellectual property) and (iv) good title to (in the case of all other personal property), all of their respective properties and assets reflected in their respective Historical Financial Statements referred to in Section 4.7 or, if more recent, in the most recent financial statements delivered pursuant to Section 5.1, in each case except for assets disposed of (x) during the Cases in accordance with applicable requirements of the Bankruptcy Code, (y) since the date of such financial statements in the ordinary course of business or as otherwise permitted under Section 6.8. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens.

          (b) Real Estate. As of the Closing Date, Schedule 4.13 contains a true, accurate and complete list of (i) all Real Estate Assets, and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Real Estate Asset of any Credit Party, regardless of whether such Credit Party is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. Each agreement listed in clause (ii) of the immediately preceding sentence that is material to the operations of Holdings and its Subsidiaries is in full force and effect and Holdings does not have knowledge of any default that has occurred and is continuing under any such agreement, and each such agreement constitutes the legally valid and binding obligation of each applicable Credit Party, enforceable against such Credit Party in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles.

     4.14. Environmental Matters. Neither Holdings nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to any Environmental Law, any Environmental Claim, or any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries has received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9604) or any comparable law that, individually or in the aggregate, could reasonably be expected to

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have a Material Adverse Effect. There are and, to each of Holdings’ and its Subsidiaries’ knowledge, have been, no conditions, occurrences, or Hazardous Materials Activities which could reasonably be expected to form the basis of an Environmental Claim against Holdings or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries nor, to any Credit Party’s knowledge, any predecessor of Holdings or any of its Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility without delivering a copy of such notice to Administrative Agent, and none of Holdings’ or any of its Subsidiaries’ operations involves the generation, transportation, treatment, storage or disposal of Hazardous Materials, including hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent except where such operations either are in compliance with Environmental Laws or where such non-compliance could not reasonably be expected to have a Material Adverse Effect. Compliance with all current or reasonably foreseeable future requirements pursuant to or under Environmental Laws could not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. No event or condition has occurred or is occurring with respect to Holdings or any of its Subsidiaries relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity which individually or in the aggregate has had, or could reasonably be expected to have, a Material Adverse Effect.

     4.15. No Defaults. Neither Holdings nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations other than as a result of the filing of the Cases (and any payment default directly related to such filing), and no condition exists which, with the giving of notice or the lapse of time or both, could constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.

     4.16. Material Contracts. Schedule 4.16 contains a true, correct and complete list of all the Material Contracts in effect on the Closing Date, and except as described thereon, all such Material Contracts are in full force and effect and no defaults currently exist thereunder (other than, as a result of the filing of the Cases, any payment default directly related to such filing).

     4.17. Governmental Regulation. Neither Holdings nor any of its Subsidiaries is subject to regulation under the Federal Power Act or the Investment Company Act of 1940 or a labor board of any other jurisdiction, statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. Neither Holdings nor any of its Subsidiaries is a “registered investment company” or a company “controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in the Investment Company Act of 1940.

     4.18. Margin Stock. Neither Holdings nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part of the proceeds of the Loans made to such Credit Party will be used to purchase or carry any such Margin Stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors.

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     4.19. Employee Matters. Neither Holdings nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect. Except as otherwise set forth on Schedule 4.19, there is (a) no unfair labor practice complaint pending against Holdings or any of its Subsidiaries, or to the knowledge of Holdings and Borrowers, threatened against any of them before the National Labor Relations Board or a labor board of any other jurisdiction and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement that is so pending against Holdings or any of its Subsidiaries or to the knowledge of Holdings and Borrowers, threatened against any of them, (b) as of the Closing Date, no strike or work stoppage in existence or threatened involving Holdings or any of its Subsidiaries, and (c) to the knowledge of Holdings and Borrowers, no union representation question existing with respect to the employees of Holdings or any of its Subsidiaries and, to the best knowledge of Holdings and Borrowers, no union organization activity that is taking place, except (with respect to any matter specified in clause (a), (b) or (c) above, either individually or in the aggregate) such as is not reasonably likely to have a Material Adverse Effect. The consummation of the Plan will not give rise to any right of termination, right of renegotiation or any other right under any collective bargaining agreement or Multiemployer Plan to which Company or any of its Subsidiaries is bound. All payments due from any Canadian Credit Party for employee health and welfare insurance have been paid or accrued as a liability on the books of such Canadian Credit Party and such Canadian Credit Party has withheld and remitted all employee withholdings to be withheld or remitted by it and has made all employer contributions to be made by it, in each case, pursuant to applicable law on account of the Canada Pension Plan and Quebec Pension Plan maintained by the Government of Canada and the Province of Quebec, respectively, employment insurance and employee income taxes.

     4.20. Employee Benefit Plans. (a) To the knowledge of Holdings and Borrowers, Holdings, each of its Subsidiaries and each of their respective ERISA Affiliates are in compliance with all applicable provisions and requirements of ERISA and the Internal Revenue Code and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan. Each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service indicating that such Employee Benefit Plan is so qualified and, to the knowledge of Holdings and Borrowers, nothing has occurred subsequent to the issuance of such determination letter which would cause such Employee Benefit Plan to lose its qualified status. Except as identified on Schedule 4.20, to the knowledge of Holdings and Borrowers, no liability to the PBGC (other than required premium payments), the Internal Revenue Service, any Employee Benefit Plan or any trust established under Title IV of ERISA has been or is expected to be incurred by Holdings, any of its Subsidiaries or any of their ERISA Affiliates. To the knowledge of Holdings and Borrowers, no ERISA Event has occurred and is continuing or is reasonably expected to occur. Except as identified on Schedule 4.20 or to the extent required under Section 4980B of the Internal Revenue Code or similar state laws, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates. As of the Closing Date, the present value of the aggregate benefit liabilities under each Pension Plan sponsored, maintained or contributed to by Holdings, any of its Subsidiaries or any of their ERISA Affiliates (determined as of the end of the most recent plan year on the basis of the actuarial assumptions specified for funding purposes in the most recent actuarial valuation for

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such Pension Plan), did not exceed the aggregate current value of the assets of such Pension Plan by an amount in excess of $7,500,000. Except as identified on Schedule 4.20, as of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of Holdings, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA is zero. To the knowledge of Holdings and Borrowers, Holdings, each of its Subsidiaries and each of their ERISA Affiliates have complied with the requirements of Section 515 of ERISA with respect to each Multiemployer Plan and are not in material “default” (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan.

          (b) In respect of each Canadian Credit Party, the Pension Plans are duly registered under all applicable laws which require registration (including the Income Tax Act (Canada) in respect of registered Pension Plans) and to the knowledge of Holdings and Borrowers no event has occurred which is reasonably likely to cause the loss of such registered status. All material obligations of each Canadian Credit Party (including fiduciary, contribution, funding, investment and administration obligations) required to be performed in connection with the Employee Benefit Plans, the Pension Plans and any funding agreements therefor under the terms thereof and applicable statutory and regulatory requirements, have been performed in a timely and proper fashion. To the knowledge of Holdings and Borrowers, there have been no improper withdrawals or applications of the assets of the Pension Plans or the Employee Benefit Plans. There are no outstanding disputes concerning the assets or liabilities of the Pension Plans or the Employee Benefit Plans. There is no Pension Plan in respect of which an event has occurred that could require immediate or accelerated funding in respect of unfunded liabilities or other deficit amounts. All contributions, in respect of a multiemployer pension plan required to be made by a Canadian Credit Party have been paid.

     4.21. Certain Fees. No broker’s or finder’s fee or commission will be payable with respect to the transactions contemplated by the Plan or the Credit Documents, except as payable to the Agents and the Lenders or as otherwise contemplated pursuant to the Plan.

     4.22. Solvency. From and after the Exit Facilities Conversion Date, upon the incurrence of any Obligation by any Credit Party on any date on which this representation and warranty is made, the Credit Parties will be, Solvent.

     4.23. Compliance with Statutes, etc. Each of Holdings and its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all Governmental Authorities, in respect of the conduct of its business and the ownership of its property (including compliance with all applicable Environmental Laws with respect to any Real Estate Asset or governing its business and the requirements of any permits issued under such Environmental Laws with respect to any such Real Estate Asset or the operations of Holdings or any of its Subsidiaries), except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

     4.24. Disclosure. No representation or warranty of any Credit Party contained in any Credit Document or in any other documents, certificates or written statements furnished to any

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Agent or Lender by or on behalf of Holdings or any of its Subsidiaries for use in connection with the transactions contemplated hereby, when taken as a whole, contains any untrue statement of a material fact or omits to state a material fact (known to Holdings or Borrowers, in the case of any document not furnished by either of them) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made; provided that any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Holdings or Borrowers to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There are no facts known to Holdings or Borrowers (other than matters of a general economic nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect and that have not been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby.

   4.25. Secured, Super-Priority Obligations. On and after the Closing Date and until the Exit Facilities Conversion Date:

          (i) The provisions of the Credit Documents, the Interim DIP Order, the Final DIP Order, the Canadian Interim Order and the Canadian Final Order are effective to create in favor of the Collateral Agent, for the benefit of the Secured Parties, legal, valid and perfected Liens on and security interests in all right, title and interest in the Collateral, having the priority provided for herein and in the Interim DIP Order, the Final DIP Order, the Canadian Interim Order and the Canadian Final Order and enforceable against the Credit Parties.

          (ii) Pursuant to subclauses (2) and (3) of clause (c) of Section 364 of the Bankruptcy Code, the Interim DIP Order, the Final DIP Order, the Canadian Interim Order and the Canadian Final Order, all Secured Obligations are secured by a first priority perfected Lien on the Collateral, subject only to (a) valid, perfected, nonavoidable and enforceable Liens existing as of the Petition Date as set forth on Schedule 4.25 hereto, (b) the extent such post-petition perfection is expressly permitted by Bankruptcy Code, valid, nonavoidable and enforeceable Liens existing as of the Petition Date, but perfected after the Petition Date as set forth on Schedule 4.25, (c) claims of the lenders and agents under the Existing DIP Credit Agreement to the Existing DIP Credit Agreement Reserve Amount, and (d) the Carve-Out.

          (iii) Pursuant to clause (c)(1) of Section 364 of the Bankruptcy Code, the Interim DIP Order, the Final DIP Order, the Canadian Interim Order and the Canadian Final Order, all Secured Obligations and all other obligations of the Credit Parties under the Credit Documents at all times shall constitute allowed super-priority administrative expense claims in the Cases having priority over all administrative expenses of the kind specified in clause (b) of Section 503 or clause (b) of Section 507 of the Bankruptcy Code, subject only to the Carve-Out.

          (iv) The Interim DIP Order, the Final DIP Order, the Canadian Interim Order and the Canadian Final Order and the transactions contemplated hereby and

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thereby, are in full force and effect and have not been vacated, reversed, modified, amended or stayed without the prior written consent of Requisite Lenders.

   4.26. Patriot Act. To the extent applicable, each Credit Party is in compliance, in all material respects, with the (i) Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the Untied States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, (ii) Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001), (iii) Part II.1 of the Criminal Code (Canada), (iv) the United Nations Suppression of Terrorism Regulations (Canada) and (v) United Nations Al-Qaida and Taliban Regulations (Canada). No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

SECTION 5. AFFIRMATIVE COVENANTS

     Each Credit Party covenants and agrees that, so long as any Commitment is in effect and until payment in full of all Obligations (other than contingent indemnification obligations for which no claim has been made) and cancellation or expiration of all Letters of Credit, each Credit Party shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 5.

   5.1. Financial Statements and Other Reports. Holdings will deliver to Administrative Agent:

          (a) Monthly Reports. As soon as available, and in any event within 30 days after the end of the first two months in each Fiscal Quarter, commencing with the month in which the Closing Date occurs, the consolidated balance sheet of Holdings and its Subsidiaries as at the end of such month and the related consolidated statements of income, stockholders’ equity and cash flows of Holdings and its Subsidiaries for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year and, except for the cash flow statements, the corresponding figures from the Financial Plan for the current Fiscal Year, to the extent prepared on a monthly basis, all in reasonable detail, together with a Financial Officer Certification;

          (b) Quarterly Financial Statements. As soon as available, and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, commencing with the Fiscal Quarter in which the Closing Date occurs, the consolidated balance sheets of Holdings and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income, stockholders’ equity and cash flows of Holdings and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year and, except for

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the cash flow statements, the corresponding figures from the Financial Plan for the current Fiscal Year, all in reasonable detail, together with a Financial Officer Certification and a Narrative Report with respect thereto;

          (c) Annual Financial Statements. As soon as available, and in any event within (x) for the Fiscal Year ended December 31, 2006, 30 days after the Plan Effective Date (it being understood and agreed that Holdings shall use its commercially reasonable efforts to deliver the following financial statements as soon as possible after the Closing Date), (y) for the Fiscal Year ended December 31, 2007, 120 days after the end of such Fiscal Year, and (z) for each Fiscal year thereafter, 105 days after the end of such Fiscal Year, (A) the audited consolidated balance sheets of Holdings and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders’ equity and cash flows of Holdings and its Subsidiaries for such Fiscal Year, (B) a report setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year and, except for the cash flow statements, the corresponding figures from the Financial Plan for the Fiscal Year covered by such financial statements, in reasonable detail, together with a Financial Officer Certification and a Narrative Report with respect thereto and (C) with respect to such audited consolidated financial statements a report thereon of KPMG LLP or other independent certified public accountants of recognized national standing selected by Holdings, and reasonably satisfactory to Administrative Agent (which report shall be unqualified as to going concern and scope of audit, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards) together with a written statement by such independent certified public accountants stating (1) that their audit examination has included a review of the terms of Section 6.7 of this Agreement and the related definitions in so far as they relate to accounting or auditing matters and (2) whether, in connection therewith, any condition or event that constitutes a Default or an Event of Default under Section 6.7 has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof;

          (d) Compliance Certificate. Together with each delivery of financial statements of Holdings and its Subsidiaries pursuant to Sections 5.1(b) and 5.1(c) (except for the delivery of annual financial statements for the Fiscal Year ended December 31, 2006 and (ii) quarterly financial statements for the Fiscal Quarter ended on March 31, 2007), a duly executed and completed Compliance Certificate;

          (e) Statements of Reconciliation after Change in Accounting Principles. If, as a result of any change in accounting principles and policies from those used in the preparation of the most recent Historical Financial Statements delivered prior to the Closing Date, the consolidated financial statements of Holdings and its Subsidiaries delivered pursuant to Section 5.1(b) or 5.1(c) will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made and such change would have an effect on the calculations required pursuant to the Compliance Certificate, then, together with the first delivery of such

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financial statements after such change, one or more statements of reconciliation for all such prior financial statements in form and substance reasonably satisfactory to Administrative Agent;

          (f) Notice of Default. Promptly upon any Executive Officer of any Borrower obtaining knowledge (i) of any condition or event that constitutes a Default or an Event of Default or that notice has been given to any Borrower with respect thereto; (ii) that any Person has given any notice to Holdings or any of its Subsidiaries or taken any other action with respect to any event or condition set forth in Section 8.1(b); or (iii) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, a certificate of its Authorized Officer specifying the nature and period of existence of such condition, event or change, or specifying the notice given and action taken by any such Person and the nature of such claimed Event of Default, Default, default, event or condition, and what action such Borrower has taken, is taking and proposes to take with respect thereto;

          (g) Notice of Litigation. Promptly upon any Executive Officer of Holdings or any Borrower obtaining knowledge of (i) the institution of, or non-frivolous threat of, any Adverse Proceeding claiming damages in excess of (A) with respect to Adverse Proceedings involving automobile and workers compensation claims in the ordinary course of business, $1,500,000 and (B) with respect to all other Adverse Proceedings, $500,000, in each case not previously disclosed in writing by Borrowers to Lenders, or (ii) any material development in any Adverse Proceeding that, in the case of either clause (i) or (ii), if adversely determined could be reasonably expected to have a Material Adverse Effect, or seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, written notice thereof together with such other information as may be reasonably available to Holdings or Borrowers to enable Lenders and their counsel to evaluate such matters;

          (h) ERISA and Canadian Pension Plans. (i) Promptly upon an Executive Officer of Holdings or any Borrower becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (ii) with reasonable promptness following the request of Administrative Agent, copies of (1) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (2) all notices received by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (3) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent shall reasonably request; and (iii) in respect of any Canadian Credit Party, (1) copies of each annual and other return, report or valuation with respect to each registered Pension Plan as filed with any applicable Governmental Authority; (2) promptly after receipt thereof, a copy of any direction, order, notice, ruling or opinion that any Canadian Credit Party may receive from any applicable Governmental Authority with respect to any registered Pension Plan; and (3) notification within 30 days of any increases having a cost to any Canadian Credit Party in excess of $100,000 per annum in the aggregate, in the benefits of any existing Pension Plan or Employee Benefit Plan,

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or the establishment of any new Pension Plan or Employee Benefit Plan, or the commencement of contributions to any such plan to which no Canadian Credit Party was previously contributing.

          (i) Financial Plan. As soon as practicable and in any event no later than 30 days after the beginning of each Fiscal Year, a consolidated plan and financial forecast for such Fiscal Year and each Fiscal Year (or portion thereof) through the final maturity date of the Loans (a “Financial Plan”), including (i) a forecasted consolidated balance sheet and forecasted consolidated statements of income and cash flows of Holdings and its Subsidiaries for each such Fiscal Year and an explanation of the assumptions on which such forecasts are based, and (ii) forecasted consolidated statements of income and cash flows of Holdings and its Subsidiaries for each month in such Fiscal Year;

          (j) Insurance Report. As soon as practicable and in any event by the last day of each Fiscal Year, if requested by Administrative Agent, a certificate from Holdings’ insurance broker(s) in form and substance reasonably satisfactory to Administrative Agent outlining all material insurance coverage maintained as of the date of such certificate by Holdings and its Subsidiaries;

          (k) Notice of Change in Board of Directors. Together with each delivery of a Compliance Certificate pursuant to Section 5.1(d), a duly executed and completed certificate of an Authorized Officer describing changes (if any) in the board of directors (or similar governing body) of Holdings since the Closing Date or since the date of the delivery of the last such certificate;

          (l) Notice Regarding Material Contracts. With reasonable promptness, written notice (i) after any Material Contract of Holdings or any of its Subsidiaries is terminated (except, with respect to any Material Contract, at the scheduled completion of the term of such Material Contract) or amended in a manner that is materially adverse to Holdings and its Subsidiaries, taken as a whole, or (ii) any new Material Contract (other than a renewal of a previous contract on similar terms and conditions) is entered into, a written statement describing such event, with copies of such material amendments or new contracts, delivered to Administrative Agent (to the extent such delivery is permitted by the terms of any such Material Contract; provided, no such prohibition on delivery shall be effective if it were bargained for by Holdings or its applicable Subsidiary with the intent of avoiding compliance with this Section 5.1(l)), and an explanation of any actions being taken with respect thereto;

          (m) Information Regarding Collateral. (a) Holdings will furnish to Collateral Agent prompt written notice of any change (i) in any Credit Party’s corporate name, (ii) in any Credit Party’s identity or corporate structure, (iii) in any Credit Party’s jurisdiction of organization, (iv) in any Credit Party’s place of business, chief executive office or domicile, or (v) in any Credit Party’s Federal Taxpayer Identification Number or state organizational identification number. Holdings agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code, Canadian PPSA or otherwise that are required in order for Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral as contemplated in the Collateral Documents. Holdings also agrees promptly to notify Collateral Agent if any material portion of the Collateral is damaged or destroyed;

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          (n) Annual Collateral Verification. Each year, beginning with Fiscal Year 2008, at the time of delivery of annual financial statements with respect to the preceding Fiscal Year pursuant to Section 5.1(c), Holdings shall deliver to Collateral Agent a certificate of its Authorized Officer (i) either confirming that there has been no change in such information since the date of the Collateral Questionnaire delivered on the Closing Date or the date of the most recent certificate delivered pursuant to this Section and/or identifying such changes and (ii) certifying that all Uniform Commercial Code and Canadian PPSA financing statements (including fixtures filings, as applicable) and all supplemental intellectual property security agreements or other appropriate filings, recordings or registrations, have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above (or in such Collateral Questionnaire) to the extent necessary to effect, protect and perfect the security interests under the Collateral Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period);

          (o) Cases. The Credit Parties shall immediately provide to each Lender copies of all material pleadings, notices, orders, agreements, and all other documents served, filed or entered, as the case may be, in connection with, or in relation to, the Cases.

          (p) Other Information. (A) Promptly upon their becoming available, copies of (i) all financial statements (and, at any time after the common stock of Holdings or any of its Subsidiaries is listed on a national securities exchange or the NASDAQ National Market quotation system, reports, notices and proxy statements) sent or made available generally by Holdings to its security holders acting in such capacity or by any Subsidiary of Holdings to its security holders other than Holdings or another Subsidiary of Holdings, (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by Holdings or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority, (iii) all press releases and other statements made available generally by Holdings or any of its Subsidiaries to the public concerning material developments in the business of Holdings or any of its Subsidiaries and (B) such other information and data with respect to Holdings or any of its Subsidiaries as from time to time may be reasonably requested by Administrative Agent or any Lender; and

          (q) Certification of Public Information. Concurrently with the delivery of any document or notice required to be delivered pursuant to this Section 5.1, Holdings shall indicate in writing whether such document or notice contains solely Public Information. Holdings and each Lender acknowledge that certain of the Lenders may be “public-side” Lenders (Lenders that do not wish to receive material non-public information with respect to Holdings, its Subsidiaries or their securities) and, if documents or notices required to be delivered pursuant to this Section 5.1 or otherwise are being distributed through IntraLinks/IntraAgency, SyndTrak or another relevant website or other information platform (the “Platform”), any document or notice that Holdings has not indicated contains solely Public Information shall not be posted on that portion of the Platform designated for such public-side Lenders. If Holdings has not indicated whether a document or notice delivered pursuant to this Section 5.1 contains solely Public Information, Administrative Agent reserves the right to post such document or notice solely on that portion of the Platform designated for Lenders who wish to receive material nonpublic information with respect to Holdings, its Subsidiaries and their securities.

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     5.2. Existence. Except as otherwise permitted under Section 6.8, each Credit Party will, and will cause each of its Subsidiaries (other than Inactive Subsidiaries) to, at all times preserve and keep in full force and effect its existence and all rights and franchises, licenses and permits material to its business; provided, no Credit Party (other than Borrowers with respect to existence) or any of its Subsidiaries shall be required to preserve any such existence, right or franchise, licenses and permits if an Executive Officer of such Credit Party shall determine that the preservation thereof is no longer desirable in the conduct of the business of such Person, and that the loss thereof is not disadvantageous in any material respect to such Person or to Lenders.

     5.3. Payment of Taxes and Claims. Each Credit Party will, and will cause each of its Subsidiaries to, pay all federal and state and provincial income Taxes and all other material Taxes imposed upon it or any of its properties or assets or in respect of any of its businesses or franchises before any penalty or fine accrues thereon, and all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided, no such Tax or claim need be paid if, prior to the Plan Effective Date, it is subject to the automatic stay in connection with the Cases or is otherwise being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (a) adequate reserve or other appropriate provision, as shall be required in conformity with GAAP shall have been made therefor, and (b) in the case of a Tax or claim which has or may become a Lien against any of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such Tax or claim. No Credit Party will, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person (other than Holdings or any of its Subsidiaries), except (x) a Subsidiary that is hereafter acquired by Holdings in a Permitted Acquisition may be included in the consolidated tax return of the seller of such Subsidiary, to the extent such tax return relates to the period prior to the closing of such Permitted Acquisition and (y) Holdings may be included in the consolidated tax return of another Person if (i) such inclusion is required as a matter of law, (ii) either no Change of Control has occurred or the Requisite Lenders have consented to such Change in Control and (iii) tax sharing arrangements have been entered into allocating the related consolidated tax benefits and liabilities among the relevant parties on an equitable basis, such that the tax benefits and liabilities allocated to Holdings shall be determined as if a separate consolidated return had been filed by Holdings on behalf of itself and the other members of the affiliate group of which Holdings would be the common parent corporation (without regard to the ownership of the capital stock of Holdings).

     5.4. Maintenance of Properties. Each Credit Party will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Holdings and its Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof.

     5.5. Insurance. Holdings will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Holdings and its

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Subsidiaries as may customarily be carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for such Persons. The Lenders and the Agents hereby acknowledge and agree that as of the Closing Date Haul Insurance is an acceptable provider of workers’ compensation and comprehensive general and auto liability insurance for the Credit Parties. Without limiting the generality of the foregoing, Holdings will maintain or cause to be maintained (a) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (b) replacement value casualty insurance (including self insurance) on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses. Each such policy of insurance shall (i) name Collateral Agent, on behalf of Secured Parties, as an additional insured thereunder as its interests may appear, (ii) in the case of each casualty insurance policy, contain a loss payable clause or endorsement, reasonably satisfactory in form and substance to Collateral Agent, that names Collateral Agent, on behalf of the Secured Parties, as the loss payee thereunder and provide for at least thirty days’ prior written notice to Collateral Agent of any modification or cancellation of such policy.

     5.6. Books and Records; Inspections. Each Credit Party will, and will cause each of its Subsidiaries to, keep proper books of record and accounts in which full, true and correct entries in conformity in all material respects with GAAP shall be made of all dealings and transactions in relation to its business and activities. Each Credit Party which keeps records relating to Collateral in the Province of Quebec shall at all times keep a duplicate copy thereof at a location outside of the Province of Quebec. Each Credit Party will, and will cause each of its Subsidiaries to, permit any authorized representatives designated by any Lender to visit and inspect any of the properties of any Credit Party and any of its respective Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants, all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested; provided that (i) such Credit Party shall be present during any discussions with the independent public accountants and (ii) so long as no Default or Event of Default shall have occurred in such Fiscal Year, the Credit Parties shall not be required to pay the expenses of more than one visit during any Fiscal Year.

     5.7. Lenders Meetings. Holdings will, upon the request of Administrative Agent or Requisite Lenders, participate in a meeting of Administrative Agent and Lenders once during each Fiscal Year to be held at Holdings’ corporate offices (or at such other location as may be agreed to by Holdings and Administrative Agent) at such time as may be agreed to by Holdings and Administrative Agent.

     5.8. Compliance with Laws. Each Credit Party will comply, and shall cause each of its Subsidiaries and all other Persons, if any, on or occupying any Facilities to comply, with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority

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(including all Environmental Laws), noncompliance with which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

   5.9. Environmental.

          (a) Environmental Disclosure. Holdings will deliver to Administrative Agent and Lenders:

               (i) as soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of any kind or character (other than those protected by attorney client or work product privileges), whether prepared by personnel of Holdings or any of its Subsidiaries or by independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility or with respect to any Environmental Claims, which could reasonably be expected to result in Borrowers and their Subsidiaries incurring liabilities or losses under Environmental Laws in excess of $1,000,000 individually or in the aggregate in a Fiscal Year;

               (ii) promptly upon an Executive Officer of any Borrower obtaining knowledge of the occurrence thereof, written notice describing in reasonable detail (1) any Release required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws, (2) any remedial action taken by Holdings or any other Person in response to (A) any Hazardous Materials Activities the existence of which has a reasonable possibility of resulting in one or more Environmental Claims having, individually or in the aggregate, a Material Adverse Effect, or (B) any Environmental Claims that, individually or in the aggregate, have a reasonable possibility of resulting in a Material Adverse Effect, and (3) such Borrower’s discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Facility that could cause such Facility or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws;

               (iii) as soon as practicable following the sending or receipt thereof by Holdings or any of its Subsidiaries, a copy of any and all written communications with respect to (1) any Environmental Claims that, individually or in the aggregate, have a reasonable possibility of giving rise to a Material Adverse Effect, (2) any Release required to be reported to any federal, state or local governmental or regulatory agency, and (3) any request for information from any governmental agency that suggests such agency is investigating whether Holdings or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity;

               (iv) prompt written notice describing in reasonable detail (1) any proposed acquisition of stock, assets, or property by Holdings or any of its Subsidiaries that could reasonably be expected to (A) expose Holdings or any of its Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (B) affect the ability of Holdings or any of its Subsidiaries to maintain in full force and effect all material Governmental

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Authorizations required under any Environmental Laws for their respective operations and (2) any proposed action to be taken by Holdings or any of its Subsidiaries to modify current operations in a manner that could reasonably be expected to subject Holdings or any of its Subsidiaries to any additional material obligations or requirements under any Environmental Laws; and

               (v) with reasonable promptness, such other documents and information as from time to time may be reasonably requested by Administrative Agent in relation to any matters disclosed pursuant to this Section 5.9(a).

          (b) Hazardous Materials Activities, Etc. Each Credit Party shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure any violation of applicable Environmental Laws by such Credit Party or its Subsidiaries that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (ii) make an appropriate response to any Environmental Claim against such Credit Party or any of its Subsidiaries and discharge any obligations it may have to any Person thereunder where failure to do so could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

          (c) Each Credit Party hereby acknowledges and agrees that no Agent, Lender or other Secured Party or any of their respective officers, directors, employees, attorneys, agents and representatives (i) is now, or has ever been, in control of any Facility or any Credit Party’s affairs, and (ii) has the capacity or the authority through the provisions of the Credit Documents or otherwise to direct or influence any (A) Credit Party’s conduct with respect to the ownership, operation or management of any Facility, (B) undertaking, work or task performed by any employee, agent or contractor of any Credit Party or the manner in which such undertaking, work or task may be carried out or performed, or (C) compliance with Environmental Laws.

   5.10. Subsidiaries. In the event that any Person becomes a Domestic Subsidiary or Canadian Subsidiary of Holdings or any Domestic Subsidiary or Canadian Subsidiary of Holdings no longer qualifies as an Inactive Subsidiary, Holdings shall (a) promptly cause such Subsidiary to become a Guarantor hereunder and a Grantor under the Pledge and Security Agreement or the Canadian Pledge and Security Agreement, as applicable, by executing and delivering to Administrative Agent and Collateral Agent a Counterpart Agreement, and (b) take all such actions and execute and deliver, or cause to be executed and delivered, all such documents, instruments, agreements, and certificates as are similar to those described in Sections 3.1(c), 3.1(g), 3.1(h) and 3.1(k) and, on or after the Exit Facilities Conversion Date, 3.4(b) and 3.4(c). Except as provided in the preceding sentence, in the event that any Person becomes a Foreign Subsidiary of Holdings, and the ownership interests of such Foreign Subsidiary are owned by Holdings or by any Domestic Subsidiary thereof, Holdings shall, or shall cause such Domestic Subsidiary to, deliver, all such documents, instruments, agreements, and certificates as are similar to those described in Sections 3.1(c), and Holdings shall take, or shall cause such Domestic Subsidiary to take, all of the actions referred to in Section 3.4(c)(i) necessary to grant and to perfect a First Priority Lien in favor of Collateral Agent, for the benefit of Secured Parties, under the Pledge and Security Agreement in 65% of such Equity Interests. With respect to each such Subsidiary, Holdings shall promptly send to Administrative Agent written notice setting forth with respect to such Person (i) the date on which such Person became a Subsidiary of

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Holdings, and (ii) all of the data required to be set forth in Schedules 4.1 and 4.2 with respect to all Subsidiaries of Holdings; and such written notice shall be deemed to supplement Schedule 4.1 and 4.2 for all purposes hereof.

     5.11. Additional Real Estate Assets.

          (a) In the event that any Credit Party acquires any Leasehold Property (other than a Material Real Estate Asset), such Credit Party shall promptly use its commercially reasonable efforts to cause to be executed and delivered, at the option of Collateral Agent in its reasonable discretion, either (i) a fully executed and notarized Subordination, Non-Disturbance and Attornment Agreement or (ii) a Landlord Personal Property Access Agreement, in each case executed by the landlord of such Leasehold Property and in form and substance reasonably satisfactory to Collateral Agent.

          (b) In the event that any time on or after the Exit Facilities Conversion Date any Credit Party acquires a Material Real Estate Asset or a Real Estate Asset owned or leased on the Exit Facilities Conversion Date becomes a Material Real Estate Asset and such interest has not otherwise been made subject to the Lien of the Collateral Documents in favor of Collateral Agent, for the benefit of Secured Parties (excluding, in any event, any Real Estate Asset that is subject to a Planned Asset Sale; provided such Real Estate Asset is sold by the first anniversary of the Closing Date), then such Credit Party shall promptly take all such actions and execute and deliver, or cause to be executed and delivered, all such mortgages, documents, instruments, agreements, opinions and certificates similar to those described in Sections 3.4(b) and 3.4(c) with respect to each such Material Real Estate Asset that Collateral Agent shall reasonably request to create in favor of Collateral Agent, for the benefit of Secured Parties, a valid and, subject to any filing and/or recording referred to herein, perfected First Priority security interest in such Material Real Estate Assets. In addition to the foregoing, Borrowers shall, at the request of Collateral Agent, deliver, from time to time, to Collateral Agent such appraisals as are required by law or regulation of Real Estate Assets with respect to which Collateral Agent has been granted a Lien.

          (c) Notwithstanding the foregoing, with respect to any Leasehold Property, if compliance with the provisions of Section 5.11(b) requires the consent of or other action by the landlord with respect to such Leasehold Property and Borrowers and the applicable Subsidiaries of Borrowers have exercised commercially reasonable efforts (which shall not in any case require any Credit Party to agree to any concessions) to obtain such consent or other action but are unable to do so, then such compliance shall not be required.

     5.12. Interest Rate Protection. No later than ninety (90) days following the Exit Facilities Conversion Date and at all times thereafter until the third anniversary of the Exit Facilities Conversion Date, Holdings shall obtain and cause to be maintained protection against fluctuations in interest rates pursuant to one or more Interest Rate Agreements in form and substance reasonably satisfactory to Administrative Agent and Syndication Agent, in order to ensure that no less than 50% of the aggregate principal amount of the total Indebtedness for borrowed money of Holdings and its Subsidiaries then outstanding is either (i) subject to such Interest Rate Agreements or (ii) Indebtedness that bears interest at a fixed rate.

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     5.13. Further Assurances.

          (a) At any time or from time to time upon the request of Administrative Agent, each Credit Party will, at its expense, promptly execute, acknowledge and deliver such further documents and do such other acts and things as Administrative Agent or Collateral Agent may reasonably request in order to effect fully the provisions of the Credit Documents. In furtherance and not in limitation of the foregoing, each Credit Party shall take such actions as Administrative Agent or Collateral Agent may reasonably request from time to time to ensure that the Obligations are guarantied by the Guarantors and are secured by substantially all of the assets of Holdings, and its Subsidiaries and all of the outstanding Equity Interests of the Subsidiaries of Holdings (subject to limitations contained in the Credit Documents with respect to Foreign Subsidiaries).

          (b) Each of the Credit Parties, Administrative Agent, Collateral Agent, the Lenders and Issuing Bank shall take such actions and execute and deliver such agreements, instruments or other documents (at the sole cost and expense of the Credit Parties) as Administrative Agent may reasonably request and solely as are necessary to give effect to the provisions of Section 3.5 including amending this Agreement and the other Credit Documents to remove those provisions that apply solely to the period prior to the Exit Facilities Conversion Date; provided, however that the consent of, or other action by, any of the Lenders or the Issuing Bank is not a condition precedent to the effectiveness of the provisions of Section 3.5.

     5.14. Maintenance of Ratings. At all times, Borrowers shall use commercially reasonable efforts to maintain ratings issued by Moody’s and S&P with respect to its senior secured debt.

     5.15. Final DIP Order. Borrowers shall use their commercially reasonable efforts to ensure that the Final DIP Order with respect to the Interim DIP Order is entered by the Bankruptcy Court no later than April 13, 2007.

     5.16. Canadian Final Order. Borrowers shall use commercially reasonable efforts to ensure that the Canadian Final Order is entered by the Canadian Court no later than April 18 2007.

     5.17. Restructuring Advisers. Borrowers shall continue to retain Miller Buckfire & Co., LLC as restructuring advisers or retain such other advisor reasonably acceptable to Administrative Agent and on terms and conditions satisfactory to Administrative Agent until the Plan Effective Date.

     5.18. Financial Plan.

          (a) Borrowers hereby acknowledge and agree that (i) the delivery of an updated business plan in form and substance reasonably satisfactory to Syndication Agent was a condition precedent to the availability of the Facilities as provided in that certain Commitment Letter, dated March 16, 2007, between GSCP and Holdings, (ii) such condition precedent was not satisfied on the Closing Date and (iii) by the making of the initial Term Loans on the Closing Date, the Lenders waived the delivery of the updated business plan as a condition precedent to

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the availability of the Facilities and the obligation of the Lenders to make the initial Term Loans on the Closing Date.

          (b) In consideration of the waiver described in clause (a) above, Borrowers agree to deliver to Syndication Agent an updated business plan in form and substance satisfactory to Syndication Agent, in its reasonable discretion, by no later than April 4, 2007.

SECTION 6. NEGATIVE COVENANTS

     Each Credit Party covenants and agrees that, so long as any Commitment is in effect and until payment in full of all Obligations (other than contingent indemnification obligations for which no claim has been made) and cancellation or expiration of all Letters of Credit, such Credit Party shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6.

   6.1. Indebtedness. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except:

          (a) the Obligations;

          (b) Indebtedness of any Guarantor Subsidiary to any Borrower or to any other Guarantor Subsidiary, or of any Borrower to any other Borrower or any Guarantor Subsidiary; provided, (i) all such Indebtedness shall be evidenced by the Intercompany Note, which shall be subject to a First Priority Lien pursuant to the Pledge and Security Agreement or the Canadian Pledge and Security Agreement, (ii) all such Indebtedness shall be unsecured and subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of the Intercompany Note, and (iii) any payment by any such Guarantor Subsidiary under any guaranty of the Obligations shall result in a pro tanto reduction of the amount of any Indebtedness owed by such Subsidiary to Borrowers or to any of its Subsidiaries for whose benefit such payment is made;

          (c) Indebtedness in an aggregate principal amount not to exceed $15,000,000 incurred to finance the cash consideration payable in connection with Permitted Acquisitions consummated after the Exit Facilities Conversion Date that is (i) subordinated to the Obligations on terms (x) customary at the time for high-yield subordinated debt securities issued in a public offering or (y) reasonably acceptable to Administrative Agent, (ii) matures after, and does not require any scheduled amortization or other scheduled payments of principal prior to, the maturity date of the Term Loans (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemptions provisions satisfying the requirement of clause (iii) hereof), (iii) has terms and conditions (other than interest rate, redemption premiums and subordination terms), taken as a whole, that are (x) not materially less favorable to Borrower as the terms and conditions customary at the time for high-yield subordinated debt securities issued in a public offering or (y) reasonably acceptable to Administrative Agent and (iv) is incurred by a Borrower or a Guarantor; provided that (1) both immediately prior and after giving effect to the incurrence thereof, (x) no Default shall exist or result therefrom and (y) Holdings will be in compliance with the covenants set forth in Section 6.7 and; provided further that a

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certificate of an Authorized Officer delivered to Administrative Agent at least 5 Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that Holdings has determined in good faith that such terms and conditions satisfy the requirements of this clause (c) shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless Administrative Agent notifies Holdings in writing within 3 days of receipt of such certificate that it disagrees with such determination;

          (d) Indebtedness incurred by Holdings or any of its Subsidiaries arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guaranties or letters of credit, surety bonds or performance bonds securing the performance of Holdings or any such Subsidiary pursuant to such agreements, in connection with Permitted Acquisitions or permitted dispositions of any business, assets or Subsidiary of Holdings or any of its Subsidiaries;

          (e) Indebtedness which may be deemed to exist pursuant to any guaranties, performance, surety, statutory, appeal or similar obligations (including in connection with workers’ compensation) incurred in the ordinary course of business;

          (f) Indebtedness in respect of netting services, overdraft protections and otherwise in connection with deposit accounts;

          (g) guaranties in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of Holdings and its Subsidiaries in an aggregate amount not to exceed $1,000,000 at any time;

          (h) guaranties by any Borrower of Indebtedness of a Guarantor Subsidiary or guaranties by a Guarantor Subsidiary of Indebtedness of any Borrower or another Guarantor Subsidiary with respect, in each case, to Indebtedness otherwise permitted to be incurred pursuant to this Section 6.1; provided, that if the Indebtedness that is being guarantied is unsecured and/or subordinated to the Obligations, the guaranty shall also be unsecured and/or subordinated to the Obligations;

          (i) Indebtedness described in Schedule 6.1, but not any extensions, renewals or replacements of such Indebtedness except (i) renewals and extensions expressly provided for in the agreements evidencing any such Indebtedness as the same are in effect on the date of this Agreement and (ii) refinancings, renewals and extensions of any such Indebtedness if the terms and conditions thereof are not less favorable to the obligor thereon or to the Lenders than the Indebtedness being refinanced, renewed or extended, and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced, renewed or extended; provided, such Indebtedness permitted under the immediately preceding clause (i) or (ii) above shall not (A) include Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (B) exceed in a principal amount the Indebtedness being renewed, extended or refinanced plus the amount of any interest, premium, or penalties required to be paid thereon plus fees and expenses associated therewith or (C) be incurred, created or assumed if any Default or Event of Default has occurred and is continuing or would result therefrom;

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          (j) Indebtedness in respect of Hedge Agreements entered into in the ordinary course of business and not for speculative purposes;

          (k) Indebtedness of Allied Canada and its Subsidiaries under an unsecured working capital credit facility provided by The Bank of Nova Scotia or other Canadian lender in an amount not to exceed $2,600,000 and any (i) renewals and extensions expressly provided for in the agreements evidencing any such Indebtedness as the same are in effect on the date of this Agreement and (ii) refinancings, renewals and extensions of any such Indebtedness if the terms and conditions thereof are not less favorable to the obligor thereon or to the Lenders than the Indebtedness being refinanced, renewed or extended, and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced, renewed or extended; provided, such Indebtedness permitted under the immediately preceding clause (i) or (ii) above shall not (A) include Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (B) exceed in a principal amount the Indebtedness being renewed, extended or refinanced plus the amount of any interest, premium, or penalties required to be paid thereon plus fees and expenses associated therewith or (C) be incurred, created or assumed if any Default or Event of Default has occurred and is continuing or would result therefrom;

          (l) (i) Indebtedness with respect to Capital Leases and purchase money Indebtedness (including any such Indebtedness incurred to finance the acquisition, construction or improvement of any fixed or capital asset) in an aggregate amount not to exceed at any time $10,000,000; provided, any such Indebtedness (A) shall be secured only by the asset acquired, constructed or improved in connection with the incurrence of such Indebtedness, and (B) shall constitute not more than 100% of the aggregate consideration paid with respect to such asset; and (ii) refinancings, renewals and extensions of any such purchase money Indebtedness if the terms and conditions thereof are not less favorable to the obligor thereon or to the Lenders than the Indebtedness being refinanced, renewed or extended, and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced, renewed or extended; provided, any such refinancings, renewals and extensions shall not (A) include Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (B) exceed in a principal amount the Indebtedness being renewed, extended or refinanced plus the amount of any interest, premium, or penalties required to be paid thereon plus fees and expenses associated therewith or (C) be incurred, created or assumed if any Default or Event of Default has occurred and is continuing or would result therefrom;

          (m) (i) Indebtedness of a Person or Indebtedness attaching to assets of a Person that, in either case, becomes a Subsidiary or Indebtedness attaching to assets that are acquired by Holdings or any of its Subsidiaries, in each case after the Exit Facilities Conversion Date as the result of a Permitted Acquisition, in an aggregate amount not to exceed $10,000,000 at any one time outstanding, provided that (x) such Indebtedness existed at the time such Person became a Subsidiary or at the time such assets were acquired and, in each case, was not created in anticipation thereof and (y) such Indebtedness is not guaranteed in any respect by Holdings or any Subsidiary (other than by any such Person that so becomes a Subsidiary or that was a guarantor prior to becoming a Subsidiary), and (ii) any refinancing, refunding, renewal or extension of any Indebtedness specified in subclause (i) above, provided, that (1) the principal amount of any such Indebtedness is not increased above the principal amount thereof outstanding

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immediately prior to such refinancing, refunding, renewal or extension plus the amount of any interest, premium or penalties required to be paid thereon plus fees and expenses associated therewith, (2) the direct and contingent obligors with respect to such Indebtedness are not changed and (3) such Indebtedness shall not be secured by any assets other than the assets securing the Indebtedness being renewed, extended or refinanced;

          (n) Indebtedness of Foreign Subsidiaries in an aggregate amount not to exceed at any time $5,000,000;

          (o) Indebtedness of Holdings that is subordinated (including, without limitation, remedy standstills) to the Obligations and is payable in kind in each case on terms reasonably satisfactory to Administrative Agent that is issued to directors, officers, consultants, employees or former employees in consideration for the redemption of Equity Interests permitted by Section 6.4(d) (it being understood that any Indebtedness of Holdings incurred pursuant to this clause (p) shall not be subject to the $2,000,000 limitation set forth in Section 6.4(d);

          (p) Indebtedness of any Foreign Subsidiary to (i) any other wholly owned Foreign Subsidiary or (ii) any other Subsidiary to extent permitted as an Investment pursuant to Section 6.6(j);

          (q) Indebtedness representing insurance premiums owing in the ordinary course of business;

          (r) unsecured Indebtedness of Holdings to any Foreign Subsidiary for cash paid to Holdings in an amount not to exceed the amount of such cash paid to Holdings; provided that all such Indebtedness shall be subordinated in right of payment to the payment in full of the Obligations;

          (s) Indebtedness in an aggregate principal amount not to exceed $20,000,000 (plus any related PIK Interest incurred in connection therewith) incurred after the Exit Facilities Conversion Date to finance the cash consideration payable in connection with Permitted Acquisitions pursuant to Section 6.8(f) that (i) is subordinated to the Obligations on terms reasonably satisfactory to Administrative Agent, (ii) matures no earlier than one year after the Maturity Date, (iii) does not require any mandatory sinking fund, scheduled payment of principal or interest (other than interest payable solely in additional subordinated Indebtedness that is permitted under this Section 6.1(t) (“PIK Interest”)), mandatory redemption or redemption at the option of the holders thereof prior to the date which is no earlier than one year after the Maturity Date and (iv) is incurred by a Borrower or a Guarantor; provided that (1) both immediately prior and after giving effect to the incurrence thereof, (x) no Default shall exist or result therefrom and (y) Holdings will be in compliance with the covenants set forth in Section 6.7;

          (t) Indebtedness in the form of deferred cash payment obligations undertaken pursuant to the Plan to pre-petition unsecured creditors with respect to their claims in an aggregate amount not to exceed $1,000,000;

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          (u) Indebtedness secured solely by split dollar or other life insurance policies entered into before the Closing Date; provided that recourse for such Indebtedness is limited to the cash surrender value of such insurance polices;

          (v) other unsecured Indebtedness of Holdings and its Subsidiaries in an aggregate amount not to exceed at any time $10,000,000; and

          (w) Indebtedness to Sponsor or any Affiliate of Sponsor in an aggregate principal amount not to exceed $25,000,000 incurred to finance the purchase by Holdings or its Subsidiaries, directly or indirectly, of any Blue Thunder Equipment and the maintenance, repairs, taxes, registration fees or other fees or expenses related to the Blue Thunder Equipment or the purchase or ownership thereof; provided that such Indebtedness (i) matures no earlier than one year after the initial funding thereof; (ii) is secured solely by the Blue Thunder Equipment purchased with the proceeds of such Indebtedness; and (iii) does not require any mandatory sinking fund, scheduled payment of principal or interest, mandatory redemption or redemption at the option of the holders thereof prior to the maturity date of such Indebtedness.

     6.2. Liens. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Holdings or any of its Subsidiaries, whether now owned or hereafter acquired or licensed, or any income, profits or royalties therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income, profits or royalties under the UCC of any State, the Canadian PPSA or under any similar recording or notice statute or under the intellectual property laws, rules or procedures, except:

          (a) Liens in favor of Collateral Agent for the benefit of Secured Parties granted pursuant to any Credit Document;

          (b) Liens for Taxes not yet delinquent or are being contested as required pursuant to Section 5.3;

          (c) Liens of landlords, banks (and rights of set-off), of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law (other than any such Lien imposed pursuant to Section 401 (a)(29) or 412(n) of the Internal Revenue Code or by ERISA), in each case incurred in the ordinary course of business (i) for amounts not yet overdue or (ii) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of thirty days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts;

          (d) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money or other Indebtedness),

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so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof;

          (e) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of Holdings or any of its Subsidiaries;

          (f) any interest or title of a lessor or sublessor under any lease of real estate permitted hereunder, and leases and subleases of real property by Holdings or any of its Subsidiaries in the ordinary course of business and not interfering in any respect with the ordinary conduct of or materially detracting from the value of the business of Holdings or such Subsidiary;

          (g) Liens solely on any cash earnest money deposits made by Holdings or any of its Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;

          (h) purported Liens evidenced by the filing of precautionary UCC or Canadian PPSA financing statements relating solely to operating leases of personal property entered into in the ordinary course of business;

          (i) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

          (j) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property;

          (k) any interest or title of a licensor under any lease of patents, copyrights, trademarks, or other intellectual property rights permitted hereunder, and licenses and sublicenses of patents, copyrights, trademarks and other intellectual property rights granted by Holdings or any of its Subsidiaries in the ordinary course of business and not interfering in any respect with the ordinary conduct of or materially detracting from the value of the business of Holdings or such Subsidiary;

          (l) Liens described in Schedule 6.2;

          (m) Liens securing Indebtedness permitted pursuant to Section 6.1(l); provided any such Lien shall encumber only the asset acquired, constructed or improved with the proceeds of such Indebtedness;

          (n) bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by any Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that, unless such Liens are non-consensual and arise by operation of law, in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness;

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          (o) Liens on the assets of Foreign Subsidiaries securing Indebtedness permitted to be incurred pursuant to Section 6.1(n);

          (p) Liens arising out of judgments or awards in connection with court proceedings which do not constitute an Event of Default;

          (q) Liens securing Indebtedness permitted pursuant to Section 6.1(q) and Section 6.1(u); provided any such Lien shall encumber only the rights and interests under the insurance policy that secures such Indebtedness;

          (r) Liens securing the Existing DIP Credit Agreement Reserve Amount;

          (s) Liens securing Indebtedness permitted pursuant to Section 6.1(w); provided any such Lien shall encumber only the Blue Thunder Equipment purchased with the proceeds of such Indebtedness and any improvements made to such Blue Thunder Equipment; and

          (t) Liens that do not, individually or in the aggregate, secure obligations (or encumber property with a fair market value) in excess of $5,000,000 at any one time outstanding.

No reference herein to Liens permitted hereunder (including Permitted Liens), including any statement or provision as to the acceptability of any Liens (including Permitted Liens), shall in any way constitute or be construed as to provide for a subordination of any rights of the Agents or the Lenders hereunder or arising under any of the other Credit Documents in favor of such Liens

     6.3. No Further Negative Pledges. Except with respect to (a) specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant to an executed agreement with respect to a permitted Asset Sale and (b) restrictions by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses and similar agreements entered into in the ordinary course of business (provided that such restrictions are limited to the property or assets secured by such Liens or the property or assets subject to such leases, licenses or similar agreements, as the case may be), no Credit Party nor any of its Subsidiaries shall enter into any agreement prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired, to secure the Obligations.

     6.4. Restricted Junior Payments. No Credit Party shall, nor shall it permit any of its Subsidiaries through any manner or means or through any other Person to, directly or indirectly, declare, order, pay, make or set apart, or agree to declare, order, pay, make or set apart, any sum for any Restricted Junior Payment except that (a) any Subsidiary of Holdings may make Restricted Junior Payments to any Credit Party that is a Domestic Subsidiary of Holdings (and, in the case of a Restricted Payment by a non-wholly owned Subsidiary of Holdings, to each other owner of Equity Interests of such Subsidiary based on their relative ownership interests), (b) any Subsidiary of Holdings that is not a Subsidiary Guarantor may make Restricted Payments to any other Subsidiary of Holdings that is not a Subsidiary Guarantor, (c) Holdings may pay dividends in the form of its common Equity Interests, (d) so long as no Default or Event of Default shall

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have occurred and be continuing or shall be caused thereby, Holdings may repurchase its Equity Interests owned by directors, officers, consultants, employees and former employees of Holdings or make payments to directors, officers, consultants, employees and former employees of Holdings in connection with stock options, stock appreciation rights, “phantom” stock plans or similar equity incentives or equity based incentives pursuant to management or other incentive plans or in connection with the termination, death or disability of such directors, officers, consultants and employees in an aggregate amount not to exceed $2,000,000 (excluding the principal amount of subordinated notes issued by Holdings under Section 6.1(p)) in any Fiscal Year and (e) Holdings may make payments pursuant to a Management Agreement as permitted in accordance with Section 6.11(h).

     6.5. Restrictions on Subsidiary Distributions. Except as provided herein, no Credit Party shall, nor shall it permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary of Holdings to (a) pay dividends or make any other distributions on any of such Subsidiary’s Equity Interests owned by Holdings or any other Subsidiary of Holdings, (b) repay or prepay any Indebtedness owed by such Subsidiary to Holdings or any other Subsidiary of Holdings, (c) make loans or advances to Holdings or any other Subsidiary of Holdings, or (d) transfer, lease or license any of its property or assets to Holdings or any other Subsidiary of Holdings other than restrictions (i) in agreements evidencing Indebtedness permitted by Section 6.1(l) that impose restrictions on the property so acquired, constructed or improved, (ii) by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses, joint venture agreements and similar agreements entered into in the ordinary course of business, (iii) that are or were created by virtue of any transfer of, agreement to transfer or option or right with respect to any property, assets or Equity Interests not otherwise prohibited under this Agreement, (iv) described on Schedule 6.5, (v) in agreements or other arrangements relating to Indebtedness to the extent incurred pursuant to Section 6.1(n) of a Foreign Subsidiary of Holdings so long as such restrictions apply only to such Foreign Subsidiary and its Foreign Subsidiaries, (vi) in agreements relating to Indebtedness to the extent incurred pursuant to Section 6.1(c), or (vii) applicable to Haul Insurance.

     6.6. Investments. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, except:

          (a) Investments in Cash and Cash Equivalents;

          (b) equity Investments owned as of the Closing Date in any Subsidiary and Investments made after the Closing Date in Systems and any wholly-owned Guarantor Subsidiary of Holdings;

          (c) Investments (i) in any Securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors and (ii) deposits, prepayments and other credits to suppliers made in the ordinary course of business consistent with the past practices of Holdings and its Subsidiaries;

          (d) intercompany loans to the extent permitted under Section 6.1(b);

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          (e) Consolidated Capital Expenditures with respect to Borrowers and the Guarantors permitted by Section 6.7(d);

          (f) (i) loans to its respective employees in the ordinary course of business consistent with past practices for travel and entertainment expenses, relocation costs and similar purposes, and stock option financing in an aggregate principal amount not to exceed $2,000,000 at any time outstanding and (ii) leases of rigs to owner/operators and advances of operating expenses thereto in the ordinary course of business, provided that such advances for operating expenses shall not exceed an aggregate amount of $5,000,000 at any time outstanding;

          (g) Investments made following the Exit Facilities Conversion Date in connection with Permitted Acquisitions permitted pursuant to Section 6.8;

          (h) Hedge Agreements entered into by Borrowers or any Subsidiary and permitted pursuant to this Agreement;

          (i) Investments described in Schedule 6.6;

          (j) other Investments in Subsidiaries other than wholly-owned Guarantor Subsidiaries of Holdings in an aggregate amount not to exceed at any time $7,500,000;

          (k) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

          (l) non-cash consideration issued by the purchaser of assets in connection with a sale of such assets to the extent permitted by Section 6.8;

          (m) cashless loans to officers and directors of Holdings and its Subsidiaries to purchase Equity Interests of Holdings in the ordinary course of business;

          (n) Holdings may make investments in Haul Insurance in a maximum aggregate net amount not to exceed the greater of (i) $35,000,000 in any Fiscal Year and (ii) any amount of capital required to be maintained by Haul Insurance under the laws of its jurisdiction of incorporation or formation; and

          (o) additional Investments so long as the aggregate amount invested, loaned or advanced pursuant to this clause (determined without regard to any write-downs or write-offs of such investments, loans and advances) does not exceed $5,000,000 in the aggregate.

     Notwithstanding the foregoing, in no event shall any Credit Party make any Investment which results in or facilitates in any manner any Restricted Junior payment not otherwise permitted under the terms of Section 6.4.

   6.7. Financial Covenants.

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          (a) Interest Coverage Ratio. Holdings shall not permit the Interest Coverage Ratio as of the end of any Fiscal Quarter, beginning with the Fiscal Quarter ending June 30, 2007, to be less than the correlative ratio indicated:

Fiscal	Interest Coverage
Quarter Ending	Ratio
June 30, 2007	1.50:1.00
September 30, 2007	1.75:1.00
December 31, 2007	2.00:1.00
March 31, 2008	2.00:1.00
June 30, 2008	2.50:1.00
September 30, 2008	2.75:1.00
December 31, 2008	3.00:1.00
March 31, 2009	3.25:1.00
June 30, 2009	3.25:1.00
September 30, 2009	3.25:1.00
December 31, 2009	3.25:1.00
March 31, 2010	3.25:1.00
June 30, 2010	3.25:1.00
September 30, 2010	3.25:1.00
December 31, 2010	3.25:1.00
Thereafter	3.50:1.00

          (b) Leverage Ratio. Holdings shall not permit the Leverage Ratio as of the end of any Fiscal Quarter, beginning with the Fiscal Quarter ending June 30, 2007, to exceed the correlative ratio indicated:

Fiscal
Quarter Ending	Leverage Ratio
June 30, 2007	6.50:1.00
September 30, 2007	5.50:1.00
December 31, 2007	5.00:1.00
March 31, 2008	4.50:1.00
June 30, 2008	3.50:1.00
September 30, 2008	3.25:1.00
December 31, 2008	3.00:1.00
March 31, 2009	2.75:1.00
June 30, 2009	2.75:1.00
September 30, 2009	2.75:1.00
December 31, 2009	2.75:1.00
March 31, 2010	2.75:1.00
June 30, 2010	2.75:1.00

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Fiscal
Quarter Ending	Leverage Ratio
September 30, 2010	2.75:1.00
December 31, 2010	2.75:1.00
Thereafter	2.50:1.00

          (c) Consolidated Adjusted EBITDA. Until the Exit Facilities Conversion Date, permit Consolidated Adjusted EBITDA as of the end of any month, beginning with the month ending March 30, 2007, for the twelve month period then ended to be less than the correlative amount indicated:

	Consolidated Adjusted
Month	EBITDA
March 2007	$	46,000,000
April 2007	$	43,000,000
May 2007	$	37,000,000
June 2007	$	32,000,000
July 2007	$	32,000,000
August 2007	$	32,000,000
September 2007	$	32,000,000

          (d) Maximum Consolidated Capital Expenditures. Holdings shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Capital Expenditures in any Fiscal Year indicated below, in an aggregate amount for Holdings and its Subsidiaries in excess of the sum of (i) the corresponding amount set forth below opposite such Fiscal Year plus (ii) cash proceeds from a capital contribution to, or the issuance of any Equity Interest in, Holdings received by Holdings during such Fiscal Year and not required to be applied to prepay Loans pursuant to Section 2.14(b); provided that such proceeds are applied by Holdings no later than six months after receipt thereof plus (iii) the Permitted Carry-Forward Amount; provided however, that for purposes of this Section 6.7(d), if during any Fiscal Year (a “Base Fiscal Year”) Holdings or its Subsidiaries has entered into a legally binding commitment to make or incur Capital Expenditures during the immediately following Fiscal Year (“Committed Capital Expenditures”), Holdings and its Subsidiaries may treat up to $7,500,000 of the aggregate amount of such Committed Capital Expenditures actually expended within ninety days after the end of such Base Fiscal Year (“Spent Committed Capital Expenditures”) as being expended during such Base Fiscal Year:

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	Consolidated Capital
Fiscal Year	Expenditures
2007	$	65,000,000
2008	$	70,000,000
2009	$	70,000,000
2010	$	70,000,000
2011	$	70,000,000
2012	$	70,000,000

For purposes of this Section 6.7(d), “Permitted Carry-Forward Amount” shall mean, for any Fiscal Year, the greater of (i) 50% of the amount of Consolidated Excess Cash Flow for the immediately preceding Fiscal Year not required to prepay the Loans pursuant to Section 2.14(d) and (ii) the amount equal to the excess, if any, (but in no event more than 50%) of the corresponding amount of permitted Consolidated Capital Expenditures for the immediately preceding Fiscal Year set forth in the chart above over the sum of (A) the actual amount of Consolidated Capital Expenditures for such previous Fiscal Year plus (B) the amount of Spent Committed Capital Expenditures actually made within ninety days after the end of such previous Fiscal Year.

Notwithstanding the foregoing, any purchase by Holdings or its Subsidiaries, directly or indirectly, of the Blue Thunder Equipment and any maintenance, repairs, taxes, registration fees or other fees or expenses related to the Blue Thunder Equipment or the purchase or ownership thereof, in each case made during the 2007 Fiscal Year in an amount up to $25,000,000 shall not be counted against the Consolidated Capital Expenditures limitation for the 2007 Fiscal Year as set forth above.

          (e) Certain Calculations. With respect to any period during which a Permitted Acquisition or an Asset Sale has occurred (each, a “Subject Transaction”) and (a) such Transaction is equal to or less than $5,000,000, Borrowers may elect, at the time of the closing of such Subject Transaction, by providing written notice to Administrative Agent, to include pro forma calculations with respect to such Subject Transaction and (b) such Transaction is greater than $5,000,000 Borrowers shall, in each case for purposes of determining compliance with the financial covenants set forth in this Section 6.7, Consolidated Adjusted EBITDA shall be calculated with respect to such period on a pro forma basis (including pro forma adjustments arising out of events which are directly attributable to a specific transaction, are factually supportable and are expected to have a continuing impact, in each case determined on a basis consistent with Article 11 of Regulation S-X promulgated under the Securities Act and as interpreted by the staff of the Securities and Exchange Commission, which would include cost savings resulting from head count reduction, closure of facilities and similar restructuring charges, which pro forma adjustments shall be certified by the chief financial officer of Holdings) using the historical (audited, if available) financial statements of any business so acquired or to be acquired or sold or to be sold and the consolidated financial statements of Holdings and its Subsidiaries which shall be reformulated as if such Subject Transaction, and any Indebtedness incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period (and assuming that such Indebtedness bears interest during any portion of the applicable measurement period prior to the relevant acquisition at the

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weighted average of the interest rates applicable to outstanding Loans incurred during such period).

     6.8. Fundamental Changes; Disposition of Assets; Acquisitions. No Credit Party shall, nor shall it permit any of its Subsidiaries (other than Inactive Subsidiaries) to, enter into any transaction of merger, amalgamation or consolidation, reorganization or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or license, exchange, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, assets or property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, whether now owned or hereafter acquired, leased or licensed, or acquire by purchase or otherwise (other than purchases or other acquisitions of inventory, materials and equipment and Capital Expenditures in the ordinary course of business) the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person or any division or line of business or other business unit of any Person, except:

          (a) any Subsidiary of Holdings may be merged or amalgamated with or into Holdings or any Subsidiary of Holdings, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Holdings or any Subsidiary; provided, in the case of such a merger or amalgamation, (i) if any Borrower is a party to such merger or amalgamation, such Borrower shall be the continuing or surviving Person and (ii) subject to the foregoing clause (i), if any Guarantor Subsidiary is a party to such merger or amalgamation, such Guarantor Subsidiary shall be the continuing or surviving Person;

          (b) upon no less than thirty (30) days prior written notice to Administrative Agent, Holdings may merge with and into any Subsidiary, if the sole purpose and effect of such merger is to effect a so-called “reincorporation merger” in which the surviving corporation will be incorporated in the State of Delaware and if all of the following conditions are met: (i) no Default or Event of Default shall exist at the time of and after giving effect to such merger, (ii) the Collateral Agent’s Liens on the Collateral shall remain a perfected First Priority Lien, and Holdings shall cause the surviving corporation to execute and deliver to Administrative Agent such documents, instruments, financing statements, and amendments to Loan Documents as Administrative Agent or Collateral Agent may reasonably request to continue the perfection and priority of the Collateral Agent’s Liens on the Collateral;

          (c) sales or other dispositions of assets that do not constitute Asset Sales;

          (d) Asset Sales, the proceeds of which (valued at the principal amount thereof in the case of non-Cash proceeds consisting of notes or other debt Securities and valued at fair market value in the case of other non-Cash proceeds) when aggregated with the proceeds of all other Asset Sales made within the same Fiscal Year, are no more than $7,500,000 and when aggregated with the proceeds of all other Asset Sales made since the Closing Date, are not more than $15,000,000; provided (1) the consideration received for such assets shall be in an amount at least equal to the fair market value thereof (determined in good faith by the board of directors of Holdings (or similar governing body) or an Executive Officer of Holdings authorized by such governing body), (2) no less than 75% thereof shall be paid in Cash, and (3) the Net Asset Sale Proceeds thereof shall be applied as required by Section 2.14(a);

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          (e) disposals of obsolete, worn out or surplus property;

          (f) Permitted Acquisitions consummated following the Exit Facilities Conversion Date, the consideration for which constitutes (i) not more than $10,000,000 in the aggregate in any Fiscal Year, and (ii) not more than $25,000,000 in the aggregate from the Closing Date to the date of determination;

          (g) Permitted Acquisitions consummated following the Exit Facilities Conversion Date, the cash consideration for which constitutes not more than $60,000,000 in the aggregate from the Closing Date to the date of determination; provided that (1) the cash consideration for such Permitted Acquisitions are funded solely with the proceeds of (i) the sale by Holdings of Equity Interests (other than Disqualified Equity Interests) to Sponsor or one of its Controlled Investment Affiliates and/or (ii) Indebtedness permitted pursuant to Sections 6.1(c) and 6.1(s) and (2) no less than 35% of the cash consideration for such Permitted Acquisitions are funded with the proceeds of Equity Interests described in clause (i) of this proviso;

          (h) Investments made in accordance with Section 6.6;

          (i) any Foreign Subsidiary of Holdings may be merged with or into a wholly-owned Foreign Subsidiary of Holdings, or be liquidated, wound up or dissolve, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to a wholly owned Foreign Subsidiary of Holdings;

          (j) the Planned Asset Sales as described on Schedule 6.8(a);

          (k) sale of terminal locations or related real estate which is no longer needed or useful in the business of the Credit Parties and having a value, in the case of any single parcel or related series of parcels sold in one transaction or a series of transaction, does not exceed $1,500,000; and

          (l) transactions expressly provided for in the Plan to occur on or substantially contemporaneously with the Plan Effective Date and described on Schedule 6.8(b).

     6.9. Disposal of Subsidiary Interests. Except for any sale of all of its interests in the Equity Interests of any of its Subsidiaries in compliance with the provisions of Section 6.8 and Liens permitted under Sections 6.2(a) no Credit Party shall, nor shall it permit any of its Subsidiaries to, (a) directly or indirectly sell, assign, pledge or otherwise encumber or dispose of any Equity Interests of any of its Subsidiaries, except to qualify directors if required by applicable law; or (b) permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or otherwise encumber or dispose of any Equity Interests of any of its Subsidiaries, except to another Credit Party (subject to the restrictions on such disposition otherwise imposed hereunder), or to qualify directors if required by applicable law.

     6.10. Sales and Lease-Backs. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease of any property (whether real, personal or mixed), whether now owned or hereafter acquired, which such Credit Party (a) has sold or transferred or is to sell or to

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transfer to any other Person (other than Holdings or any of its Subsidiaries), or (b) intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by such Credit Party to any Person (other than Holdings or any of its Subsidiaries) in connection with such lease unless (1) the sale of such property is permitted pursuant to Section 6.8 and (2) any Capital Lease or Liens arising in connection therewith are permitted by Sections 6.1 and 6.2, as the case may be.

     6.11. Transactions with Shareholders and Affiliates. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of Holdings on terms that are less favorable to Holdings or that Subsidiary, as the case may be, than those that might be obtained at the time from a Person who is not such a holder or Affiliate; provided, the foregoing restriction shall not apply to (a) any transaction between or among the Credit Parties; (b) reasonable and customary fees paid to members of the board of directors (or similar governing body) of Holdings and its Subsidiaries; (c) compensation arrangements for officers and other employees of Holdings and its Subsidiaries entered into in the ordinary course of business; (d) transactions described in Schedule 6.11; (e) Restricted Junior Payments permitted pursuant to Section 6.4 (other than those permitted under Section 6.4(d)), (f) Investments may be made to the extent permitted by Sections 6.1(p) and 6.6(j), (g) the provision of officers’ and directors indemnification and insurance in the ordinary course of business to the extent permitted by applicable law, (h) after the Exit Facilities Conversion Date, payments of management fees pursuant to a Management Agreement in an aggregate amount not to exceed $1,500,000 per Fiscal Year plus reasonable out-of-pocket expenses of the manager thereunder; provided that (A) the payments of such amounts shall be subordinated to the Obligations on terms reasonably satisfactory to Administrative Agent, (B) no Default or Event of Default shall have occurred and be continuing at the time of such payments or shall be caused thereby, (C) the Leverage Ratio as of the last day of the Fiscal Quarter most recently ended for which financial statements have been delivered pursuant to Section 5.1(b) or Section 5.1(c) shall not exceed 1.75:1.00 and (D) the Consolidated Excess Cash Flow for the Fiscal Year most recently ended shall be greater than $0; (i) customary cash management arrangements with Foreign Subsidiaries in the ordinary course of business; and (i) sale for less than fair market value to management of Holdings or any Subsidiary of any common Equity Interests of Holdings. Conduct of Business. From and after the Closing Date, no Credit Party shall, nor shall it permit any of its Subsidiaries to, engage in any business other than (i) the businesses engaged in by such Credit Party on the Closing Date and similar or related businesses and (ii) such other lines of business as may be consented to by Requisite Lenders.

     6.13. Amendments or Waivers of Organizational Documents and Certain Agreements. No Credit Party shall, nor shall it permit any of its Subsidiaries to, agree to any amendment, restatement, supplement or other modification to, or waiver of, any of its Organizational Documents, any Management Agreement or, after the Exit Facilities Conversion Date, any of its rights under the Plan which in each case is materially adverse to the Lenders, without in each case obtaining the prior written consent of Requisite Lenders to such amendment, restatement, supplement or other modification or waiver.

     6.14. Haul Insurance. Haul Insurance shall have no assets or liabilities other than those associated with the provision of insurance and services related thereto, and shall not conduct and

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or engage in any business activities other than such business and activities as they relate to the provision of insurance and services related thereto substantially all of which insurance and related services are provided for the benefit of Holdings or their Subsidiaries. The insurance and related services of Haul Insurance not provided for the benefit of Holdings or its Subsidiaries shall be provided to third parties and the insurance premiums charged and collected with respect thereto shall be segregated from any cash or other assets of Holdings and its other Subsidiaries. Haul Insurance shall take appropriate measures (through reinsurance and other appropriate means) to reduce the insurance risk and exposure relating to such third party insurance to an amount not in excess of the capital provided to support such activities.

     6.15. Chapter 11 Claims; Adequate Protection. Prior to the Exit Facilities Conversion Date, no Credit Party shall, nor shall it permit any of its Subsidiaries to, incur, create, assume, suffer to exist or permit (other than those existing, and disclosed to Syndication Agent, on the date hereof) any (i) administrative expense, unsecured claim, or other super-priority claim or Lien (except Permitted Liens) that is pari passu with or senior to the claims of the Secured Parties against the Credit Parties hereunder, or apply to the Bankruptcy Court or the Canadian Court for authority to do so, except for the Carve-Out, or (ii) obligation to make adequate protection payments, or otherwise provide adequate protection, other than as approved by the Requisite Lenders.

     6.16. DIP Orders and Canadian Orders. Prior to the Exit Facilities Conversion Date, no Credit Party shall make or permit to be made any change, amendment or modification, or any application or motion for any change, amendment or modification, to the Interim DIP Order, the Final DIP Order, the Canadian Interim Order or Canadian Final Order, other than as approved in writing by the Requisite Lenders.

     6.17. Limitation on Prepayments of Pre-Petition Obligations. Prior to the Exit Facilities Conversion Date, and except as otherwise permitted pursuant to the Interim DIP Order, the Final DIP Order, the Canadian Interim Order, Canadian Final Order, the order of the Bankruptcy Court granting Debtors’ Motion for Authority to Pay Prepetition Automobile Liability Claims and to Enter into a Corrective Endorsement with Respect to One of the Automobile Policies” entered on September 25, 2006 or otherwise consented to by the Requisite Lenders, no Credit Party shall (i) make any payment or prepayment on or redemption or acquisition for value (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) of any Prepetition Indebtedness or other pre-Petition Date obligations of any Credit Party, (ii) pay any interest on any pre-Petition Date Indebtedness of any Credit Party (whether in cash, in kind securities or otherwise), or (iii) make any payment or create or permit any Lien pursuant to Section 361 of the Bankruptcy Code (or pursuant to any other provision of the Bankruptcy Code authorizing adequate protection), or apply to the Bankruptcy Court or the Canadian Court for the authority to do any of the foregoing; provided, that (x) Borrowers may make payments for administrative expenses that are allowed and payable under Sections 328, 330 and 331 of the Bankruptcy Code, and (y) Borrowers may make payments permitted by the order of the Bankruptcy Court entered prior to March 16, 2007. In addition, no Credit Party shall permit any

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of its Subsidiaries to make any payment, redemption or acquisition which such Credit Party is prohibited from making under the provisions of this Section 6.17.

     6.18. Fiscal Year. No Credit Party shall, nor shall it permit any of its Subsidiaries to change its Fiscal Year-end from December 31.

     6.19. Repayment of Indebtedness. Except pursuant to the Plan and except as specifically permitted hereunder, prior to the Exit Facilities Conversion Date no Credit Party shall make any payment or transfer with respect to any Lien or Indebtedness incurred or arising prior to the filing of the Cases that is subject to the automatic stay provisions of the Bankruptcy Code or the Canadian Stay Order whether by way of “adequate protection” under the Bankruptcy Code or otherwise except pursuant to an order of the Bankruptcy Court or the Canadian Court after notice and hearing.

     6.20. Reclamation Claims. No Credit Party shall hereafter enter into any agreement to return any of its inventory to any of its creditors for application against any Prepetition Indebtedness, trade payables incurred prior to the Petition Date or other prepetition claims under Section 546(g) of the Bankruptcy Code or otherwise or allow any creditor to take any setoff or recoupment against such Prepetition Indebtedness, trade payables incurred prior to the Petition Date or other prepetition claims based upon any such return pursuant to Section 553(b)(1) of the Bankruptcy Code or otherwise if, after giving effect to any such agreement, setoff or recoupment, the aggregate amount of Prepetition Indebtedness, prepetition trade payables and other prepetition claims subject to all such agreements, setoffs and recoupments since the Petition Date would exceed $400,000. Subject to the foregoing limitation, Borrowers shall be permitted to make payments in respect of trade payables incurred prior to the Petition Date and wages, commissions and benefits owed to employees and independent contractors that are in the ordinary course of business so long as such payments are consistent with orders entered prior to March 17, 2006 and are approved by the Bankruptcy Court.

     6.21. Chapter 11 Claims. No Credit Party shall incur, create, assume, suffer to exist or permit any other super-priority administrative claim which is pari passu with or senior to the claims of Agents and Lenders against Borrowers and the other Credit Parties, except as set forth in Section 2.24.

SECTION 7. GUARANTY

     7.1. Guaranty of the Obligations. Subject to the provisions of Section 7.2, Guarantors jointly and severally hereby irrevocably and unconditionally guaranty to Administrative Agent for the ratable benefit of the Beneficiaries the due and punctual payment in full of all Obligations when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a) or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect) (collectively, the “Guaranteed Obligations”).

     7.2. Contribution by Guarantors. All Guarantors desire to allocate among themselves (collectively, the “Contributing Guarantors”), in a fair and equitable manner, their obligations

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arising under this Guaranty. Accordingly, in the event any payment or distribution is made on any date by a Guarantor (a “Funding Guarantor”) under this Guaranty such that its Aggregate Payments exceeds its Fair Share as of such date, such Funding Guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in an amount sufficient to cause each Contributing Guarantor’s Aggregate Payments to equal its Fair Share as of such date. “Fair Share” means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (a) the ratio of (i) the Fair Share Contribution Amount with respect to such Contributing Guarantor to (ii) the aggregate of the Fair Share Contribution Amounts with respect to all Contributing Guarantors multiplied by (b) the aggregate amount paid or distributed on or before such date by all Funding Guarantors under this Guaranty in respect of the obligations Guaranteed. “Fair Share Contribution Amount” means, with respect to a Contributing Guarantor as of any date of determination, the maximum aggregate amount of the obligations of such Contributing Guarantor under this Guaranty that would not render its obligations hereunder or thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; provided, solely for purposes of calculating the “Fair Share Contribution Amount” with respect to any Contributing Guarantor for purposes of this Section 7.2, any assets or liabilities of such Contributing Guarantor arising by virtue of any rights to subrogation, reimbursement or indemnification or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Contributing Guarantor. “Aggregate Payments” means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (1) the aggregate amount of all payments and distributions made on or before such date by such Contributing Guarantor in respect of this Guaranty (including in respect of this Section 7.2), minus (2) the aggregate amount of all payments received on or before such date by such Contributing Guarantor from the other Contributing Guarantors as contributions under this Section 7.2. The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. The allocation among Contributing Guarantors of their obligations as set forth in this Section 7.2 shall not be construed in any way to limit the liability of any Contributing Guarantor hereunder. Each Guarantor is a third party beneficiary to the contribution agreement set forth in this Section 7.2.

     7.3. Payment by Guarantors. Subject to Section 7.2, Guarantors hereby jointly and severally agree, in furtherance of the foregoing and not in limitation of any other right which any Beneficiary may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of Borrowers to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a) or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect), Guarantors will upon demand pay, or cause to be paid, in Cash, to Administrative Agent for the ratable benefit of Beneficiaries, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for Borrowers’ becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against Borrowers for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to Beneficiaries as aforesaid.

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     7.4. Liability of Guarantors Absolute. Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows:

          (a) this Guaranty is a guaranty of payment when due and not of collectability. This Guaranty is a primary obligation of each Guarantor and not merely a contract of surety;

          (b) Administrative Agent may enforce this Guaranty upon the occurrence of an Event of Default notwithstanding the existence of any dispute between Borrowers and any Beneficiary with respect to the existence of such Event of Default;

          (c) the obligations of each Guarantor hereunder are independent of the obligations of Borrowers and the obligations of any other guarantor (including any other Guarantor) of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against such Guarantor whether any or not any action is brought against Borrowers or any of such other guarantors and whether or not any Borrower is joined in any such action or actions;

          (d) payment by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge any Guarantor’s liability for any portion of the Guaranteed Obligations which has not been paid. Without limiting the generality of the foregoing, if Administrative Agent is awarded a judgment in any suit brought to enforce any Guarantor’s covenant to pay a portion of the Guaranteed Obligations, such judgment shall not be deemed to release such Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit, and such judgment shall not, except to the extent satisfied by such Guarantor, limit, affect, modify or abridge any other Guarantor’s liability hereunder in respect of the Guaranteed Obligations;

          (e) any Beneficiary, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person (including any other Guarantor) with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of such Beneficiary in respect hereof or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that such Beneficiary may have against any such security, in each case as such Beneficiary in its discretion may determine

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consistent herewith or the applicable Hedge Agreement and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantor against Borrowers or any security for the Guaranteed Obligations; (vi) exercise the Exit Facilities Option; and (vii) exercise any other rights available to it under the Credit Documents or any Hedge Agreements; and

          (f) this Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under the Credit Documents or any Hedge Agreements, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) hereof, any of the other Credit Documents, any of the Hedge Agreements or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or such Credit Document, such Hedge Agreement or any agreement relating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Credit Documents or any of the Hedge Agreements or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as collateral for indebtedness other than the Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed Obligations, even though any Beneficiary might have elected to apply such payment to any part or all of the Guaranteed Obligations; (v) any Beneficiary’s consent to the change, reorganization or termination of the corporate structure or existence of Holdings or any of its Subsidiaries and to any corresponding restructuring of the Guaranteed Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) any defenses, set-offs or counterclaims which Borrowers may allege or assert against any Beneficiary in respect of the Guaranteed Obligations, including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any Guarantor as an obligor in respect of the Guaranteed Obligations.

     7.5. Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of Beneficiaries: (a) any right to require any Beneficiary, as a condition of payment or performance by such Guarantor, to (i) proceed against Borrowers, any other guarantor (including any other Guarantor) of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from Borrowers, any such other guarantor or any other Person, (iii) proceed

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against or have resort to any balance of any Deposit Account or credit on the books of any Beneficiary in favor of Borrowers or any other Person, or (iv) pursue any other remedy in the power of any Beneficiary whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Borrowers or any other Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Borrowers or any other Guarantor from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon any Beneficiary’s errors or omissions in the administration of the Guaranteed Obligations, except behavior which amounts to willful misconduct, gross negligence or bad faith; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantor’s obligations hereunder, (ii) the benefit of any statute of limitations affecting such Guarantor’s liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that any Beneficiary protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default hereunder, the Hedge Agreements or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to Borrowers and notices of any of the matters referred to in Section 7.4 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof.

     7.6. Guarantors’ Rights of Subrogation, Contribution, etc. Until the Guaranteed Obligations (other than contingent indemnification obligations for which no claim has been made) shall have been indefeasibly paid in full and the Revolving Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled, each Guarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against Borrowers or any other Guarantor or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against Borrowers with respect to the Guaranteed Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that any Beneficiary now has or may hereafter have against Borrowers, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Beneficiary. In addition, until the Guaranteed Obligations (other than contingent indemnification obligations for which no claim has been made) shall have been indefeasibly paid in full and the Revolving Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor (including any other Guarantor) of the Guaranteed Obligations, including any such right of contribution as contemplated by Section 7.2. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth

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herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against Borrowers or against any collateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights any Beneficiary may have against Borrowers, to all right, title and interest any Beneficiary may have in any such collateral or security, and to any right any Beneficiary may have against such other guarantor. If any amount shall be paid to any Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Guaranteed Obligations (other than contingent indemnification obligations for which no claim has been made) shall not have been finally and indefeasibly paid in full, such amount shall be held in trust for Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over to Administrative Agent for the benefit of Beneficiaries to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof.

     7.7. Subordination of Other Obligations. Any Indebtedness of Borrowers or any Guarantor now or hereafter held by any Guarantor (the “Obligee Guarantor”) is hereby subordinated in right of payment to the Guaranteed Obligations, and any such Indebtedness collected or received by the Obligee Guarantor after an Event of Default has occurred and is continuing shall be held in trust for Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over to Administrative Agent for the benefit of Beneficiaries to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other provision hereof.

     7.8. Continuing Guaranty. This Guaranty is a continuing guaranty and shall remain in effect until all of the Guaranteed Obligations shall have been paid in full and the Revolving Commitments and LC Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guaranteed Obligations.

     7.9. Authority of Guarantors or Borrowers. It is not necessary for any Beneficiary to inquire into the capacity or powers of any Guarantor or any Borrower or the officers, directors or any agents acting or purporting to act on behalf of any of them.

     7.10. Financial Condition of Borrowers. Any Credit Extension may be made to any Borrower or continued from time to time, and any Hedge Agreements may be entered into from time to time, in each case without notice to or authorization from any Guarantor regardless of the financial or other condition of Borrowers at the time of any such grant or continuation or at the time such Hedge Agreement is entered into, as the case may be. No Beneficiary shall have any obligation to disclose or discuss with any Guarantor its assessment, or any Guarantor’s assessment, of the financial condition of Borrowers. Each Guarantor has adequate means to obtain information from Borrowers on a continuing basis concerning the financial condition of any Borrower and their ability to perform its obligations under the Credit Documents and the Hedge Agreements, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of Borrowers and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty on the part of any Beneficiary to disclose any matter, fact or thing relating to the

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business, operations or conditions of Borrowers now known or hereafter known by any Beneficiary.

     7.11. Bankruptcy, etc.

          (a) So long as any Guaranteed Obligations (other than contingent indemnification obligations for which no claim has been made) remain outstanding, no Guarantor shall, without the prior written consent of Administrative Agent acting pursuant to the instructions of Requisite Lenders, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency case or proceeding of or against Borrowers or any other Guarantor. The obligations of Guarantors hereunder shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any case or proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Borrowers or any other Guarantor or by any defense which Borrowers or any other Guarantor may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding.

          (b) Each Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any case or proceeding referred to in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of Guarantors and Beneficiaries that the Guaranteed Obligations which are guaranteed by Guarantors pursuant hereto should be determined without regard to any rule of law or order which may relieve Borrowers of any portion of such Guaranteed Obligations. Guarantors will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar Person to pay Administrative Agent, or allow the claim of Administrative Agent in respect of, any such interest accruing after the date on which such case or proceeding is commenced.

          (c) In the event that all or any portion of the Guaranteed Obligations are paid by Borrowers, the obligations of Guarantors hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from any Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder.

     7.12. Discharge of Guaranty Upon Sale of Guarantor. (a) If all of the Equity Interests of any Guarantor or any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or consolidation) in accordance with the terms and conditions hereof, the Guaranty of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released without any further action by any Beneficiary or any other Person effective as of the time of such Asset Sale.

          (b) Notwithstanding anything to the contrary in this Agreement or the other Loan Documents, if at any time after the Exit Facilities Conversion Date, the Guaranty of any

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Canadian Subsidiary that is a Controlled Foreign Subsidiary causes, or is reasonably expected to cause, material adverse tax consequences to Holdings and its Domestic Subsidiaries, taken as a whole, then the Guaranty of such Canadian Subsidiary shall be discharged and released by Administrative Agent without any further action by any Beneficiary or any other Person; provided that in the event (whether as a result of an amendment of the Internal Revenue Code or otherwise) a Guaranty by such Canadian Subsidiary thereafter would not result in material adverse tax consequences to Holdings and its Domestic Subsidiaries, upon the request of Administrative Agent, such Canadian Subsidiary shall again become a Guarantor hereunder by executing a Counterpart Agreement and taking the actions required pursuant to Section 5.10.

SECTION 8. EVENTS OF DEFAULT; CARVE-OUT EVENT

     8.1. Events of Default. If any one or more of the following conditions or events shall occur:

          (a) Failure to Make Payments When Due. Failure by Borrowers to pay (i) when due any installment of principal of any Loan, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; (ii) when due any amount payable in reimbursement of any LC Disbursement; or (iii) any interest on any Loan or any fee or any other amount due hereunder within three Business Days after the date due; or

          (b) Default in Other Agreements. (i) Failure of any Credit Party or any of their respective Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than (x) Indebtedness referred to in Section 8.1(a) and (y) during the pendency of the Cases, Indebtedness incurred prior to the commencement of the Cases) with an aggregate principal amount of $7,500,000 or more, in each case beyond the grace period, if any, provided therefor; or (ii) breach or default by any Credit Party with respect to any other material term of (1) one or more items of Indebtedness in the aggregate principal amount referred to in clause (i) above or (2) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness, in each case beyond the grace period, if any, provided therefor, if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders), to cause, that Indebtedness to become or be declared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or

          (c) Breach of Certain Covenants. Failure of any Credit Party to perform or comply with any term or condition contained in Section 2.6, Sections 5.1(a), 5.1(b), 5.1(c), 5.1(d) and 5.1(f), Section 5.2, 5.15, 5.16, 5.17, 5.18 or Section 6; or

          (d) Breach of Representations, etc. Any representation, warranty, certification or other statement made or deemed made by any Credit Party in any Credit Document or in any statement or certificate at any time given by any Credit Party or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect as of the date made or deemed made; or

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          (e) Other Defaults Under Credit Documents. Any Credit Party shall default in the performance of or compliance with any term contained herein or any of the other Credit Documents (other than any Mortgage), other than any such term referred to in any other Section of this Section 8.1, and such default shall not have been remedied or waived within thirty days after the earlier of (i) an Authorized Officer of such Credit Party becoming aware of such default or (ii) receipt by any Borrower of notice from Administrative Agent or any Lender of such default; or

          (f) Involuntary Bankruptcy; Appointment of Receiver, etc. Following the Exit Facilities Conversion Date, (i) a court of competent jurisdiction shall enter a decree or order for relief in respect of Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) in an involuntary case or application under the Bankruptcy Code, Canadian Insolvency Law or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal, state, or provincial law; or (ii) an involuntary case or application shall be commenced against Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) under the Bankruptcy Code, Canadian Insolvency Law or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, receiver-manager, interim receiver, monitor, administrator, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Holdings or any of its Subsidiaries, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of a receiver, receiver-manager, interim receiver, monitor, administrator, liquidator, sequestrator, trustee, or other custodian of Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Holdings or any of its Subsidiaries (other than any Inactive Subsidiary), and any such event described in this clause (ii) shall continue for sixty days without having been dismissed, bonded or discharged; or

          (g) Voluntary Bankruptcy; Appointment of Receiver, etc. Following the Exit Facilities Conversion Date, (i) Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) shall have an order for relief entered with respect to it or shall commence a voluntary case or application under the Bankruptcy Code, Canadian Insolvency Law or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, including, without limitation, filing a notice of intention to make a proposal pursuant to the BIA or shall consent to the entry of an order for relief in an involuntary case or application, or to the conversion of an involuntary case or application to a voluntary case or application, under any such law, or shall consent to the appointment of or taking possession by a receiver, receiver-manager, interim receiver, monitor, administrator, liquidator, sequestrator, trustee or other custodian for all or a substantial part of its property; or Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) shall make any assignment for the benefit of creditors; or (ii) Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the board of directors (or similar governing body) of Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to herein or in Section 8.1(f); or

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          (h) Defaults Under Mortgages. Any Event of Default under and as defined in any Mortgage which would reasonably be expected to impair or adversely affect Collateral Agent’s ability to realize upon the Real Estate subject to such Mortgage shall occur and be continuing.

          (i) Judgments and Attachments. Any money judgment, writ or warrant of attachment or similar process involving in the aggregate at any time an amount in excess of $7,500,000 (in either case to the extent not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Holdings or any of its Subsidiaries or any of their respective assets (other than the allowance of claims in the Cases) and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty days (or in any event later than five days prior to the date of any proposed sale thereunder); or

          (j) Dissolution. Any order, judgment or decree shall be entered against any Credit Party decreeing the winding up, dissolution or split up of such Credit Party and such order shall remain undischarged or unstayed for a period in excess of thirty days; or

          (k) Employee Benefit Plans. (i) There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $7,500,000 during the term hereof; or (ii) there exists any fact or circumstance that reasonably could be expected to result in the imposition of a Lien or security interest under Section 412(n) of the Internal Revenue Code or under ERISA, which individually or in the aggregate results in or might reasonably be expected to result in liability of Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $2,000,000 during the term hereof; or

          (l) Change of Control. A Change of Control shall occur; or

          (m) Guaranties, Collateral Documents and other Credit Documents. At any time after the execution and delivery thereof, (i) the Guaranty for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void or any Guarantor shall repudiate its obligations thereunder, (ii) this Agreement or any Collateral Document ceases to be in full force and effect (other than by reason of a release of Collateral in accordance with the terms hereof or thereof or the satisfaction in full of the Obligations in accordance with the terms hereof) or shall be declared null and void, or Collateral Agent shall not have or shall cease to have a valid and perfected Lien in any Collateral purported to be covered by the Collateral Documents with the priority required by the relevant Collateral Document, in each case for any reason other than the failure of Collateral Agent or any Secured Party to take any action within its control, or (iii) any Credit Party shall contest the validity or enforceability of any Credit Document in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Credit Document to which it is a party or shall contest the validity or perfection of any Lien in any Collateral purported to be covered by the Collateral Documents; or

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          (n) Prior to the Exit Facilities Conversion Date, any Case shall be dismissed or converted to a case under Chapter 7 of the Bankruptcy Code, or any Credit Party shall file any pleading requesting dismissal or there shall be filed a motion or other pleading seeking the termination of any of the proceedings pursuant to section 18.6 of the CCAA in respect of any of the Canadian Credit Parties; or a motion, any plan of reorganization or disclosure statement shall be filed by any Credit Party or any other action shall be taken by any Credit Party in any of the Cases, for the approval of (i) additional financing under Section 364(c) or (d) of the Bankruptcy Code not otherwise permitted pursuant to this Agreement or (ii) the granting of any Lien (other than Permitted Liens or Liens expressly permitted in the Interim DIP Order, the Final DIP Order, the Canadian Interim Order or the Canadian Final Order) upon or affecting any Collateral which are pari passu or senior to the Liens on the Collateral in favor of the Collateral Agent, for the benefit of Agent and Lenders, or (iii) any other action or actions adverse to Administrative Agent’s, the Syndication Agent’s, the Collateral Agent’s or Lenders’ interests under any Credit Document or their rights and remedies hereunder or their interest in the Collateral; or

          (o) Prior to the Exit Facilities Conversion Date, the Bankruptcy Court shall enter an order in any of the Cases granting (i) any other claim having priority senior to or pari passu with the claims of the Lenders under the Credit Documents or any other claim having priority over any or all administrative expenses of the kind specified in clause (b) of Section 503 or clause (b) of Section 507 of the Bankruptcy Code (other than the Carve-Out) or (ii) any Lien on the Collateral having a priority senior to or pari passu with the Liens and security interests granted herein, except as expressly provided herein, in the Interim DIP Order, the Final DIP Order, the Canadian Interim Order or the Canadian Final Order; or

          (p) Prior to the Exit Facilities Conversion Date, any Credit Party shall pay any prepetition Claim without the consent of Administrative Agent unless otherwise permitted pursuant to Section 6.17 of this Agreement; or

          (q) Prior to the Exit Facilities Conversion Date, the Bankruptcy Court or Canadian Court shall enter an order granting relief from the automatic stay applicable under Section 362 of the Bankruptcy Code or the Canadian Stay Order to any holder of any security interest to permit foreclosure on any assets having a book value in excess of $1,000,000 in the aggregate; or

          (r) Prior to the Exit Facilities Conversion Date, (i) any Credit Party shall fail to comply with the terms of the Interim DIP Order, the Final DIP Order, the Canadian Interim Order or the Canadian Final Order in any material respect, (ii) the Interim DIP Order, the Final DIP Order, the Canadian Interim Order or the Canadian Final Order shall be amended, supplemented, stayed, reversed, vacated or otherwise modified in any respect adverse to the Lenders without the written consent of the Requisite Lenders, or (iii) any Credit Party shall file a motion for reconsideration with respect to the Interim DIP Order, the Final DIP Order, the Canadian Interim Order or the Canadian Final Order; or

          (s) Prior to the Exit Facilities Conversion Date, the Bankruptcy Court shall enter an order appointing a trustee under Chapter 7 or Chapter 11 of the Bankruptcy Code, or a responsible officer or an examiner with enlarged powers relating to the operation of the business (powers beyond those set forth in subclauses (3) and (4) of clause (a) of Section 1106 of the Bankruptcy Code) under clause (b) of Section 1106 of the

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Bankruptcy Code in the Cases ; or, in Canada, the appointment of a receiver, receiver-manager, interim receiver or trustee in bankruptcy in respect of any Credit Party; or

          (t) Prior to the Exit Facilities Conversion Date, a plan or reorganization (other than the Plan) is filed and both (i) the treatment of the claims of the Agents and Lenders in such plan of reorganization is not approved by Administrative Agent and the Syndication Agent and (ii) except as contemplated by Section 3.5, such plan of reorganization does not provide for the payment in full in cash of the Obligations on or prior to the date of consummation thereof; or

          (u) Prior to the Exit Facilities Conversion Date, the Credit Parties or any of their Subsidiaries shall seek to, or shall support (in any such case by way of any motion or other pleading filed with the Bankruptcy Court or the Canadian Court or any other writing to another party-in-interest executed by or on behalf of the Credit Parties or any of their Subsidiaries) any other Person’s motion to, disallow in whole or in part the Lenders’ claim in respect of the Obligations or to challenge the validity and enforceability of the Liens in favor of the Collateral Agent; or

          (v) The Information Officer’s Certificate (in substantially the form attached to the Canadian Interim Order) is not executed and filed with the Canadian Court on or before April 2, 2007; or

          (w) The Final DIP Order is not entered by the Bankruptcy Court on or before April 13, 2007; or

          (x) The Canadian Final Order is not entered by the Canadian Court on or before April 18, 2007.

THEN, (1) upon the occurrence of any Event of Default described in Section 8.1(f) or 8.1(g), automatically, and (2) upon the occurrence of any other Event of Default, at the request of (or with the consent of) Requisite Lenders, upon notice to any Borrower by Administrative Agent, in each case notwithstanding the provisions of Section 362 of the Bankruptcy Code or the Canadian Stay Order and without any application, motion or notice to, hearing before, or order from, the Bankruptcy Court or the Canadian Court, (A) the Revolving Commitments, if any, of each Lender having such Revolving Commitments shall immediately terminate; (B) the Term Loan Commitments, if any, of each Lender having such Term Loan Commitments shall immediately terminate; (C) the LC Commitments, if any, of each Lender having such LC Commitments and the obligation of Administrative Agent to cause Issuing Bank to issue Letters of Credit shall immediately terminate; (D) each of the following shall immediately become due and payable, in each case without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by each Credit Party: (I) the unpaid principal amount of and accrued interest on the Loans, (II) the unreimbursed amounts of LC Disbursements, (III) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (regardless of whether any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letters of Credit), and (IV) all other Obligations (other than contingent indemnification obligations for which no claim has been made); provided, the

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foregoing shall not affect in any way the obligations of Lenders under Section 2.3(b)(v) or Section 2.4(e); (E) subject, prior to the Exit Facilities Conversion Date, to the satisfaction of the notice and other requirements set forth in the Interim DIP Order, Final DIP Order, the Canadian Interim Order or the Canadian Final Order, Administrative Agent may cause Collateral Agent to enforce any and all Liens and security interests created pursuant to Collateral Documents; and (F) Administrative Agent shall direct Borrowers to pay (and Borrowers hereby agree upon receipt of such notice, or upon the occurrence of any Event of Default specified in Sections 8.1(f) and (g) to pay) to Administrative Agent such additional amounts of cash as reasonably requested by Issuing Bank or Administrative Agent, to be held as security for Borrowers’ reimbursement Obligations in respect of Letters of Credit then outstanding.

     8.2. Carve-Out Events.

          (a) Upon the first date on which the Agents and/or the Lenders are entitled to exercise remedies as provided in Section 8.1 hereof and notice thereof by Administrative Agent to the Credit Parties (the “Carve-Out Event Notice”), the right of the Credit Parties to pay professional fees outside the Carve-Out shall terminate (a “Carve-Out Event”), and, upon such occurrence, the Credit Parties, after receipt of the Carve-Out Event Notice from Administrative Agent, shall provide immediate notice by facsimile to all professionals informing them that a Carve-Out Event has occurred and further advising them that the Credit Parties’ ability to pay professionals is subject to the Carve-Out.

          (b) Notwithstanding anything in this Agreement to the contrary, on and after the Exit Facilities Conversion Date the right of the Credit Parties to pay professional fees shall be governed solely in accordance with the Plan and the Confirmation Order.

SECTION 9. AGENTS

     9.1. Appointment of Agents. (a) GSCP is hereby appointed Syndication Agent hereunder, and each Lender hereby authorizes GSCP to act as Syndication Agent in accordance with the terms hereof and the other Credit Documents. CIT is hereby appointed Administrative Agent and Collateral Agent hereunder and under the other Credit Documents and each Lender hereby authorizes CIT to act as Administrative Agent and Collateral Agent in accordance with the terms hereof and the other Credit Documents. Each Agent hereby agrees to act in its capacity as such upon the express conditions contained herein and the other Credit Documents, as applicable. Except as expressly provided in Section 9.7, the provisions of this Section 9 are solely for the benefit of Agents and Lenders and no Credit Party shall have any rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties hereunder, each Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Holdings or any of its Subsidiaries. Syndication Agent, without consent of or notice to any party hereto, may assign any and all of its rights or obligations hereunder to any of its Affiliates. As of the Closing Date, GSCP, in its capacity as Syndication Agent, shall not have any obligations but shall be entitled to all benefits of this Section 9.

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          (b) For the purpose of holding any security granted by any Credit Party pursuant to the laws of the Province of Quebec to secure payment of any debenture issued by any Credit Party, Collateral Agent is hereby appointed to act as the person holding the power of attorney (fondé de pouvoir) pursuant to article 2692 of the Civil Code of Quebec to act on behalf of each of the debentureholders, initially CIT in its capacity as Collateral Agent for the Secured Parties. Each Person who is or becomes a Lender and each assignee holder of any debenture issued by any Credit Party shall be deemed to ratify the power of attorney (fondé de pouvoir) granted to Collateral Agent hereunder by its execution of an Assignment Agreement or Joinder Agreement. Collateral Agent agrees to act in such capacity. Each party hereto agrees that, notwithstanding Section 32 of An Act respecting the special powers of legal persons (Quebec), Collateral Agent, as fondé de pouvoir, shall also be entitled to act as a debentureholder and to acquire and/or be the pledgee of any debentures or other titles of indebtedness to be issued under any deed of hypothec executed by or on behalf of any Credit Party.

     9.2. Powers and Duties. Each Lender irrevocably authorizes each Agent to take such action on such Lender’s behalf and to exercise such powers, rights and remedies hereunder and under the other Credit Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Each Agent shall have only those duties and responsibilities that are expressly specified herein and the other Credit Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. No Agent shall have, by reason hereof or any of the other Credit Documents, a fiduciary relationship in respect of any Lender; and nothing herein or any of the other Credit Documents, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect hereof or any of the other Credit Documents except as expressly set forth herein or therein. Administrative Agent hereby agrees that it shall (i) furnish to GSCP, in its capacity as Arranger, upon GSCP’s request, a copy of the Register, (ii) cooperate with GSCP in granting access to any Lenders (or potential lenders) who GSCP identifies to the Platform and (iii) maintain GSCP’s access to the Platform.

     9.3. General Immunity.

          (a) No Responsibility for Certain Matters. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency hereof or any other Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by any Agent to Lenders or by or on behalf of any Credit Party or any Lender in connection with the Credit Documents and the transactions contemplated thereby or for the financial condition or business affairs of any Credit Party or any other Person liable for the payment of any Obligations, nor shall any Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Credit Documents or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event of Default or Default or to make any disclosures with respect to the foregoing. Anything contained herein to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof.

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          (b) Exculpatory Provisions. No Agent nor any of its officers, partners, directors, employees or agents shall be liable to Lenders for any action taken or omitted by any Agent under or in connection with any of the Credit Documents except to the extent caused by such Agent’s gross negligence or willful misconduct. Each Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection herewith or any of the other Credit Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 10.5) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Holdings and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting or (where so instructed) refraining from acting hereunder or any of the other Credit Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 10.5).

          (c) Delegation of Duties. Administrative Agent may perform any and all of its duties and exercise its rights and powers under this Agreement or under any other Credit Document by or through any one or more sub-agents appointed by Administrative Agent. Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Affiliates. The exculpatory, indemnification and other provisions of this Section 9.3 and of Section 9.6 shall apply to any the Affiliates of Administrative Agent and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. All of the rights, benefits, and privileges (including the exculpatory and indemnification provisions) of this Section 9.3 and of Section 9.6 shall apply to any such sub-agent and to the Affiliates of any such sub-agent, and shall apply to their respective activities as sub-agent as if such sub-agent and Affiliates were named herein. Notwithstanding anything herein to the contrary, with respect to each sub-agent appointed by Administrative Agent, (i) such sub-agent shall be a third party beneficiary under this Agreement with respect to all such rights, benefits and privileges (including exculpatory rights and rights to indemnification) and shall have all of the rights and benefits of a third party beneficiary, including an independent right of action to enforce such rights, benefits and privileges (including exculpatory rights and rights to indemnification) directly, without the consent or joinder of any other Person, against any or all of the Credit Parties and the Lenders, (ii) such rights, benefits and privileges (including exculpatory rights and rights to indemnification) shall not be modified or amended without the consent of such sub-agent, and (iii) such sub-agent shall only have obligations to Administrative Agent and not to any Credit Party, Lender or any other Person and no Credit Party, Lender or any other Person shall have any rights, directly or indirectly, as a third party beneficiary or otherwise, against such sub-agent.

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     9.4. Agents Entitled to Act as Lender. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans and the Letters of Credit, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as if it were not performing the duties and functions delegated to it hereunder, and the term “Lender” shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. Any Agent and its Affiliates may accept deposits from, lend money to, own securities of, and generally engage in any kind of banking, trust, financial advisory or other business with Holdings or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Borrowers for services in connection herewith and otherwise without having to account for the same to Lenders.

     9.5. Lenders’ Representations, Warranties and Acknowledgment.

          (a) Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Holdings and its Subsidiaries in connection with Credit Extensions hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Holdings and its Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders.

          (b) Each Lender, by delivering its signature page to this Agreement or an Assignment Agreement and funding its Term Loan, LC Deposit and/or Revolving Loans on the Closing Date, shall be deemed to have acknowledged receipt of, and consented to and approved, each Credit Document and each other document required to be approved by any Agent, Requisite Lenders or Lenders, as applicable on the Closing Date.

     9.6. Right to Indemnity. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify each Agent, to the extent that such Agent shall not have been reimbursed by any Credit Party, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other Credit Documents or otherwise in its capacity as such Agent in any way relating to or arising out of this Agreement or the other Credit Documents; provided, no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s gross negligence or willful misconduct. If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished; provided, in no event shall this sentence require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement in excess of such Lender’s Pro Rata Share thereof; and

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provided further, this sentence shall not be deemed to require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement described in the proviso in the immediately preceding sentence.

     9.7. Successor Administrative Agent, Collateral Agent and Swing Line Lender. Administrative Agent may resign at any time by giving thirty days’ prior written notice thereof to Lenders and Borrowers, and Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Borrowers and Administrative Agent and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, with the consent of Borrowers (such consent (x) not to be unreasonably withheld or delayed and (y) not required if an Event of Default has occurred and is continuing), to appoint a successor Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall promptly (i) transfer to such successor Administrative Agent all sums, Securities and other items of Collateral held under the Collateral Documents, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Administrative Agent under the Credit Documents, and (ii) execute and deliver to such successor Administrative Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Administrative Agent of the security interests created under the Collateral Documents, whereupon such retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder. If the Requisite Lenders have not appointed a successor Administrative Agent, Administrative Agent shall have the right to appoint a financial institution to act as Administrative Agent hereunder and in any case, Administrative Agent’s resignation shall become effective on the thirtieth day after such notice of resignation. If neither the Requisite Lenders nor Administrative Agent have appointed a successor Administrative Agent, the Requisite Lenders shall be deemed to succeeded to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent; provided that, until a successor Administrative Agent is so appointed by the Requisite Lenders or Administrative Agent, Administrative Agent, by notice to Borrowers and the Requisite Lenders, may retain its role as Collateral Agent under any Collateral Document. Except as provided in the immediately preceding sentence, any resignation or removal of CIT or its successor as Administrative Agent pursuant to this Section shall also constitute the resignation or removal of CIT or its successor as Collateral Agent. After any retiring or removed Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent hereunder. Any successor Administrative Agent appointed pursuant to this Section shall, upon its acceptance of such appointment, become the successor Collateral Agent for all purposes hereunder. If CIT or its successor as Administrative Agent pursuant to this Section has resigned as Administrative Agent but retained its role as Collateral Agent and no successor Collateral Agent has become the Collateral Agent pursuant to the immediately preceding sentence, CIT or its successor may resign as Collateral Agent upon notice to Borrowers and the Requisite Lenders at any time. Any resignation or removal of CIT or its successor as Administrative Agent pursuant to this Section shall also constitute the resignation or removal of CIT or its successor as Swing Line Lender, and any

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successor Administrative Agent appointed pursuant to this Section shall, upon its acceptance of such appointment, become the successor Swing Line Lender for all purposes hereunder. In such event (a) Borrowers shall prepay any outstanding Swing Line Loans made by the retiring or removed Administrative Agent in its capacity as Swing Line Lender, (b) upon such prepayment, the retiring or removed Administrative Agent and Swing Line Lender shall surrender any Swing Line Note held by it to Borrowers for cancellation, and (c) Borrowers shall issue, if so requested by successor Administrative Agent and Swing Line Loan Lender, a new Swing Line Note to the successor Administrative Agent and Swing Line Lender, in the principal amount of the Swing Line Loan Sublimit then in effect and with other appropriate insertions.

     9.8. Collateral Documents and Guaranty.

          (a) Agents under Collateral Documents and Guaranty. Each Secured Party hereby further authorizes Administrative Agent or Collateral Agent, as applicable, on behalf of and for the benefit of Secured Parties, to be the agent for and representative of the Secured Parties with respect to the Guaranty, the Collateral and the Collateral Documents; provided that neither Administrative Agent nor Collateral Agent shall owe any fiduciary duty, duty of loyalty, duty of care, duty of disclosure or any other obligation whatsoever to any holder of Obligations with respect to any Hedge Agreement. Subject to Section 10.5, without further written consent or authorization from any Secured Party, Administrative Agent or Collateral Agent, as applicable may execute any documents or instruments necessary to (i) in connection with a sale or disposition of assets permitted by this Agreement, release any Lien encumbering any item of Collateral that is the subject of such sale or other disposition of assets or to which Requisite Lenders (or such other Lenders as may be required to give such consent under Section 10.5) have otherwise consented or (ii) release any Guarantor from the Guaranty pursuant to Section 7.12 or with respect to which Requisite Lenders (or such other Lenders as may be required to give such consent under Section 10.5) have otherwise consented.

          (b) Right to Realize on Collateral and Enforce Guaranty. Anything contained in any of the Credit Documents to the contrary notwithstanding, Borrowers, Administrative Agent, Collateral Agent and each Secured Party hereby agree that (i) no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce the Guaranty, it being understood and agreed that all powers, rights and remedies hereunder may be exercised solely by Administrative Agent, on behalf of the Secured Parties in accordance with the terms hereof and all powers, rights and remedies under the Collateral Documents may be exercised solely by Collateral Agent, and (ii) in the event of a foreclosure by Collateral Agent on any of the Collateral pursuant to a public or private sale or other disposition, Collateral Agent or any Lender may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition and Collateral Agent, as agent for and representative of Secured Parties (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by Collateral Agent at such sale or other disposition.

          (c) Rights under Hedge Agreements. No Hedge Agreement will create (or be deemed to create) in favor of any Lender Counterparty that is a party thereto any rights in

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connection with the management or release of any Collateral or of the obligations of any Guarantor under the Credit Documents except as expressly provided in Section 10.5(c)(v) of this Agreement and Section 7.2 of the Pledge and Security Agreement.

SECTION 10. MISCELLANEOUS

     10.1. Notices.

          (a) Notices Generally. Any notice or other communication herein required or permitted to be given to a Credit Party, Syndication Agent, Collateral Agent, Administrative Agent, Swing Line Lender or Issuing Bank, shall be sent to such Person’s address as set forth on Appendix B or in the other relevant Credit Document, and in the case of any Lender, the address as indicated on Appendix B or otherwise indicated to Administrative Agent in writing. Except as otherwise set forth in paragraph (b) below, each notice hereunder shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail (certified, return receipt) or courier service and shall be deemed to have been given when delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided, no notice to any Agent shall be effective until received by such Agent; provided further, any such notice or other communication shall at the request of Administrative Agent be provided to any sub-agent appointed pursuant to Section 9.3(c) hereto as designated by Administrative Agent from time to time.

          (b) Electronic Communications.

          (i) Notices and other communications to the Lenders and Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites, including the Platform) pursuant to procedures approved by Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or Issuing Bank pursuant to Section 2 if such Lender or Issuing Bank, as applicable, has notified Administrative Agent that it is incapable of receiving notices under such Section by electronic communication. Administrative Agent or any Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

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          (ii) Each of the Credit Parties understands that the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution and agrees and assumes the risks associated with such electronic distribution, except to the extent caused by the willful misconduct or gross negligence of Administrative Agent.

          (iii) The Platform and any Approved Electronic Communications are provided “as is” and “as available”. None of the Agents or any of their respective officers, directors, employees, agents, advisors or representatives (the “Agent Affiliates”) warrant the accuracy, adequacy, or completeness of the Approved Electronic Communications or the Platform and each expressly disclaims liability for errors or omissions in the Platform and the Approved Electronic Communications. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects is made by the Agent Affiliates in connection with the Platform or the Approved Electronic Communications.

          (iv) Each of the Credit Parties, the Lenders, Issuing Bank and the Agents agree that Administrative Agent may, but shall not be obligated to, store any Approved Electronic Communications on the Platform in accordance with Administrative Agent’s customary document retention procedures and policies.

   10.2. Expenses. Whether or not the transactions contemplated hereby shall be consummated, each Borrower agrees to pay promptly (a) all the actual and reasonable costs and expenses of Administrative Agent for the preparation, negotiation, execution and administration of the Credit Documents and the transactions contemplated thereby (including any costs and expenses incurred in connection with the establishment, maintenance and administration of the LC Deposit Account) and any consents, amendments, waivers or other modifications thereto; (b) all the costs of furnishing all opinions by counsel for Borrowers and the other Credit Parties; (c) the reasonable fees, expenses and disbursements of counsel to Agents (in each case including reasonable allocated costs of internal counsel) in connection with the negotiation, preparation, execution and administration of the Credit Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by Borrowers; (d) all the actual costs and reasonable expenses of creating, perfecting and recording Liens in favor of Collateral Agent, for the benefit of the Secured Parties, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums and reasonable fees, expenses and disbursements of counsel to each Agent and of counsel providing any opinions that any Agent or Requisite Lenders may reasonably request in respect of the Collateral or the Liens created pursuant to the Collateral Documents; (e) all the actual costs and reasonable fees, expenses and disbursements of any auditors, accountants, consultants or appraisers; (f) all the actual costs and reasonable expenses (including the reasonable fees, expenses and disbursements of any appraisers, consultants, advisors and agents employed or retained by Collateral Agent and its counsel) in connection with the custody or preservation of any of the Collateral; (g) all other actual and reasonable costs and expenses incurred by each Agent in connection with the syndication of the Loans and Commitments and the negotiation, preparation and execution of the Credit Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby; and (h) after the

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occurrence of a Default or an Event of Default, all reasonable costs and expenses, including reasonable attorneys’ fees (including reasonable allocated costs of internal counsel) and reasonable costs of settlement, incurred by any Agent and Lenders in enforcing any Obligations of or in collecting any payments due from any Credit Party hereunder or under the other Credit Documents by reason of such Default or Event of Default (including in connection with the sale, lease or license of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty) or in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a “work-out” or pursuant to any insolvency or bankruptcy cases or proceedings.

     10.3. Indemnity.

          (a) In addition to the payment of expenses pursuant to Section 10.2, whether or not the transactions contemplated hereby shall be consummated, each Credit Party agrees to defend (subject to Indemnitees’ selection of counsel (which shall be reasonably acceptable to Borrowers)), indemnify, pay and hold harmless, each Agent and Lender and the officers, partners, members, directors, trustees, advisors, employees, agents, sub-agents and Affiliates of each Agent and each Lender (each, an “Indemnitee”), from and against any and all Indemnified Liabilities; provided, no Credit Party shall have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this Section 10.3 may be unenforceable in whole or in part because they are violative of any law or public policy, the applicable Credit Party shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.

          (b) To the extent permitted by applicable law, no Credit Party shall assert, and each Credit Party hereby waives, any claim against each Lender, each Agent and their respective Affiliates, directors, employees, attorneys, agents or sub-agents, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, arising out of, as a result of, or in any way related to, this Agreement or any Credit Document or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and each Credit Party hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

     10.4. Set-Off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized, in each case notwithstanding the provisions of Section 362 of the Bankruptcy Code, and without any application, motion or notice to, hearing before, or order from, the Bankruptcy Court, by each Credit Party at any time or from time to time subject to the consent of Administrative Agent (such consent not to be unreasonably withheld or delayed), without notice to any Credit Party or to any other Person (other than Administrative Agent), any

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such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by such Lender to or for the credit or the account of any Credit Party against and on account of the obligations and liabilities of any Credit Party to such Lender hereunder, the Letters of Credit and participations therein and under the other Credit Documents, including all claims of any nature or description arising out of or connected hereto, the Letters of Credit and participations therein or with any other Credit Document, irrespective of whether or not (a) such Lender shall have made any demand hereunder or (b) the principal of or the interest on the Loans or any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and payable pursuant to Section 2 and although such obligations and liabilities, or any of them, may be contingent or unmatured.

   10.5. Amendments and Waivers.

          (a) Requisite Lenders’ Consent. Subject to the additional requirements of Sections 10.5(b) and 10.5(c), no amendment, modification, termination or waiver of any provision of the Credit Documents, or consent to any departure by any Credit Party therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders; provided that Administrative Agent may, with the consent of each Borrower only, amend, modify or supplement this Agreement to cure any ambiguity, omission, defect or inconsistency, so long as such amendment, modification or supplement does not adversely affect the rights of any Lender or Issuing Bank.

          (b) Affected Lenders’ Consent. Without the written consent of each Lender (other than a Defaulting Lender) that would be affected thereby, no amendment, modification, termination, or consent shall be effective if the effect thereof would:

          (i) extend the scheduled final maturity of any Loan or Note;

          (ii) waive, reduce or postpone any scheduled repayment (but not prepayment);

          (iii) extend the stated expiration date of any Letter of Credit beyond the LC Commitment Termination Date;

          (iv) extend the date on which any LC Deposit is required to be made by, or returned to, any LC Lender.

          (v) reduce the rate of interest on any Loan (other than any waiver of any increase in the interest rate applicable to any Loan pursuant to Section 2.10) or any fee or any premium payable hereunder;

          (vi) extend the time for payment of any such interest or fees;

          (vii) reduce the principal amount of any Loan or any reimbursement obligation in respect of any Letter of Credit;

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          (viii) amend, modify, terminate or waive any provision of Section 2.13(b)(iii), this Section 10.5(b), Section 10.5(c) or any other provision of this Agreement that expressly provides that the consent of all Lenders is required;

          (ix) amend the definition of “Requisite Lenders” or “Pro Rata Share”; provided, with the consent of Requisite Lenders, additional extensions of credit pursuant hereto may be included in the determination of “Requisite Lenders” or “Pro Rata Share” on substantially the same basis as the Term Loan Commitments, the Term Loans, the LC Commitments, the LC Deposits, the Revolving Commitments and the Revolving Loans are included on the Closing Date;

          (x) release all or substantially all of the Collateral or all or substantially all of the Guarantors from the Guaranty except as expressly provided in the Credit Documents; or

          (xi) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under any Credit Document.

          (c) Other Consents. No amendment, modification, termination or waiver of any provision of the Credit Documents, or consent to any departure by any Credit Party therefrom, shall:

          (i) increase any Commitment of any Lender over the amount thereof then in effect without the consent of such Lender; provided, no amendment, modification or waiver of any condition precedent, covenant, Default or Event of Default shall constitute an increase in any Commitment of any Lender;

          (ii) amend, modify, terminate or waive any provision hereof relating to the Swing Line Sublimit or the Swing Line Loans without the consent of Swing Line Lender;

          (iii) alter the required application of any repayments or prepayments as between Classes pursuant to Section 2.15 without the consent of Lenders holding more than 50% of the aggregate Term Loan Exposure of all Lenders, LC Exposure of all Lenders or Revolving Exposure of all Lenders, as applicable, of each Class which is being allocated a lesser repayment or prepayment as a result thereof; provided, Requisite Lenders may waive, in whole or in part, any prepayment so long as the application, as between Classes, of any portion of such prepayment which is still required to be made is not altered;

          (iv) amend, modify, terminate or waive any provision of Section 2.4 without the written consent of Administrative Agent;

          (v) amend, modify, terminate or waive any provision of Section 2.16(h) without the written consent of one or more Lenders having or holding Revolving Exposure and representing more than 50% of the sum of the aggregate Revolving Exposure of all Lenders;

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          (vi) amend, modify or waive this Agreement or the Pledge and Security Agreement so as to alter the ratable treatment of Obligations arising under the Credit Documents and Obligations arising under Hedge Agreements or the definition of “Lender Counterparty,” “Hedge Agreement,” “Obligations,” or “Secured Obligations” in each case in a manner adverse to any Lender Counterparty with Obligations then outstanding without the written consent of any such Lender Counterparty;

          (vii) amend, modify, terminate or waive any provision of Section 9 as the same applies to any Agent, or any other provision hereof as the same applies to the rights or obligations of any Agent, in each case without the consent of such Agent;

          (viii) amend, modify, terminate or waive any provision of Section 2.24, 4.25, 6.15, or 6.21, without the written consent of each Lender; or

          (ix) amend, modify, terminate or waive any provision of Section 3.4 that provides for the satisfaction of Administrative Agent with any conditions set forth therein, without the written consent of Administrative Agent.

          (d) Execution of Amendments, etc. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 10.5 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by a Credit Party, on such Credit Party. In addition, Administrative Agent may, with the consent of Borrowers, amend, modify, supplement or execute a restatement of this Agreement (i) to cure any typographical error, defect or inconsistency or (ii) to reflect the terms of this Agreement after giving effect to the Exit Facilities Conversion Date and the provisions of Section 3.5 (including the deletion of any provisions hereof which are no longer operative); provided that any such amendment, modification or supplement shall not adversely affect any Lender or Issuing Bank in any material respect.

   10.6. Successors and Assigns; Participations.

          (a) Generally. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders. No Credit Party’s rights or obligations hereunder nor any interest therein may be assigned or delegated by any Credit Party without the prior written consent of all Lenders. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, Affiliates of each of the Agents and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

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          (b) Register. Borrowers, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments, LC Deposits and Loans listed therein for all purposes hereof, and no assignment or transfer of any such Commitment, LC Deposit or Loan shall be effective, in each case, unless and until recorded in the Register following receipt of an Assignment Agreement effecting the assignment or transfer thereof, in each case, as provided in Section 10.6(d). Each assignment shall be recorded in the Register on the Business Day the Assignment Agreement is received by Administrative Agent, if received by 12:00 noon New York City time, and on the following Business Day if received after such time, prompt notice thereof shall be provided to Borrowers and a copy of such Assignment Agreement shall be maintained, as applicable. The date of such recordation of a transfer shall be referred to herein as the “Assignment Effective Date.” Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments, LC Deposits or Loans.

          (c) Right to Assign. Each Lender shall have the right at any time to sell, assign or transfer all or a portion of its rights and obligations under this Agreement, including all or a portion of its Commitment, LC Deposit or Loans owing to it or other Obligations (provided, however, that pro rata assignments shall not be required and each assignment shall be of a uniform, and not varying, percentage of all rights and obligations under and in respect of any applicable Loan and any related Commitments):

          (i) to any Person meeting the criteria of clause (i) of the definition of the term of “Eligible Assignee” upon the giving of notice to Borrowers and Administrative Agent; and

          (ii) to any Person meeting the criteria of clause (ii) of the definition of the term of “Eligible Assignee” upon giving of notice to Borrowers and Administrative Agent and, in the case of assignments of Revolving Loans or Revolving Commitments to any such Person (except in the case of assignments made by or to GSCP), consented to by each Borrower and Administrative Agent (such consent not to be (x) unreasonably withheld or delayed or, (y) in the case of Borrowers, required at any time an Event of Default shall have occurred and then be continuing); provided, further each such assignment pursuant to this Section 10.6(c)(ii) shall be in an aggregate amount of not less than (A) $1,000,000 (or such lesser amount as may be agreed to by Borrowers and Administrative Agent or as shall constitute the aggregate amount of the Revolving Commitments and Revolving Loans of the assigning Lender) with respect to the assignment of the Revolving Commitments and Revolving Loans and (B) $1,000,000 (or such lesser amount as may be agreed to by Borrowers and Administrative Agent or as shall constitute the aggregate amount of the Term Loans of the assigning Lender) with respect to the assignment of Term Loans. Assignments by Related Funds shall be aggregated for purposes of determining compliance with such minimum assignment amounts.

          (d) Mechanics. Assignments and assumptions of Loans, LC Deposits and Commitments shall only be effected by manual execution and delivery to Administrative Agent

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of an Assignment Agreement. Assignments shall be effective as of the Assignment Effective Date. In connection with all assignments there shall be delivered to Administrative Agent such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver pursuant to Section 2.20(c).

          (e) Representations and Warranties of Assignee. Each Lender, upon execution and delivery hereof or upon succeeding to an interest in the Commitments, LC Deposits, and Loans, as the case may be, represents and warrants as of the Closing Date or as of the Assignment Effective Date that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the making of or investing in commitments or loans such as the applicable Commitments, LC Deposits or Loans, as the case may be; and (iii) it will make or invest in, as the case may be, its Commitments, LC Deposits or Loans for its own account in the ordinary course and without a view to distribution of such Commitments, LC Deposits or Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this Section 10.6, the disposition of such Commitments, LC Deposits or Loans or any interests therein shall at all times remain within its exclusive control).

          (f) Effect of Assignment. Subject to the terms and conditions of this Section 10.6, as of the Assignment Effective Date with respect to any Assignment Agreement (i) the assignee thereunder shall have the rights and obligations of a “Lender” hereunder to the extent of its interest in the Loans, LC Deposits and Commitments as reflected in the Register and shall thereafter be a party hereto and a “Lender” for all purposes hereof; (ii) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned to the assignee, relinquish its rights (other than any rights which survive the termination hereof under Section 10.8) and be released from its obligations hereunder (and, in the case of an assignment covering all or the remaining portion of an assigning Lender’s rights and obligations hereunder, such Lender shall cease to be a party hereto on such Assignment Effective Date; provided, anything contained in any of the Credit Documents to the contrary notwithstanding, such assigning Lender shall continue to be entitled to the benefit of all indemnities hereunder as specified herein with respect to matters arising out of the prior involvement of such assigning Lender as a Lender hereunder); (iii) the Commitments shall be modified to reflect any Commitment of such assignee and any Commitment of such assigning Lender, if any; and (iv) if any such assignment occurs after the issuance of any Note hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Notes to Administrative Agent for cancellation, and thereupon each Borrower shall issue and deliver new Notes, if so requested by the assignee and/or assigning Lender, to such assignee and/or to such assigning Lender, with appropriate insertions, to reflect the new Revolving Commitments and/or outstanding Loans of the assignee and/or the assigning Lender.

          (g) LC Deposits. In connection with each assignment of an LC Deposit, the LC Deposit of the assigning LC Lender shall not be released, but shall instead be purchased by the relevant assignee, and the amount of such LC Deposit shall continue to be held in the LC Deposit Account for application (to the extent not already applied) in accordance with Section 2.4 to satisfy such assignee’s obligations in respect of the LC Usage. Each LC Lender agrees that immediately prior to each such assignment (i) Administrative Agent shall establish a new Sub-Account in the name of the assignee, (ii) a corresponding portion of the amount held in the

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LC Deposit Account credited by Administrative Agent to the Sub-Account of the assigning LC Lender shall be purchased by the assignee and shall be transferred from the assigning LC Lender’s Sub-Account to the assignee’s Sub-Account and (iii) if after giving effect to such assignment the LC Deposit of the assigning LC Lender shall be zero, Administrative Agent shall close the Sub-Account of such assigning LC Lender.

          (h) Participations.

          (i) Each Lender shall have the right at any time to sell one or more participations to any Person (other than Holdings, any of its Subsidiaries or any of its Affiliates) in all or any part of its Commitments, Loans or in any other Obligation.

          (ii) The holder of any such participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except with respect to any amendment, modification or waiver that would (A) extend the final scheduled maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is not extended beyond the LC Termination Date) in which such participant is participating, or reduce the rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant’s participation is not increased as a result thereof), (B) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement or (C) release all or substantially all of the Collateral under the Collateral Documents (except as expressly provided in the Credit Documents) supporting the Loans hereunder in which such participant is participating.

          (iii) Each Borrower agrees that each participant shall be entitled to the benefits of Sections 2.18(c), 2.19 and 2.20 and subject to the provisions of Section 2.23 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (c) of this Section; provided, (x) a participant shall not be entitled to receive any greater payment under Section 2.19 or 2.20 than the applicable Lender would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with such Borrower’s prior written consent and (y) a participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of Section 2.20 unless each Borrower is notified of the participation sold to such participant and such participant agrees, for the benefit of each Borrower, to comply with Section 2.20 as though it were a Lender; provided further that, except as specifically set forth in clauses (x) and (y) of this sentence, nothing herein shall require any notice to any Borrower or any other Person in connection with the sale of any participation. The Lender who has assigned to any participant that, by virtue of application of the provisions of this Section 10.6(h)(iii), is subject to replacement under Section 2.23 agrees that such Lender can also be replaced pursuant to the provisions of Section 2.23. To the extent permitted by law, each

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participant also shall be entitled to the benefits of Section 10.4 as though it were a Lender, provided such Participant agrees to be subject to Section 2.17 as though it were a Lender.

          (i) Certain Other Assignments and Participations. In addition to any other assignment or participation permitted pursuant to this Section 10.6:

          (i) any Lender may assign and/or pledge all or any portion of its Loans, the other Obligations owed by or to such Lender, and its Notes, if any, to secure obligations of such Lender including any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors and any operating circular issued by such Federal Reserve Bank; and

          (ii) notwithstanding anything to the contrary in this Section 10.6, any Lender may sell participations (or otherwise transfer its rights) in or to all or a portion of its rights and obligations under the Credit Documents (including all its rights and obligations with respect to the Term Loans, Revolving Loans and Letters of Credit) to one or more lenders or other Persons that provide financing to such Lender;

provided, that no Lender, as between Borrowers and such Lender, shall be relieved of any of its obligations hereunder as a result of any such assignment, pledge, participation or other transfer and provided further, that in no event shall the applicable Federal Reserve Bank, pledge, trustee, lender or other financing source described in the preceding clauses (i) or (ii) be considered to be a “Lender” or be entitled to require the assigning, selling or transferring Lender to take or omit to take any action hereunder.

   10.7. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists.

   10.8. Survival of Representations, Warranties and Agreements. All representations, warranties and agreements made herein shall survive the execution and delivery hereof and the making of any Credit Extension. Notwithstanding anything herein or implied by law to the contrary, the agreements of each Credit Party set forth in Sections 2.18(c), 2.19, 2.20, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in Sections 2.17, 9.3(b) and 9.6 shall survive the payment of the Loans, the return of the LC Deposits, the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination hereof.

   10.9. No Waiver; Remedies Cumulative. No failure or delay on the part of any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. The rights, powers and remedies given to each Agent and each Lender hereby are

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cumulative and shall be in addition to and independent of all rights, powers and remedies existing by virtue of any statute or rule of law or in any of the other Credit Documents or any of the Hedge Agreements. Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy.

     10.10. Marshalling; Payments Set Aside. Neither any Agent nor any Lender shall be under any obligation to marshal any assets in favor of any Credit Party or any other Person or against or in payment of any or all of the Obligations. To the extent that any Credit Party makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent, on behalf of Lenders), or any Agent or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred.

     10.11. Severability. In case any provision in or obligation hereunder or under any other Credit Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

     10.12. Obligations Several; Independent Nature of Lenders’ Rights. The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitment of any other Lender hereunder. Nothing contained herein or in any other Credit Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out hereof and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

     10.13. Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.

     10.14. APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

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     10.15. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY CREDIT PARTY ARISING OUT OF OR RELATING HERETO OR ANY OTHER CREDIT DOCUMENT, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH CREDIT PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (A) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (B) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (C) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE CREDIT PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 10.1; (D) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (C) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE CREDIT PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (E) AGREES THAT AGENTS AND LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY CREDIT PARTY IN THE COURTS OF ANY OTHER JURISDICTION. AT ALL TIMES PRIOR TO THE EXIT FACILITIES CONVERSION DATE, THE PARTIES HERETO SUBMIT TO THE JURISDICTION OF THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA.

     10.16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10.16 AND EXECUTED BY EACH

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OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER CREDIT DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

     10.17. Confidentiality. Each Agent, and each Lender (which term shall for the purposes of this Section 10.17 include Issuing Bank) shall hold all non-public information regarding Holdings and its Subsidiaries and their businesses obtained by such Lender pursuant to the requirements hereof in accordance with such Lender’s customary procedures for handling confidential information of such nature, it being understood and agreed by Holdings that, in any event, each Agent and each Lender may make (i) disclosures of such information to Affiliates of such Lender or Agent and to their respective agents and advisors (and to other Persons authorized by a Lender or Agent to organize, present or disseminate such information in connection with disclosures otherwise made in accordance with this Section 10.17) so long as, in the case of any such Affiliates, such Persons have been advised of the confidential nature of such information and instructed to maintain the confidentiality of such information and, in the case of any such agents and advisors, such Persons have (A) a duty to keep such information confidential or (B) have agreed to keep such information confidential, (ii) disclosures of such information reasonably required by any bona fide or potential assignee, pledgee, transferee or participant in connection with the contemplated assignment, pledge, transfer or participation of any Loans or any participations therein or by any direct or indirect contractual counterparties (or the professional advisors thereto) to any swap or derivative transaction relating to any Borrower and its obligations (provided, such assignees, pledgees, transferees, participants, counterparties and advisors are advised of and agree to be bound by either the provisions of this Section 10.17 or other provisions at least as restrictive as this Section 10.17), (iii) disclosure to any rating agency when required by it, provided that, prior to any disclosure, such rating agency shall undertake in writing to preserve the confidentiality of any confidential information relating to the Credit Parties received by it from any of the Agents or any Lender, and (iv) disclosures required or requested by any governmental agency or representative thereof or by the NAIC or pursuant to legal or judicial process; provided, unless specifically prohibited by applicable law or court order, each Lender and each Agent shall make reasonable efforts to notify Borrowers of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition or other routine examination of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information. In addition, each Agent and each Lender may disclose the existence of this Agreement and the information about this Agreement to market data collectors, similar services providers to the lending industry, and service providers to the Agents and the Lenders in connection with the administration and management of this Agreement and the other Credit Documents.

     10.18. Usury Savings Clause.

          (a) Notwithstanding any other provision herein with respect to each Credit Party other than a Canadian Credit Party, the aggregate interest rate charged with respect to any of the Obligations, including all charges or fees in connection therewith deemed in the nature of

151

interest under applicable law shall not exceed the Highest Lawful Rate. If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate, the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, Borrowers shall pay to Administrative Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of Lenders and Borrowers to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender’s option be applied to the outstanding amount of the Loans made hereunder or be refunded to Borrowers.

          (b) If any provision of this Agreement or of any of the other Credit Documents would obligate any Canadian Credit Party to make any payment of interest or other amount payable to any Agent or any Lender in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by such Agent or such Lender of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada)) then, notwithstanding such provisions, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a receipt by such Agent or such Lender of interest at a criminal rate, such adjustment to be effected, to the extent necessary, as follows: (1) firstly, by reducing the amount or rate of interest required to be paid to such Agent or such Lender under Section 2.8, and (2) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to such Agent or such Lender which would constitute “interest” for purposes of Section 347 of the Criminal Code (Canada). Notwithstanding the foregoing, and after giving effect to all adjustments contemplated thereby, if an Agent or Lender shall have received an amount in excess of the maximum permitted by that section of the Criminal Code (Canada), such Canadian Credit Party shall be entitled, by notice in writing to such Agent or such Lender, to obtain reimbursement from such Agent or such Lender in an amount equal to such excess and, pending such reimbursement, such amount shall be deemed to be an amount payable by such Agent or such Lender such Canadian Credit Party. Any amount or rate of interest referred to in this Section 10.18 shall be determined in accordance with GAAP as an effective annual rate of interest over the term that the applicable Loan remains outstanding on the assumption that any charges, fees or expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be pro-rated over that period of time and otherwise be pro-rated over the period from the Closing Date to the Maturity Date and, in the event of a dispute, a certificate of a actuary appointed by Administrative Agent shall be conclusive for the purposes of such determination.

152

     10.19. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.

     10.20. Effectiveness. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Holdings and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof.

     10.21. Patriot Act. Each Lender and Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Borrower that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies such Borrower, which information includes the name and address of such Borrower and other information that will allow such Lender or Administrative Agent, as applicable, to identify such Borrower in accordance with the Act.

     10.22. Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment Agreement shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping sysem, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

     10.23. Post-Closing Actions. Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, the parties hereto acknowledge and agree that Holdings and its Subsidiaries shall be required to take the actions specified in Schedule 10.23 as promptly as practicable, and in any event within the time periods set forth in Schedule 10.23 or such other time periods as Administrative Agent may agree. The provisions of Schedule 10.23 shall be deemed incorporated by reference herein as fully as if set forth herein in their entirety. All provisions of this Agreement and the other Credit Documents (including, without limitation, all conditions precedent, representations, warranties, certificates, borrowing notices, covenants, events of default and other agreements herein and therein) shall be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions described above within the time periods required above, rather than as otherwise provided in the Credit Documents); provided that (a) to the extent any representation and warranty would not be true because the foregoing actions were not taken on the Closing Date, the respective representation and warranty shall be required to be true and correct in all material respects at the time the respective action is taken (or was required to be taken) in accordance with the foregoing provisions of this Section 10.23 and (b) all representations and warranties relating to the Collateral Documents shall be required to be true immediately after the actions required to be taken by this Section 10.23 have been taken (or were required to be taken). The parties hereto acknowledge and agree that the failure to take any of the actions required above within the relevant time periods required above shall give rise to an immediate Event of Default pursuant to this Agreement.

153

     10.24. Joint and Several Liability. Notwithstanding any other provision contained herein or in any other Credit Document, if a “secured creditor” (as that term is defined under the Bankruptcy and Insolvency Act (Canada)) is determined by a court of competent jurisdiction not to include a Person to whom obligations are owed on a joint or joint and several basis, then any Canadian Credit Party’s Obligations (and the Obligations of each other Credit Party with respect thereto), to the extent such Obligations are secured, only shall be several obligations and not joint or joint and several obligations.

     10.25. Limitations Act, 2002. Each of the parties hereto agree that any and all limitation periods provided for in the Limitations Act, 2002 (Ontario), as amended from time to time, shall be excluded from application to the Obligations and any undertaking, covenant, indemnity or other agreement of any Credit Party provided for in any Credit Document to which it is a party in respect thereof, in each case to fullest extent permitted by such Act.

[Remainder of page intentionally left blank]

154

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

ALLIED HOLDINGS, INC.
By:	/s/ Thomas H. King
	Thomas H. King
	Executive Vice President and Chief Financial Officer

ALLIED SYSTEMS, LTD. (L.P.)
By:	Allied Automotive Group, Inc.,
	its Managing General Partner

By:	/s/ Thomas H. King
	Thomas H. King
	Executive Vice President and Assistant Treasurer

ACE OPERATIONS, LLC
AH INDUSTRIES INC.
ALLIED AUTOMOTIVE GROUP, INC.
ALLIED FREIGHT BROKER LLC
ALLIED SYSTEMS (CANADA) COMPANY
AXIS ARETA, LLC
AXIS CANADA COMPANY
AXIS GROUP, INC.
AXIS NETHERLANDS, LLC
COMMERCIAL CARRIERS, Inc.
CORDIN TRANSPORT LLC
C T SERVICES, INC.
F.J. BOUTELL DRIVEAWAY LLC
GACS INCORPORATED
LOGISTIC SYSTEMS, LLC
LOGISTIC TECHNOLOGY, LLC
QAT, INC.
RMX LLC
TERMINAL SERVICES LLC
TRANSPORT SUPPORT LLC

By:	/s/ Thomas H. King
	Thomas H. King
	Executive Vice President and Assistant Treasurer

GOLDMAN SACHS CREDIT PARTNERS L.P., as Syndication Agent and a Lender
By:	/s/ Tom Connolly
	Name: Tom Connolly

THE CIT GROUP/BUSINESS CREDIT, INC., as Administrative Agent, Collateral Agent, Swing Line Lender and a Lender
By:	/s/ Allison Adornato
	Name:	Allison Adornato
	Title:	SVP

APPENDIX A-1
TO CREDIT AND GUARANTY AGREEMENT

Term Loan Commitments

			Pro
Lender	Term Loan Commitment		Rata Share
Goldman Sachs Credit Partners L.P.	$	230,000,000.00		100	%
Total	$	230,000,000.00		100	%

APPENDIX A-1-1

APPENDIX A-2
TO CREDIT AND GUARANTY AGREEMENT

LC Commitments

Lender	LC Commitment		Pro Rata Share
Goldman Sachs Credit Partners L.P.	$	50,000,000.00		100	%
Total	$	50,000,000.00		100	%

APPENDIX A-2-1

APPENDIX A-3
TO CREDIT AND GUARANTY AGREEMENT

Revolving Commitments

Lender	Revolving Commitment		Pro Rata Share
The CIT Group/Business Credit, Inc.	$	35,000,000.00		100	%
Total	$	35,000,000.00		100	%

APPENDIX A-3-1

APPENDIX B
TO CREDIT AND GUARANTY AGREEMENT

Notice Addresses

44ALLIED HOLDINGS, INC.

160 Clairemont Avenue
Decatur, GA 30030
Attention: Chief Financial Officer
With a Copy to: General Counsel
Facsimile: 404-370-4206

44ALLIED SYSTEMS, LTD. (L.P.)

160 Clairemont Avenue
Decatur, GA 30030
Attention: Chief Financial Officer
With a Copy to: General Counsel
Facsimile: 404-370-4206

44ACE OPERATIONS, LLC.
44AH INDUSTRIES INC.
44ALLIED AUTOMOTIVE GROUP, INC.
44ALLIED FREIGHT BROKER LLC

APPENDIX B-2

44ALLIED SYSTEMS (CANADA) COMPANY
44AXIS ARETA, LLC
44AXIS CANADA COMPANY
44AXIS GROUP, INC.
44AXIS NETHERLANDS, LLC
44COMMERCIAL CARRIERS, INC.
44CORDIN TRANSPORT LLC
44C T SERVICES, INC.
44F.J. BOUTELL DRIVEAWAY LLC
44GACS INCORPORATED
44LOGISTIC SYSTEMS LLC
44LOGISTIC TECHNOLOGY, LLC
44QAT, INC.
44RMX LLC
44TERMINAL SERVICES LLC
44TRANSPORT SUPPORT LLC

160 Clairemont Avenue
Decatur, GA 30030
Attention: Chief Financial Officer
With a Copy to: General Counsel
Facsimile: 404-370-4206

in each case, with a copy to:

Hazen H. Dempster
Troutman Sanders LLP
Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Telephone: (404) 885-3126
Facsimile: (404) 962-6544
Email: hazen.dempster@troutmansanders.com

APPENDIX B-3

GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Syndication Agent and a Lender:

Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
30 Hudson Street, 17th Floor
Jersey City, NJ 07302
Attention: SBD Operations
Attention: Pedro Ramirez
Telecopier: (212) 357-4597
Email: gsd.link@gs.com

with a copy to:

Goldman Sachs Credit Partners L.P.
1 New York Plaza
New York, New York 10004
Attention: Rob Schatzman
Telecopier: (212) 902-3000

APPENDIX B-4

THE CIT GROUP/BUSINESS CREDIT, INC.,
as Administrative Agent, Collateral Agent,
Swing Line Lender and a Lender

Administrative Agent’s Principal Office:

The CIT Group/Business Credit, Inc.
30 S. Wacker Drive
30th Floor
Chicago, IL 60606
Attn: Portfolio Manager
Facsimile: 312-906-5827

Swing Line Lender’s Principal Office:

The CIT Group/Business Credit, Inc.
30 S. Wacker Drive
30th Floor
Chicago, IL 60606
Attn: Portfolio Manager
Facsimile: 312-906-5827

with a copy to:

Hunton & Williams LLP
200 Park Avenue
New York, New York 10166
Attn: Bruce W. Moorhead, Jr., Esq.
Facsimile: 212-309-1883

APPENDIX B-5

JPMorgan Chase Bank, N.A.,
as Issuing Bank

Attention:

Facsimile:

APPENDIX B-6

EX-4.3(A)

Exhibit 4.3(a)

EXECUTION VERSION

THE CIT GROUP/BUSINESS CREDIT, INC.
30 S. Wacker Drive, 30th Floor
Chicago, IL 60606

April 18, 2007

Allied Holdings, Inc.
160 Clairemont Avenue
Decatur, GA 30030

Re: Amendments to Credit Agreement

Ladies and Gentlemen:

Reference is hereby made to the Secured Super-Priority Debtor in Possession and Exit Credit and Guaranty Agreement, dated as of March 30, 2007 (the “Credit Agreement”), by and among Allied Holdings, Inc. (“Holdings”), Allied Systems, Ltd. (L.P.) (“Systems” and, together with Holdings, "Borrowers”), certain subsidiaries of Borrowers, the lenders party thereto from time to time, Goldman Sachs Credit Partners L.P., as Syndication Agent (“GSCP”), and The CIT Group/Business Credit, Inc., as Administrative Agent (“CIT”). Terms defined in the Credit Agreement are used herein as defined therein.

Pursuant to Section 5.18(b) of the Credit Agreement, Borrowers agreed to deliver to Syndication Agent an updated business plan in form and substance satisfactory to Syndication Agent by no later than April 4, 2007. Borrowers have requested that CIT and GSCP extend the date of delivery of the business plan to April 9, 2007, and each of CIT and GSCP, as the sole Lenders under the Credit Agreement, have agreed to extend the date of delivery of the business plan to April 9, 2007. In furtherance thereof, the parties hereto agree to amend Section 5.18(b) by deleting the reference to “April 4, 2007” and inserting in lieu thereof “April 9, 2007”. The Syndication Agent acknowledges and agrees that Borrowers delivered a satisfactory updated business plan to the Syndication Agent on April 9, 2007.

The parties hereto also agree to amend the definition of “Permitted Acquisition” set forth in Section 1.1 of the Credit Agreement as follows:

     (i) Clause (iv) is hereby amended in its entirety to read as follows:

     “(iv) the Interest Coverage Ratio on a pro forma basis after giving effect to such acquisition as of the last day of the Fiscal Quarter most recently ended for which financial statements have been delivered pursuant to Section 5.1(b) or (c) (as determined in accordance with Section 6.7(e)) shall be no less than the correlative ratio indicated:

Fiscal	Interest Coverage
Quarter Ending	Ratio
June 30, 2007	1.15:1.00
September 30, 2007	1.35:1.00

Allied Holdings, Inc.
April 18, 2007
Page 2

Fiscal	Interest Coverage
Quarter Ending	Ratio
December 31, 2007	1.55:1.00
March 31, 2008	1.75:1.00
June 30, 2008	2.00:1.00
September 30, 2008	2.25:1.00
December 31, 2008	2.25:1.00
March 31, 2009	2.25:1.00
June 30, 2009	2.50:1.00
September 30, 2009	2.50:1.00
December 31, 2009	2.50:1.00
March 31, 2010	2.50:1.00
June 30, 2010	2.50:1.00
September 30, 2010	2.50:1.00
December 31, 2010	2.50:1.00
Thereafter	3.00:1.00”

          (ii) Clause (v) is hereby amended in its entirety to read as follows:

     “(v) the Leverage Ratio on a pro forma basis after giving effect to such acquisition as of the last day of the Fiscal Quarter most recently ended for which financial statements have been delivered pursuant to Section 5.1(b) or (c) (as determined in accordance with Section 6.7(e)) shall be no greater than the correlative ratio indicated:

Fiscal
Quarter Ending	Leverage Ratio
June 30, 2007	6.25:1.00
September 30, 2007	5.50:1.00
December 31, 2007	4.75:1.00
March 31, 2008	4.25:1.00
June 30, 2008	3.50:1.00
September 30, 2008	3.25:1.00
December 31, 2008	3.25:1.00
March 31, 2009	3.00:1.00
June 30, 2009	3.00:1.00
September 30, 2009	3.00:1.00
December 31, 2009	3.00:1.00
March 31, 2010	3.00:1.00
June 30, 2010	3.00:1.00
September 30, 2010	3.00:1.00
December 31, 2010	3.00:1.00
Thereafter	2.50:1.00”

Allied Holdings, Inc.
April 18, 2007
Page 3

The parties hereto also agree to amend Section 2.8 of the Credit Agreement by deleting clause (a) thereof in its entirety and inserting in lieu thereof the following:

          “Except as otherwise set forth herein, each Loan shall bear interest on the unpaid principal amount thereof from the date made through repayment (whether by acceleration or otherwise) thereof as follows:

          (i) in the case of Term Loans:

               (1) if a Base Rate Loan, at the Base Rate plus 2.50%; or

               (2) if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus 3.50%;

          (ii) in the case of Revolving Loans:

               (1) if a Base Rate Loan, at the Base Rate plus 1.00%; or

               (2) if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus 2.00%; and

          (iii) in the case of Swing Line Loans, at the Base Rate plus 1.00%.”

The parties hereto also agree to amend Section 2.11 of the Credit Agreement by deleting the reference to “0.50%” in clause (a) thereof and inserting in lieu thereof “0.375%”.

The parties hereto also agree to amend Section 6.7 of the Credit Agreement as follows:

          (i) Section 6.7(a) of the Credit Agreement is hereby amended in its entirety to read as follows:

     “(a) Interest Coverage Ratio. Holdings shall not permit the Interest Coverage Ratio as of the end of any Fiscal Quarter, beginning with the Fiscal Quarter ending June 30, 2007, to be less than the correlative ratio indicated:

Fiscal	Interest Coverage
Quarter Ending	Ratio
June 30, 2007	1.40:1.00
September 30, 2007	1.60:1.00
December 31, 2007	1.80:1.00
March 31, 2008	2.00:1.00
June 30, 2008	2.25:1.00
September 30, 2008	2.50:1.00
December 31, 2008	2.50:1.00
March 31, 2009	2.75:1.00
June 30, 2009	2.75:1.00
September 30, 2009	2.75:1.00
December 31, 2009	2.75:1.00
March 31, 2010	2.75:1.00

Allied Holdings, Inc.
April 18, 2007
Page 4

Fiscal	Interest Coverage
Quarter Ending	Ratio
June 30, 2010	2.75:1.00
September 30, 2010	2.75:1.00
December 31, 2010	2.75:1.00
Thereafter	3.25:1.00”

          (ii) Section 6.7(b) of the Credit Agreement is hereby amended in its entirety to read as follows:

     “(b) Leverage Ratio. Holdings shall not permit the Leverage Ratio as of the end of any Fiscal Quarter, beginning with the Fiscal Quarter ending June 30, 2007, to exceed the correlative ratio indicated:

Fiscal
Quarter Ending	Leverage Ratio
June 30, 2007	6.50:1.00
September 30, 2007	5.75:1.00
December 31, 2007	5.00:1.00
March 31, 2008	4.50:1.00
June 30, 2008	3.75:1.00
September 30, 2008	3.50:1.00
December 31, 2008	3.50:1.00
March 31, 2009	3.25:1.00
June 30, 2009	3.25:1.00
September 30, 2009	3.25:1.00
December 31, 2009	3.25:1.00
March 31, 2010	3.25:1.00
June 30, 2010	3.25:1.00
September 30, 2010	3.25:1.00
December 31, 2010	3.25:1.00
Thereafter	2.75:1.00”

          (iii) Section 6.7(d) of the Credit Agreement is hereby amended by deleting the reference to “$65,000,000” for Fiscal Year 2007 and inserting in lieu thereof “$67,000,000”.

          (iv) Section 6.7 of the Credit Agreement is hereby amended to insert a new clause (f) as follows:

     “(f) Certain Amendments. Notwithstanding anything to the contrary set forth herein, if the Exit Facilities Conversion Date occurs:

          (i) on or after June 1, 2007 and prior to July 1, 2007, then the ratios in subsections (a) and (b) of Section 6.7 of the Credit Agreement for any date through June 30, 2008 may be amended with the sole respective consents of the Borrowers and the Administrative Agent in order to account for

Allied Holdings, Inc.
April 18, 2007
Page 5

the financial impact of the delayed implementation of revised labor and customer contracts of Borrowers and their Subsidiaries solely as a result of the Exit Facilities Conversion Date not occurring on or before May 31, 2007; or

          (ii) on or after July 1, 2007 and prior to October 1, 2007, then the ratios in subsections (a) and (b) of this Section 6.7 of the Credit Agreement for any date through September 30, 2008 may be amended with the sole respective consents of the Borrowers and the Administrative Agent in order to account for the financial impact of the delayed implementation of revised labor and customer contracts of Borrowers and their Subsidiaries solely as a result of the Exit Facilities Conversion Date not occurring on or before May 31, 2007.”

This letter may be executed in any number of counterparts, each of which when executed will be an original, and all of which, when taken together, will constitute one agreement. Delivery of an executed counterpart of a signature page of this letter by facsimile or other electronic transmission will be effective as delivery of a manually executed counterpart hereof.

This letter shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders. No Credit Party’s rights or obligations hereunder or any interest therein may be assigned or delegated by any Credit Party without the prior written consent of all Lenders. In case any provision in or obligation hereunder shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

Upon the effectiveness of this letter, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement, and each reference in the other Credit Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this letter. Except as specifically amended by this letter, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this letter shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of any Agent or Lender under, the Credit Agreement or any of the other Credit Documents.

This letter shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of law (other than Section 5-1401 of the New York General Obligations Law).

[Remainder of page intentionally left blank]

Allied Holdings, Inc.
April 18, 2007
Page 6

Please indicate your agreement to the foregoing by the due execution of a counterpart of this letter agreement by a proper and duly authorized officer.

Very truly yours,

THE CIT GROUP/BUSINESS CREDIT, INC., as Administrative Agent and a Lender
By:
	Name: Title:
GOLDMAN SACHS CREDIT PARTNERS L.P., as a Lender
By:
	Authorized Signatory
		ACKNOWLEDGED AND AGREED AS OF THE DATE ABOVE:
		ALLIED HOLDINGS, INC.
		By:
			Thomas H. King Executive Vice President and Chief Financial Officer
		ALLIED SYSTEMS, LTD. (L.P.)
		By:	Allied Automotive Group, Inc., its Managing General Partner
			By:
				Thomas H. King Executive Vice President and Assistant Treasurer

Allied Holdings, Inc.
April 18, 2007
Page 7

ACE OPERATIONS, LLC AXIS NETHERLANDS, LLC
By:	AXIS Group, Inc., its Sole Member and Manager
	By:
		Thomas H. King Executive Vice President and Assistant Treasurer
AH INDUSTRIES INC. ALLIED AUTOMOTIVE GROUP, INC. ALLIED FREIGHT BROKER LLC ALLIED SYSTEMS (CANADA) COMPANY AXIS CANADA COMPANY AXIS GROUP, INC. COMMERCIAL CARRIERS, INC. CORDIN TRANSPORT LLC C T SERVICES, INC. F.J. BOUTELL DRIVEAWAY LLC GACS INCORPORATED QAT, INC. RMX LLC TERMINAL SERVICES LLC TRANSPORT SUPPORT LLC
By:
	Thomas H. King Executive Vice President and Assistant Treasurer
AXIS ARETA, LLC LOGISTIC SYSTEMS, LLC LOGISTIC TECHNOLOGY, LLC
	By:	AX International Limited, its Sole Member and Manager
	By:
		Thomas H. King Executive Vice President and Assistant Treasurer

EX-4.4

Exhibit 4.4

EXECUTION VERSION

LOAN AND SECURITY AGREEMENT AND GUARANTY

dated as of April 5, 2007

among

ALLIED SYSTEMS, Ltd. (L.P.),
a Georgia limited partnership and a debtor and debtor in possession under
Chapter 11 of the Bankruptcy Code.

as “Borrower”

ALLIED HOLDINGS, INC.,
a Georgia corporation and a debtor and debtor in possession under
Chapter 11 of the Bankruptcy Code

and

THE OTHER SUBSIDIARIES PARTY HERETO

as “Guarantors”

and

YUCAIPA TRANSPORTATION, LLC,
a Delaware limited liability company

as “Lender”

TABLE OF CONTENTS

	PAGE
SECTION 1. DEFINITIONS		2
1.1 General Definitions		2
1.2 Definitions; Interpretation		11
SECTION 2. LOAN PROVISIONS		11
2.1 Loan Mechanics		11
2.2 Use of Proceeds		12
2.3 Conversion to Equity		12
SECTION 3. CONDITIONS TO FUNDING		12
3.1 Conditions to Initial Funding		12
3.2 Conditions to Each Funding		14
SECTION 4. GRANT OF SECURITY		15
4.1 Grant of Security		15
SECTION 5. SECURITY FOR OBLIGATIONS; BORROWER REMAINS LIABLE		15
5.1 Security for Obligations		15
5.2 Continuing Liability Under Collateral		15
SECTION 6. REPRESENTATIONS AND WARRANTIES AND COVENANTS		16
6.1 Representations and Warranties		16
6.2 Covenants and Agreements		20
SECTION 7. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES		24
7.1 Access; Right of Inspection		24
7.2 Further Assurances		24
SECTION 8. LENDER APPOINTED ATTORNEY-IN-FACT		24
8.1 Power of Attorney		24
8.2 No Duty on the Part of Lender		25
SECTION 9. REMEDIES		26
9.1 Events of Default		26
9.2 Application of Proceeds		33
9.3 Sales on Credit		33
9.4 Cash Proceeds		33
SECTION 10. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS		33
SECTION 11. STANDARD OF CARE; LENDER MAY PERFORM		34

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SECTION 12. MISCELLANEOUS	34
12.1 Reimbursement of Expenses	34
12.2 Notices	35
12.3 No Waiver	35
12.4 Severability	35
12.5 Independence	36
12.6 Successors and Assigns	36
12.7 Entire Agreement	36
12.8 Counterparts	36
12.9 Governing Law	36
SECTION 13. GUARANTY	36
13.1 Guaranty of the Obligations	36
13.2 Payment by Guarantors	36
13.3 Liability of Guarantors Absolute	37
13.4 Waivers by Guarantors	39
13.5 Guarantors’ Rights of Subrogation, Contribution, etc	39
13.6 Subordination of Other Obligations	40
13.7 Continuing Guaranty	40
13.8 Authority of Guarantors or Borrower	40
13.9 Financial Condition of Borrower	40
13.10 Bankruptcy, etc	40
13.11 Discharge of Guaranty Upon Sale of Guarantors	41
13.12 Contribution by Guarantors	42

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          This LOAN AND SECURITY AGREEMENT AND GUARANTY is entered into as of April 5, 2007 (this “Agreement”), by and among ALLIED SYSTEMS, LTD. (L.P.), a Georgia limited partnership and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (“Borrower”), ALLIED HOLDINGS, INC., a Georgia corporation and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (“Holdings”), THE OTHER SUBSIDIARIES (AS DEFINED BELOW) OF HOLDINGS PARTY HERETO (such Subsidiaries, together with any future Subsidiaries of Holdings, the “Subsidiary Guarantors”, and together with Borrower and Holdings, collectively, the “Loan Parties”, and individually, a “Loan Party”), and YUCAIPA TRANSPORTATION, LLC, a Delaware limited liability company (“Lender”).

RECITALS:

          WHEREAS, on July 31, 2005 (the “Petition Date”), Holdings, Borrower, and certain Subsidiaries (as defined below) of Borrower and Holdings (such Subsidiaries, together with Borrower and Holdings, collectively the “Debtors”, and individually a “Debtor”) filed a voluntary petition for relief (collectively, the “Cases”) under Chapter 11 of the Bankruptcy Code (as defined below) with the United States Bankruptcy Court for the Northern District of Georgia (such court or any other court having competent jurisdiction over the Cases, the “Bankruptcy Court”);

          WHEREAS, from and after the Petition Date, the Debtors are continuing to operate their respective businesses and manage their respective properties as debtors in possession under Sections 1107 and 1108 of the Bankruptcy Code;

          WHEREAS, pursuant to that certain Equipment Purchase Agreement, entered into as of April 5, 2007 (as amended, modified and supplemented from time to time, the “Purchase Agreement”) by and among Borrower, Holdings and Lender, Borrower and Holdings have agreed to purchase and in the future may agree to purchase certain tractors and trailers and related equipment from Lender (any such purchase, individually, an “Equipment Purchase”, and all such purchases collectively, the “Equipment Purchases”);

          WHEREAS, Lender has agreed to accept as payment of the purchase price for the initial Equipment Purchase that certain Secured Convertible Promissory Note, dated April 5, 2007 (as amended, modified and supplemented from time to time, the “Initial Promissory Note”), in the original principal amount of Five Hundred Sixty-Four Thousand ($564,000), payable to Lender;

          WHEREAS, Lender may advance additional funds to Borrower for (i) Equipment Purchases and Transfer Taxes (as defined in the Purchase Agreement), registration fees and any other out-of-pocket fees, costs or expenses incurred, by Lender or its Affiliates in connection with the Equipment Purchases and (ii) funding of repair and maintenance for the rigs and other equipment purchased pursuant to the Equipment Purchases, with any such advance to be made pursuant to additional secured convertible promissory notes in substantially the form of the Initial Promissory Note (such additional notes, the “Additional Promissory Notes”, and together with the Initial Promissory Note, collectively, the “Promissory Notes”, and individually a “Promissory Note”); and

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          WHEREAS, as a condition precedent to advancing funds under the Promissory Notes, Lender has required the Loan Parties to execute and deliver this Agreement.

          NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Loan Parties and Lender agree as follows:

SECTION 1. DEFINITIONS.

          1.1 General Definitions. In this Agreement, the following terms shall have the following meanings:

          “Additional Promissory Notes” shall have the meaning set forth in the recitals.

          “Advance Date” shall mean the Closing Date and the date of each future advance pursuant to any Promissory Note.

          “Agreement” shall have the meaning set forth in the preamble.

          “Approval Order” shall mean the Interim Approval Order or the Final Approval Order, as applicable.

          “Approved Plan” shall mean a plan of reorganization that is (i) proposed by the Debtors, (ii) supported by Lender or any affiliate of Lender and (iii) approved and confirmed in the Cases pursuant to a confirmation order of the Bankruptcy Court in form and substance acceptable to Lender.

          “Available Funding Period” shall mean the period commencing on the Closing Date and ending on the Maturity Date.

          “Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

          “BIA” shall mean the Bankruptcy and Insolvency Act (Canada), as now or hereafter in effect or any successor statute.

          “Borrower” shall have the meaning set forth in the preamble.

          “Business Day” shall mean any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of Georgia or the State of California or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

          “Canadian Approval Order” shall mean the Canadian Interim Approval Order or the Canadian Final Approval Order, as applicable.

          “Canadian Court” shall mean the Ontario Superior Court of Justice (Commercial List).

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          “Canadian Final Approval Order” shall mean an order of the Canadian Court under Section 18.6 of the CCAA, together with all extensions, modifications and amendments thereto, in each case in form and substance satisfactory to Lender, giving full effect to the Final Approval Order, which order shall specifically but not exclusively provide that each of the Canadian Loan Parties is authorized to enter into the Loan Documents to which it is a party, and provide, execute and deliver all such guarantees, documents, security interests and liens as are contemplated in such Loan Documents and granting to Lender a fixed charge, mortgage, hypothec, security interest and lien in all of the Collateral in which any of the Canadian Loan Parties now or hereafter has an interest ranking in priority to all other encumbrances.

          “Canadian Insolvency Law” shall mean any of the BIA and the CCAA, and any other applicable insolvency or other similar law.

          “Canadian Interim Approval Order” shall mean an order of the Canadian Court under Section 18.6 of the CCAA, together with all extensions, modifications and amendments thereto, in each case in form and substance satisfactory to Lender, giving full effect to the Interim Approval Order, which order shall specifically but not exclusively provide that each of the Canadian Loan Parties is authorized to enter into the Loan Documents to which it is a party, and provide, execute and deliver all such guarantees, documents, security interests and liens as are contemplated in such Loan Documents and granting to Lender a fixed charge, mortgage, hypothec, security interest and lien in all of the Collateral in which any of the Canadian Loan Parties now or hereafter has an interest ranking in priority to all other encumbrances.

          “Canadian Loan Party” shall mean any Loan Party incorporated, organized or otherwise established under the laws of Canada or any political subdivision of Canada.

          “Canadian PPSA” shall mean the Personal Property Security Act (Ontario) and the Regulations thereunder, as from time to time in effect, provided, however, if the validity, perfection (or opposability), effect of perfection or of non-perfection or priority of Lender’s security interest in any Collateral are governed by the personal property security laws or laws relating to movable property of any jurisdiction other than Ontario, Canadian PPSA shall mean those personal property security laws or laws relating to movable property in such other jurisdiction for the purpose of the provisions hereof relating to such validity, perfection (or opposability), effect of perfection or of non-perfection or priority and for the definitions related to such provisions.

          “Canadian Subsidiary” shall mean any Subsidiary that is incorporated, organized or otherwise established under the laws of Canada or any political subdivision of Canada.

          “Capital Lease” shall mean, as applied to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in conformity with GAAP, is or should be accounted for as a capital lease on the balance sheet of such Person.

          “Cases” shall have the meaning set forth in the recitals.

          “Cash Proceeds” shall have the meaning assigned in Section 9.4.

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          “CCAA” shall mean Companies’ Creditors Arrangement Act (Canada), as now and hereafter in effect, or any successor statute.

          “Change of Control” shall mean (i) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) other than Lender and its Affiliates (a) shall have acquired beneficial ownership of 35% or more on a fully diluted basis of the voting and/or economic interest in the Equity Interests of Holdings or (b) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of Holdings; or (ii) Holdings shall cease to beneficially own and control, directly or indirectly, 100% on a fully diluted basis of the economic and voting interest in the Equity Interests of Systems; or (ill) a plan of reorganization other than the Approved Plan is consummated.

          “Closing Date” shall mean the date on which the Initial Promissory Note is issued.

          “Collateral” shall have the meaning assigned in Section 4.1.

          “Collateral Account” shall mean any account established by Lender.

          “Collateral Records” shall mean books, records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes, disks and related data processing software and similar items that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon.

          “Committee” shall mean the Official Committee of Unsecured Creditors appointed in the Cases pursuant to Section 1102 of the Bankruptcy Code, on August 5, 2005, as reconstituted from time to time.

          “Contractual Obligation” shall mean, as applied to any Person, any provision of any Security issued by that Person or of any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

          “Debtors” shall have the meaning set forth in the recitals.

          “Default” shall mean a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.

          “Disclosure Statement” shall mean the written disclosure statement that relates to the Plan, as approved by the Bankruptcy Court pursuant to Section 1125 of the Bankruptcy Code and Rule 3017 of the Federal Rules of Bankruptcy Procedure, as such disclosure statement may be amended, modified or supplemented from time to time in accordance with applicable law.

          “Disqualified Equity Interests” shall mean any Equity Interest which, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for

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which it is exchangeable), or upon the happening of any event or condition (i) matures or is mandatorily redeemable (other than solely for Equity Interests which are not otherwise Disqualified Equity Interests), pursuant to a sinking fund obligation or otherwise, (ii) is redeemable at the option of the holder thereof (other than solely for Equity Interests which are not otherwise Disqualified Equity Interests), in whole or in part, (iii) provides for the scheduled payments or dividends in cash, or (iv) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 91 days after the Maturity Date.

          “Domestic Subsidiary” shall mean any Subsidiary organized under the laws of the United States of America, any State thereof or the District of Columbia.

          “Employee Benefit Plan” shall mean, in respect of any Loan Party other than a Canadian Loan Party, any “employee benefit plan” as defined in Section 3(3) of ERISA which is or was sponsored, maintained or contributed to by, or required to be contributed by, Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates, and in respect of any Canadian Loan Party, any employee benefit plan of any nature or kind that is not a Pension Plan and is maintained by or contributed to, or required to be maintained by or contributed to, by such Canadian Loan Party.

          “Equipment Purchase” and “Equipment Purchases” shall have the meanings set forth in the recitals.

          “Equipment Schedule” shall have the meaning set forth in the Purchase Agreement.

          “Equity Interests” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

          “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.

          “ERISA Affiliate” shall mean, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of Holdings or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of Holdings or any such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Holdings or such Subsidiary and with respect to

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liabilities arising after such period for which Holdings or such Subsidiary could be liable under the Internal Revenue Code or ERISA.

          “Event of Default” shall mean each of the conditions or events set forth in Section 9.1 (a).

          “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

          “Executive Officer” shall mean, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executive officer, president (or the equivalent thereof), such Person’s chief financial officer or treasurer and such Person’s vice president of human resources and risk management.

          “Existing Credit Agreement” shall mean that Secured Super-Priority Debtor in Possession and Exit Credit and Guaranty Agreement, dated as of March 30. 2007, entered into by and among Holdings, Borrower, and certain subsidiaries of Holdings, as Subsidiary Guarantors, the Lenders party thereto from time to time, Goldman Sachs Credit Partners L.P., as Syndication Agent, and The CIT Group/Business Credit, Inc., as Administrative Agent and as Collateral Agent , as it may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.

          “Fair Market Value” shall mean, with respect to any Purchased Title Vehicle, the purchase price paid for such Purchased Title Vehicle pursuant to the Purchase Agreement.

          “Final Approval Order” shall mean an order (in form and substance substantially similar to the Interim Approval Order and otherwise in form and substance satisfactory to Lender) of the Bankruptcy Court pursuant to Section 364 of the Bankruptcy Code entered after the final hearing approving this Agreement and the other Loan Documents, as to which no stay has been entered and which has not been reversed, vacated or overturned, and from which no appeal or motion to reconsider has been timely filed, or if timely filed, such appeal or motion to reconsider has been dismissed or denied unless Lender waives such requirement, and which has not been amended, supplemented or otherwise modified in any respect adverse to Lender without the prior written consent of Lender.

          “Funding Notice” shall mean a notice substantially in the form of Exhibit A.

          “GAAP” shall mean United States generally accepted accounting principles in effect as of the date of determination thereof.

          “Governmental Authority” shall mean any federal, state, provincial, municipal, national or other government, governmental department, commission, board, bureau, court, tribunal, agency or instrumentality or political subdivision thereof or any entity, officer or examiner exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government.

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          “Governmental Authorization” shall mean any permit, license, authorization, plan, directive, consent order or consent decree of or from any Governmental Authority.

          “Guarantors” shall mean Holdings and each Domestic Subsidiary and Canadian Subsidiary of Holdings, excluding in each case. Borrower and any Inactive Subsidiary.

          “Guaranty” shall mean the guaranty of Guarantors set forth in Section 13.

          “Holdings” shall have the meaning set forth in the preamble.

          “Inactive Subsidiary” shall mean any Subsidiary of Holdings that has (i) no assets other than de minimus assets not exceeding $250,000, (ii) no revenues and (iii) no income.

          “Indebtedness”, as applied to any Person, shall mean, without duplication, (i) all indebtedness of such Person for borrowed money; (ii) that portion of obligations of such Person with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (iii) notes payable and bankers acceptances of such Person; (iv) any obligation of such Person owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all indebtedness secured by any Lien on any property or asset owned or held by such Person (other than a Lien on leased property (real or personal) granted by the landlord or lessor thereof) regardless of whether the indebtedness secured thereby shall have been assumed by such Person or is nonrecourse to the credit of such Person; (vi) the face amount of any letter of credit issued for the account of such Person or as to which such Person is otherwise liable for reimbursement of drawings; (vii) Disqualified Equity Interests, (viii) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation which would be Indebtedness of another; (ix) any obligation which would be Indebtedness of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; and (x) any liability of such Person for an obligation which would be Indebtedness of another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (x), the primary purpose or intent thereof is as described in clause (ix) above.

           “Initial Promissory Note” shall have the meaning set forth in the recitals.

          “Initial Repair Costs” shall have the meaning provided in the Purchase Agreement.

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          “Insurance” shall mean (i) all insurance policies covering any or all of the Collateral (regardless of whether Lender is the loss payee thereof) and (ii) any key man life insurance policies.

          “Interim Approval Order” shall mean an order (in substantially the form of Exhibit C and otherwise in form and substance satisfactory to Lender) of the Bankruptcy Court pursuant to Section 364 of the Bankruptcy Code entered after an interim hearing approving this Agreement and the other Loan Documents, as to which no stay has been entered and which has not been reversed, vacated or overturned, and from which no appeal or motion to reconsider has been timely filed, or if timely filed, such appeal or motion to reconsider has been dismissed or denied unless Lender waives such requirement, and which has not been amended, supplemented or otherwise modified in any respect adverse to Lender without the prior written consent of Lender.

          “Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.

          “Lender” shall have the meaning set forth in the preamble.

          “Lien” shall mean any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.

          “Loan Documents” shall mean this Agreement, the Promissory Notes, the Purchase Agreement and all other documents, instruments or agreements executed and delivered by a Loan Party for the benefit of Lender in connection herewith and therewith.

          “Loan Party” shall have the meaning set forth in the preamble.

          “Material Adverse Effect” shall mean (i) a material adverse effect on and/or material adverse developments with respect to the business, operations, properties, assets or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole; (ii) a material impairment of the ability of the Loan Parties to fully and timely perform their Obligations; (iii) a material adverse effect on and/or material adverse developments with respect to the legality, validity, binding effect or enforceability against a Loan Party of a Loan Document to which it is a party; or (iv) a material impairment of the rights, remedies and benefits available to, or conferred upon. Lender under any Loan Document.

          “Maturity Date” shall mean the earlier of (i) April 4, 2008; and (ii) the date that all Obligations shall become due and payable in full hereunder and under the Promissory Notes, whether by acceleration or otherwise.

          “Maximum Loan Amount” shall mean fifteen million dollars ($15,000,000).

          “Multiemployer Plan” shall mean any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA.

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          “Obligations” shall mean all obligations of every nature of the Loan Parties under any Loan Document, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to any Loan Party, would have accrued on any Obligation, whether or not a claim is allowed against such Loan Party for such interest in the related bankruptcy proceeding), fees, expenses, indemnification or otherwise.

          “PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor thereto.

          “Pension Plan” shall mean, in respect of any Loan Party other than any Canadian Loan Party, any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA and in respect of any Canadian Loan Party, each pension, supplementary pension, retirement savings or other retirement income plan or arrangement of any kind, registered or non-registered, established, maintained or contributed to by such Canadian Loan Party for its employees or former employees, but does not include the Canada Pension Plan or the Quebec Pension Plan that is maintained by the Government of Canada or the Province of Quebec, respectively.

          “Permitted Encumbrances” shall mean each of the following Liens: (i) Liens in favor of Lender granted pursuant to any Loan Document; (ii) Liens for Taxes not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (a) adequate reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor, and (b) such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such Tax or claim; (iii) Liens of landlords, banks (and rights of set-off), of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law (other than any such Lien imposed pursuant to Section 401 (a)(29) or 412(n) of the Internal Revenue Code or by ERISA), in each case incurred in the ordinary course of business (a) for amounts not yet overdue or (b) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of thirty days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any. as shall be required by GAAP shall have been made for any such contested amounts; (iv) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money or other Indebtedness), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof; (v) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (vi) bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and cash equivalents on deposit in one or more accounts maintained by any Loan Party, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that, unless such Liens are non-consensual and arise by operation of law, in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness; and

9

(vii) Liens arising out of judgments or awards in connection with court proceedings which do not constitute an Event of Default.

          “Person” shall mean and include natural persons, corporations, limited partnerships, general partnerships, limited liability companies, unlimited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.

          “Petition Date” shall have the meaning set forth in the recitals.

          “Plan” shall mean the Chapter 11 plan of reorganization with respect to the Debtors confirmed by the Bankruptcy Court.

          “Plan Effective Date” shall mean the Effective Date as defined in the Plan.

          “Pledge Supplement” shall mean any supplement to this agreement in substantially the form of Exhibit B.

          “Proceeds” shall mean (i) all “proceeds” as defined in Article 9 of the UCC, and (ii) whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.

          “Promissory Note” and “Promissory Notes” shall have the meanings set forth in the recitals.

          “Purchase Agreement” shall have the meaning set forth in the recitals.

          “Record” shall have the meaning specified in Article 9 of the UCC.

          “Secured Obligations” shall have the meaning assigned in Section 5.1.

          “Stipulation Regarding Continued Exclusivity” shall mean that certain Stipulation Regarding Continued Exclusivity and Plan of Reorganization between the Debtors and Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP, which was filed with the Bankruptcy Court in February 2007, as amended, modified and supplemented from time to time in accordance with the terms thereof.

          “Subsidiary” shall mean, with respect to any Person, any other Person of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of such Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided, in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a “qualifying share” of the former Person shall be deemed to be outstanding.

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          “Subsidiary Guarantors” shall have the meaning set forth in the preamble.

          “Tax” shall mean any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided, “Tax on the overall net income” of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which such Person is organized or in which such Person’s applicable principal office is located or in which such Person is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of such Person.

          “Title Vehicles” shall mean motor vehicles, tractors, trailers and other like property of which title thereto is governed by a certificate of title or similar instrument.

          “Transfer Taxes” shall have the meaning provided in the Purchase Agreement.

          “UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York or, when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction.

          “United States” shall mean the United States of America.

     1.2 Definitions; Interpretation. All capitalized terms used herein (including the preamble and recitals hereto) and not otherwise defined herein shall have the meanings ascribed thereto in the UCC. References to “Sections,” “Exhibits” and “Schedules” shall be to Sections, Exhibits and Schedules, as the case may be, of this Agreement unless otherwise specifically provided. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. The use herein of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC.

SECTION 2. LOAN PROVISIONS.

     2.1 Loan Mechanics.

          (a) Loan Commitments. Subject to the terms and conditions hereof, during the Available Funding Period, Lender agrees to make loans to Borrower in an aggregate amount up to but not exceeding the Maximum Loan Amount. Any amount borrowed under this Section 2.1 (a) and subsequently repaid or prepaid may not be reborrowed. All amounts owed hereunder

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with respect to the loans made pursuant to the Promissory Notes shall be paid in full no later than the Maturity Date.

          (b) Borrowing Mechanics for Loans.

                    (i) Whenever Borrower desires that Lender make a Loan, Borrower shall deliver to Lender a fully executed and delivered Funding Notice no later than 11:00 a.m. (New York City time) at least three Business Day in advance of the proposed Advance Date.

                    (ii) Upon satisfaction or waiver of the conditions precedent specified herein, Lender shall make the proceeds of the requested loans available to Borrower on the applicable Advance Date by either (x) crediting such amount against the purchase price to be paid under and pursuant to the Purchase Agreement (for loans made in connection with purchases of Purchased Title Vehicles or (y) causing an amount of same day funds in Dollars equal to the proceeds of such loan to be credited to the account of Borrower at to the account as may be designated in writing to Lender by Borrower.

     2.2 Use of Proceeds. Promissory Notes shall only be issued (i) in payment of the purchase price for Equipment Purchases and related Transfer Taxes, registration fees and any other out-of-pocket fees, costs or expenses incurred, by Lender or its Affiliates in connection with the Equipment Purchases and the Loan Documents and (ii) for proceeds which are applied to finance expenses incurred by Borrower and Holdings for Initial Repair Costs.

     2.3 Conversion to Equity. Upon the effective date of and pursuant to an Approved Plan, the principal and interest due and owing under the Notes (including, without limitation, any interest which has been added to principal pursuant to the Notes) and all other Obligations owing under the Loan Documents shall, at the option of the either Holdings or Lender, in each case in its sole and absolute discretion, be converted into voting Equity Interests of Holdings, which option must be exercised by giving Holdings or Lender, as applicable, written notice within ten(10) days after the entry by the Bankruptcy Court of an order confirming such Approved Plan. If the conversion right is exercised, then the Obligations shall be exchanged into a percentage of the total outstanding voting Equity Interests of Holdings after giving effect to consummation of the Approved Plan, with the percentage of shares to be issued to Lender to be calculated as follows: 100 percent multiplied by a fraction, (i) the numerator of which equals the total amount of the Obligations as of the Plan Effective Date and (ii) the denominator of which equals (a) Two Hundred Eighty-Five Million Dollars ($285,000,000) minus (b) the principal amount of Indebtedness (other than the Obligations) of Holdings and its Subsidiaries net of cash on hand outstanding on the Plan Effective Date after giving effect to consummation of the Approved Plan.

SECTION 3. CONDITIONS TO FUNDING.

     3.1 Conditions to Initial Funding. The obligation of Lender to make fund the Initial Promissory Note on the Closing Date is subject to the satisfaction or waiver of the following conditions on or before the Closing Date:

          (a) Credit Documents. Lender shall have received a copy of each Loan Document originally executed and delivered by each applicable Loan Party.

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          (b) Court Order. The Bankruptcy Court shall have entered the Interim Approval Order, which shall be certified by the Clerk of the Bankruptcy Court as having been duly entered, and the Interim Approval Order shall be in full force and effect, shall not be subject to a motion for reconsideration and shall not have been vacated, reversed, modified, amended or stayed without the written consent of Lenders and, if the Interim Approval Order is the subject of a pending appeal or motion for reconsideration in any respect, neither the making of the loans pursuant to the Promissory Notes nor the performance by the Loan Parties of their respective obligations under the Loan Documents shall be the subject of a presently effective stay pending appeal. The Loan Parties shall have complied in full with the notice and all other requirements as provided for under the Interim Approval Order. The Canadian Court shall have entered the Canadian Interim Approval Order, which shall be certified by the Clerk of the Canadian Court as having been duly entered, and the Canadian Interim Approval Order shall be in full force and effect, shall not be subject to a motion for reconsideration and shall not have been vacated, reversed, modified, amended or stayed without the written consent of Lender and, if the Canadian Interim Approval Order is the subject of a pending appeal or motion for reconsideration in any respect, neither the making of the loans pursuant to the Promissory Notes nor the performance by the Loan Parties of their respective obligations under the Loan Documents shall be the subject of a presently effective stay pending appeal.

          (c) Organizational Documents; Incumbency. Lender shall have received (i) copies of each Organizational Document executed and delivered by each Loan Party, as applicable, and, to the extent applicable, certified as of a recent date by the appropriate governmental official, each dated the Closing Date or a recent date prior thereto; (ii) signature and incumbency certificates of the officers of such Person executing the Loan Documents to which it is a party; (iii) resolutions of the Board of Directors or similar governing body of each Loan Party approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party or by which it or its assets may be bound as of the Closing Date, certified as of the Closing Date by its secretary or an assistant secretary as being in full force and effect without modification or amendment; provided that the resolutions for each Loan Party other than Borrower, Holdings, and Allied Systems (Canada) Company shall be delivered within 30 days following the Closing Date; (iv) a good standing certificate or equivalent from the applicable Governmental Authority of each Loan Party’s jurisdiction of incorporation, organization or formation, each dated a recent date prior to the Closing Date; and (v) such other documents as Lender may reasonably request.

          (d) Governmental Authorizations and Consents. Each Loan Party shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Loan Documents to occur on or before the Closing Date and each of the foregoing shall be in full force and effect and in form and substance reasonably satisfactory to Lender.

          (e) Personal Property Collateral. In order to create in favor of Lender a valid, perfected security interest in the Collateral, the Loan Parties shall have delivered to Lender:

          (i) evidence reasonably satisfactory to Lender that Lender will have a first priority perfected security interest in the Collateral and of the filing or publishing of

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UCC and Canadian PPSA financing statements and other evidence of registration or publication; and

          (ii) a list setting forth the vehicle identification numbers for each Purchased Title Vehicle as of the Closing Date.

          (f) Evidence of Insurance. Lender shall have received a certificate from Borrower’s insurance broker or other evidence reasonably satisfactory to it that all insurance required to be maintained pursuant to Section 6.2(c) is in full force and effect, together with endorsements naming Lender, as additional insured and loss payee thereunder to the extent required under Section 6.2(c).

          (g) Closing Date Certificate. Borrower shall have delivered to Lender an originally executed closing certificate certifying that the conditions set forth in this Section 3.1 have been satisfied.

          (h) No Litigation. There shall not exist any action, suit, investigation, litigation, proceeding, hearing (other than the Cases) or other legal or regulatory developments, pending or threatened in any court or before any arbitrator or Governmental Authority that, in the reasonable opinion of Lender, singly or in the aggregate, materially impairs the transactions contemplated by the Loan Documents, or that could reasonably be expected to have a Material Adverse Effect.

     3.2 Conditions to Each Funding. The obligation of Lender to make any loan on any Advance Date pursuant to a Promissory Note, including the Initial Promissory Note, is subject to the satisfaction or waiver of the following conditions precedent:

          (a) Funding Notice. Lender shall have received a fully executed and delivered Funding Notice.

          (b) Amount. After making the loan requested on such Advance Date, the aggregate principal amount of all outstanding Promissory Notes shall not exceed the Maximum Loan Amount.

          (c) Representations and Warranties. As of such Advance Date, the representations and warranties contained herein and in the other Loan Documents shall be true and correct in all material respects on and as of such Advance Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date.

          (d) No Default. As of such Advance Date, no event shall have occurred and be continuing or would result from the consummation of the loan to be made that would constitute an Event of Default or a Default.

          (e) Executed Promissory Note. Lender shall have received an original of a fully executed Promissory Note in the principal amount of the loan being requested.

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          (f) Event Specific Conditions.

          (i) For each funding of a loan as the payment price for a purchase of additional Purchased Title Vehicles, Lender shall have received an Equipment Schedule with respect to such purchase, such Equipment Schedule to be delivered pursuant to the provisions of the Purchase Agreement.

          (ii) For each funding of a loan for the purpose of financing Initial Repair Costs, Transfer Taxes, registration fees and any other out-of-pocket fees, costs or expenses incurred, by Lender or its Affiliates in connection with the Equipment Purchases and the Loan Documents, such Promissory Notes shall be issued in accordance with the provisions of Section 7.5 of the Purchase Agreement.

SECTION 4. GRANT OF SECURITY.

     4.1 Grant of Security. Each Loan Party hereby grants to Lender a security interest in and continuing lien on all of such Loan Party’s right, title and interest in, to and under the following property of such Loan Party, whether now owned or existing or hereafter acquired or arising and wherever located (all of which being hereinafter collectively referred to as the “Collateral”):

          (i) all Title Vehicles purchased pursuant to the Purchase and Sale Agreements, including those Title Vehicles set forth on Schedule 4.1 (collectively, the “Purchased Title Vehicles”);

          (ii) all Collateral Records (including certificates of title) relating exclusively to the Purchased Title Vehicles; and

          (iii) to the extent not otherwise included above, all Proceeds and accessions of or in respect of any Collateral.

SECTION 5. SECURITY FOR OBLIGATIONS; BORROWER REMAINS LIABLE.

     5.1 Security for Obligations. This Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. §362(a) (and any successor provision thereof)), of all Obligations of the Loan Parties (the “Secured Obligations”).

     5.2 Continuing Liability Under Collateral. Notwithstanding anything herein to the contrary, (i) each Loan Party shall remain liable for all obligations under the Collateral and nothing contained herein is intended or shall be a delegation of duties to Lender, (ii) each Loan Party shall remain liable under each of the agreements included in the Collateral to perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to the terms and provisions thereof, and Lender shall not have any obligation or liability under any of such agreements by reason of or arising out of this Agreement or any other document related thereto, nor shall Lender have any obligation to make any inquiry as to the nature or sufficiency of any

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payment received by it or have any obligation to take any action to collect or enforce any rights under any agreement included in the Collateral, and (iii) the exercise by Lender of any of its rights hereunder shall not release any Loan Party from any of its duties or obligations under the contracts and agreements included in the Collateral.

SECTION 6. REPRESENTATIONS AND WARRANTIES AND COVENANTS.

     6.1 Representations and Warranties. Each Loan Party hereby represents and warrants, on each Advance Date, that:

          (a) Corporate Existence. Such Loan Party and each of its Subsidiaries (other than Inactive Subsidiaries) (i) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as identified in Schedule 6.1(a), (ii) subject to the entry of the Approval Order by the Bankruptcy Court and the Canadian Approval Order the Canadian Court has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into this Agreement and the other Loan Documents to which such Loan Party is a party and to carry out the transactions contemplated thereby, and (ii) is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had, and could not be reasonably expected to have, a Material Adverse Effect.

          (b) Due Authorization. Upon the entry of the Approval Order by the Bankruptcy Court and the Canadian Approval Order by the Canadian Court, the execution, delivery and performance of this Agreement and the other Loan Documents have been duly authorized by all necessary action on the part of such Loan Party.

          (c) No Conflict. Subject to entry of the Approval Order by the Bankruptcy Court and the Canadian Approval Order by the Canadian Court, the execution, delivery and performance by such Loan Party of this Agreement and the other Loan Documents to which such Loan Party is a party, the consummation of the Plan, and the consummation of the transactions contemplated by this Agreement do not and will not (i) violate (x) any provision of any law or any governmental rule or regulation applicable to such Loan Party or any of its Subsidiaries, (y) any of the Organizational Documents of such Loan Party, or (z) any order, judgment or decree of any court or other agency of government binding on such Loan Party or any of its Subsidiaries; (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of such Loan Party or any of its Subsidiaries except to the extent such conflict, breach or default could not reasonably be expected to have a Material Adverse Effect; (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of such Loan Party or any of its Subsidiaries (other than any Liens created under this Agreement in favor of Lender); or (iv) require any approval of stockholders, members or partners or any approval or consent of any Person under any Contractual Obligation of such Loan Party or any of its Subsidiaries, except for (x) such approvals or consents which will be obtained on or before the Closing Date, and (y) any such approvals or consents the failure of which to obtain could not reasonably be expected to have a Material Adverse Effect.

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          (d) No Government Action. Upon the entry of the Approval Order by the Bankruptcy Court and the Canadian Approval Order by the Canadian Court, the execution, delivery and performance by such Loan Party of this Agreement and the other Loan Documents to which such Loan Party is a party, the consummation of the Plan, and the consummation of the transactions contemplated by this Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority except (i) as required by the Approval Order or the Canadian Approval Order or as otherwise set forth in the Plan, (ii) in the case of consummation of the Plan, as required by the Bankruptcy Code, (iii) for filings and recordings with respect to the Collateral to be made, or otherwise delivered to Lender for filing and/or recordation and (iv) any registration, consent, approval, notice or action to the extent that the failure to undertake or obtain such registration, consent, approval, notice or action could not reasonably be expected to have a Material Adverse Effect.

          (e) Valid and Binding. This Agreement and the other Loan Documents to which such Loan Party is a party have been duly executed and delivered by such Loan Party and, subject to the entry of the Approval Order by the Bankruptcy Court and the Canadian Approval Order by the Canadian Court, are the legally valid and binding obligations of such Loan Party, enforceable against such Loan Party in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

          (f) No Material Adverse Effect. Since December 31, 2005, no event, circumstance or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, other than (i) as described in the Disclosure Statement, (ii) the commencement of the Cases and the events typically resulting from the commencement of the Cases, and (iii) such events, circumstances or changes that have been publicly disclosed by such Loan Party or its Subsidiaries.

          (g) Taxes. Except as otherwise permitted under Section 6.2(b), all federal income and all other material Tax returns and reports of such Loan Party and its Subsidiaries required to be filed by any of them have been timely filed, and all Taxes shown on such Tax returns to be due and payable and all other material assessments, fees and other governmental charges upon such Loan Party and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. Such Loan Party knows of no proposed Tax assessment against such Loan Party or any of its Subsidiaries which is not being actively contested by such Loan Party or such Subsidiary in good faith and by appropriate proceedings; provided, such reserves or other appropriate provisions, as shall be required in conformity with GAAP shall have been made or provided therefor.

          (h) Contractual Obligations. Neither such Loan Party nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations other than as a result of the filing of the Cases (and any payment default directly related to such filing), and no condition exists which, with the giving of notice or the lapse of time or both, could constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.

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          (i) Compliance with Law. Each of such Loan Party and its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all Governmental Authorities, in respect of the conduct of its business and the ownership of its property, except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

          (j) Purchased Title Vehicles. Such Loan Party owns the Purchased Title Vehicles purported to be owned by it or otherwise has the rights it purports to have in the Purchased Title Vehicles and, as to all Purchased Title Vehicles whether now existing or hereafter acquired, will continue to own or have such rights in each Purchased Title Vehicle, in each case free and clear of any and all Liens, rights or claims of all other Persons, other than Permitted Encumbrances.

          (k) Location of Collateral. All of the Purchased Title Vehicles (excluding Purchased Title Vehicles being repaired in a third-party location in the ordinary course of business) are garaged at and/or operated out of the locations specified in Schedule 6.1(k) (as such schedule may be amended or supplemented from time to time).

          (1) Corporate Information. Such Loan Party has indicated on Schedule 6.1 (a) (as such schedule may be amended or supplemented from time to time): (i) the type of organization of such Loan Party, (ii) the jurisdiction of organization of such Loan Party, (iii) such Loan Party’s organizational identification number and (iv) the jurisdiction where the chief executive office of such Loan Party is located.

          (m) Legal Names. The full legal name of such Loan Party is as set forth on Schedule 6.1 (a) and since July 31, 2005 such Loan Party has not done, and does not do, business under any other name (including any trade name or fictitious business name) except for those names set forth on Schedule 6.1(b) (as such schedule may be amended or supplemented from time to time).

          (n) Corporate Structure. Except as provided on Schedule 6.1(c), such Loan Party has not changed its name, jurisdiction of organization or its corporate structure in any way (e.g., by merger, consolidation, change in corporate form or otherwise) since July 31, 2005.

          (o) Perfection of Lien. Upon (i) the filing of all UCC financing statements naming such Loan Party as “debtor” and Lender as “secured party” and describing the Collateral in the filing offices set forth opposite such Loan Party’s name on Schedule 6.1 (d) hereof (as such schedule may be amended or supplemented from time to time) and other filings delivered by Borrower, and (ii) notation of Lender’s first priority lien on motor vehicle certificates of title with respect to any Purchased Title Vehicle, the security interests granted to Lender hereunder constitute valid and perfected first priority Liens on all of the Collateral.

          (p) Filings. All actions and consents, including all filings, notices, registrations and recordings necessary or desirable for the exercise by Lender of remedies in respect of the Collateral have been made or obtained, except to the extent that the period of time to have Lender’s Lien noted on the motor vehicle certificates of title with respect to any Purchased Title Vehicle pursuant to Section 6.2(q) has not yet passed.

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          (q) Financing Statements. Other than the financing statements filed in favor of Lender, no effective UCC financing statement, fixture filing or other instrument similar in effect under any applicable law covering all or any part of the Collateral is on file in any filing or recording office except for financing statements for which proper termination statements have been filed or authorized for filing.

          (r) Authorization. Other than the Approval Order and the Canadian Approval Order, no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for either (i) the pledge or grant by such Loan Party of the Liens purported to be created in favor of Lender hereunder or (ii) the exercise by Lender of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law), except for the filings and registrations contemplated by clause (o) above.

          (s) Information. All information supplied by such Loan Party with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects.

          (t) Secured, Super-Priority Obligations. On and after the Closing Date and until the Plan Effective Date:

          (i) The provisions of the Loan Documents, the Approval Order and the Canadian Approval Order are effective to create in favor of Lender, legal, valid and perfected Liens on and security interests in all right, title and interest in the Collateral, having the priority provided for herein and in the Approval Order and the Canadian Approval Order and enforceable against the Loan Parties.

          (ii) Pursuant to subclauses (2) and (3) of clause (c) of Section 364 of the Bankruptcy Code, the Interim Approval Order, the Final Approval Order, the Canadian Interim Approval Order and the Canadian Final Approval Order, all Obligations are secured by a first priority perfected Lien on the Collateral, subject only to (x) valid, perfected, nonavoidable and enforceable Liens existing as of the Petition Date as set forth on Schedule 6.1(t) hereto, and (y) the extent such post-petition perfection is expressly permitted by Bankruptcy Code, valid, nonavoidable and enforeceable Liens existing as of the Petition Date, but perfected after the Petition Date as set forth on Schedule 6.l(t).

          (iii) Pursuant to clause (c)(l) of Section 364 of the Bankruptcy Code, the Interim Approval Order, the Final Approval Order, the Canadian Interim Approval Order and the Canadian Final Approval Order, all Obligations and all other obligations of the Loan Parties under the Loan Documents at all times shall constitute allowed super-priority administrative expense claims in the Cases having priority over all administrative expenses of the kind specified in clause (b) of Section 503 or clause (b) of Section 507 of the Bankruptcy Code. Such super-priority administrative expense claims shall be subject and subordinate to the super-priority administrative expense claims of the Agent and the Lenders (each as defined in the Existing Credit Agreement) under and pursuant to the

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Existing Credit Agreement and the other Credit Documents (as defined in the Existing Credit Agreement).

          (iv) the Interim Approval Order, the Final Approval Order, the Canadian Interim Approval Order, the Canadian Final Approval Order and the transactions contemplated hereby and thereby, are in full force and effect and have not been vacated, reversed, modified, amended or stayed without the prior written consent of Lender.

6.2 Covenants and Agreements. Each Loan Party hereby covenants and agrees that:

          (a) Corporate Existence. Except as otherwise permitted under Section 6.8 of the Existing Credit Agreement, each Loan Party will, and will cause each of its Subsidiaries (other than Inactive Subsidiaries) to, at all times preserve and keep in full force and effect its existence and all rights and franchises, licenses and permits material to its business; provided, neither any such Loan Party (other than Borrower with respect to existence) or any of its Subsidiaries shall be required to preserve any such existence, right or franchise, licenses and permits if an Executive Officer of such Loan Party shall determine that the preservation thereof is no longer desirable in the conduct of the business of such Person, and that the loss thereof is not disadvantageous in any material respect to such Person or to Lender.

          (b) Taxes. Such Loan Party will, and will cause each of its Subsidiaries to, pay promptly when due all federal and state and provincial income Taxes and property and other Taxes, assessments and governmental charges or levies imposed upon it, and all claims (including claims for labor, materials and supplies) against, the Collateral; provided, no such Tax or claim need be paid if it is subject to the automatic stay in connection with the Cases or is otherwise being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (i) adequate reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor, and (ii) in the case of a Tax or claim which has or may become a Lien against any of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such Tax or claim.

          (c) Insurance. Borrower shall maintain at all times on the Purchased Title Vehicles, at its expense, all-risk physical damage insurance and comprehensive general and/or automobile (as appropriate) liability insurance (covering bodily injury and property damage exposures) in such amounts, against such risks, in such form and with such insurers as shall be satisfactory to Lender; provided, that the amount of all-risk physical damage insurance shall not be less than the Fair Market Value of such Purchased Title Vehicle. Each physical damage insurance policy will name Lender as loss payee with respect to each Purchased Title Vehicle. Each liability insurance policy will name Lender as additional insured. In no event shall Lender be responsible for premiums, warranties or representations to any insurer or any agent thereof. Borrower shall furnish to Lender a certificate or other evidence reasonably satisfactory to Lender that such insurance coverage is in effect, but Lender shall be under no duty to ascertain the existence or adequacy of such insurance. Borrower shall be liable for all deductible portions of all required insurance. Lender may, at its own expense, for its own benefit, purchase insurance in excess of that required under this Agreement. Physical damage insurance proceeds shall be applied as set forth in Section 6.2(d).

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          (d) Risk of Loss. Borrower agrees to assume and bear the entire risk of any partial or complete loss with respect to the Purchased Title Vehicles from any and every cause whatsoever including theft, loss, damage, destruction or governmental taking, whether or not such loss is covered by insurance or caused by any default or neglect of Borrower. Borrower agrees to give Lender prompt notice of any damage to or loss of any Purchased Title Vehicle. All physical damage insurance proceeds shall be payable directly to Lender. If any Purchased Title Vehicle is lost, destroyed, damaged beyond repair, or taken by governmental action, Borrower shall pay to Lender within thirty (30) days following such loss or taking the Market Value for such Purchased Title Vehicle and any other amounts then due and owing hereunder with respect to such Purchased Title Vehicle. Following payment of the Market Value for any Purchased Title Vehicle, and if no Event of Default has occurred and remains continuing, Lender will then:

          (i) transfer to Borrower Lender’s rights to such Purchased Title Vehicle “as-is, where-is and with all defects,” without recourse and without representation or warranty, express or implied, other than a warranty that the Title Vehicle is free and clear of any liens created by Lender; and

          (ii) remit to Borrower any physical damage insurance proceeds arising out of such loss up to the amount of the Fair Market Value of the Purchased Title Vehicle on the date of loss.

Lender shall determine in the exercise of its reasonable judgment whether the Purchased Title Vehicle is damaged beyond repair. In the event of damage or loss, which does not result in damage beyond repair or a total loss of the Purchased Title Vehicle or any item thereof, Borrower shall cause the affected Purchased Title Vehicle to be restored to the condition required by the terms of this Agreement. Upon completion of such repair and after supplying Lender with satisfactory evidence thereof (and provided no Event of Default has occurred and remains continuing), Borrower shall be entitled to receive any insurance proceeds or other recovery to which Lender would otherwise be entitled in connection with such loss up to the amount expended by Borrower in making the repair.

Lender shall not be obligated to undertake by litigation or otherwise the collection of any claim against any person for loss of, damage to, or governmental taking of the Purchased Title Vehicles, but Lender will cooperate with Borrower at Borrower’s sole cost and expense to pursue such claims.

          (e) Compliance with Law. Such Loan Party will comply, and shall cause each of its Subsidiaries and all other Persons, if any, on or occupying any Facilities to comply, with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority (including all Environmental Laws), noncompliance with which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

          (f) Final Approval Order. Holdings and Borrower shall use their commercially reasonable efforts to ensure that the Final Approval Order with respect to the Interim Approval Order is entered by the Bankruptcy Court no later than April 25, 2007.

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          (g) Canadian Final Approval Order. Holdings and Borrower shall use their commercially reasonable efforts to ensure that the Canadian Final Approval Order is entered by the Canadian Court no later than April 27, 2007.

          (h)  Liens on Collateral. Except for the security interest created by this Agreement, such Loan Party shall not create or suffer to exist any Lien upon or with respect to any of the Collateral, except Permitted Encumbrances, and such Loan Party shall defend the Collateral against all Persons at any time claiming any other interest therein.

          (i) Use of Collateral. Such Loan Party shall not produce, use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement or any applicable statute, regulation or ordinance, except to the extent that any such violation could either individually or in the aggregate reasonably be expected to have a Material Adverse Effect, or any policy of insurance covering the Collateral.

          (j) Change in Corporate Structure. Such Loan Party shall not change such Loan Party’s name, identity, corporate structure (e.g., by merger, consolidation, change in corporate form or otherwise), chief executive office, type of organization or jurisdiction of organization or establish any trade names unless such Loan Party shall have (a) notified Lender in writing, by executing and delivering to Lender a completed Pledge Supplement, substantially in the form of Exhibit B attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any such change or establishment, identifying such new proposed name, identity, corporate structure, chief executive office, jurisdiction of organization or trade name and providing such other information in connection therewith as Lender may reasonably request and (b) taken all actions necessary or advisable to maintain the continuous validity, perfection and the same or better priority of Lender’s security interest in the Collateral intended to be granted and agreed to hereby.

          (k) Rights in Collateral. Such Loan Party shall not take or permit any action which could materially impair Lender’s rights in the Collateral except as otherwise permitted under this Agreement.

          (1) Transfer of Collateral. Such Loan Party shall not sell, transfer or assign (by operation of law or otherwise) any Collateral except the Collateral or any portion thereof may be transferred (i) to the Borrower or any Guarantor and (ii) as otherwise permitted pursuant to this Agreement.

          (m) Registration, Licensing and Titling. Such Loan Party shall in the ordinary course of business be responsible for proper registration, licensing, and titling of the Purchased Title Vehicles. Such Loan Party shall pay or cause to be paid all registration fees, title fees, licensing fees, traffic summonses, penalties, judgments and fines incurred with respect to any Purchased Title Vehicle.

          (n) Repairs. Such Loan Party shall perform or cause to be performed, and shall pay for any costs for all maintenance and repairs of the Purchased Title Vehicles, and shall keep all of the Purchased Title Vehicles in good working order and condition.

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          (o) Location. Such Loan Party shall garage the Purchased Title Vehicles at or operate the Purchased Title Vehicles out of the location specified on Schedule 6.1(k) (as such schedule may be amended or supplemented from time to time) unless it shall have (i) notified Lender in writing, by executing and delivering to Lender a completed Pledge Supplement, substantially in the form of Exhibit B attached hereto, together with all Supplements to Schedules thereto promptly after any change in locations, identifying such new locations and providing such other information in connection therewith as Lender may reasonably request and (ii) taken all actions necessary or advisable to maintain the continuous validity, perfection and the same or better priority of Lender’s security interest in the Collateral intended to be granted and agreed to hereby, or to enable Lender to exercise and enforce its rights and remedies hereunder, with respect to such Purchased Title Vehicles.

          (p) Records. Such Loan Party shall keep correct and accurate records of the Purchased Title Vehicles, as is customarily maintained under similar circumstances by Persons of established reputation engaged in similar business, and in any event in conformity with GAAP.

          (q) Record Title. With respect the Purchased Title Vehicles, if any such Purchased Title Vehicle is covered by a certificate of title under a statute of any jurisdiction under the law of which indication of a security interest on such certificate is required as a condition of perfection thereof, such Loan Party shall (i) promptly, and in any event within fifteen calendar days after the acquisition of any such Purchased Title Vehicle, execute and file with the registrar of motor vehicles or other appropriate authority in such jurisdiction an application or other document requesting the notation or other indication of the security interest created hereunder on such certificate of title, and (ii) within five Business Days after such filing, deliver to Lender copies of all such applications or other documents filed.

          (r) Exclusivity. The Debtors covenant that, subject to their rights under Section 12(c) of the Stipulation Regarding Continued Exclusivity, they will use best efforts to preserve their exclusivity under Section 1121 of the Bankruptcy Code, including taking all actions that are commercially reasonable to object to any motion, application or other effort to terminate such exclusivity.

          (s) Delivery of Information to Participants. From and after the date that Borrower receives notice (which notice shall include a mailing address for the applicable Participant) that any Person has become a participant with respect to the Promissory Notes or any of the other Obligations (any such person, a “Participant” and all such Persons, the “Participants”) and until Borrower has received notice that such Person is no longer a Participant, such Loan Party shall provide to such Participant a copy of each certificate, notice, request, report and financial statement that such Loan Party is required to deliver to Lender hereunder.

          (t) Other Information. Such Loan Party shall provide any information reasonably requested by Lender with respect to the Collateral.

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SECTION 7. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES

     7.1 Access; Right of Inspection. Lender shall at all times upon reasonable notice and at reasonable times during normal business hours (except after the occurrence and during the continuation of an Event of Default) have full and free access during normal business hours to all the books, correspondence and records of the Loan Parties, and Lender and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and the Loan Parties agree to render to Agent, at the Loan Parties’ cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. Upon reasonable notice and at reasonable times during normal business hours (except after the occurrence and during the continuation of an Event of Default) Lender and its representatives shall at all times also have the right to enter any premises of the Loan Parties and inspect any property of the Loan Parties where any of the Collateral of the Loan Parties granted pursuant to this Agreement is located for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein.

     7.2 Further Assurances.

          (a) The Loan Parties agree that from time to time, at the expense of the Loan Parties, that the Loan Parties shall promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary or desirable, or that Lender may reasonably request, in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted hereby or to enable Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, the Loan Parties shall:

          (i) file such financing or continuation statements, or amendments thereto, and execute and deliver such other agreements, instruments, endorsements, powers of attorney or notices, as may be necessary or desirable, or as Lender may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby; and

          (ii) at Lender’s request, appear in and defend any action or proceeding that may affect the Loan Parties’ title to or Lender’s security interest in all or any part of the Collateral.

          (b) Each Loan Party hereby authorizes Lender to file a Record or Records, including, without limitation, financing or continuation statements, and amendments thereto, in any jurisdictions and with any filing offices as Lender may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to Lender herein. Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as Lender may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to Lender herein.

SECTION 8. LENDER APPOINTED ATTORNEY-IN-FACT.

     8.1 Power of Attorney. Each Loan Party hereby irrevocably appoints Lender (such appointment being coupled with an interest) as such Loan Party’s attorney-in-fact, with full

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authority in the place and stead of such Loan Party and in the name of such Loan Party, Lender or otherwise, from time to time in Lender’s discretion to take any action and to execute any instrument that Lender may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, the following:

          (a) upon the occurrence and during the continuance of any Event of Default, to obtain and adjust insurance required to be maintained by such Loan Party or paid to Lender pursuant to this Agreement;

          (b) upon the occurrence and during the continuance of any Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral;

          (c) upon the occurrence and during the continuance of any Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (b) above;

          (d) upon the occurrence and during the continuance of any Event of Default, to file any claims or take any action or institute any proceedings that Lender may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Lender with respect to any of the Collateral;

          (e) to prepare and file any UCC financing statements against such Loan Party as debtor;

          (f) upon the occurrence and during the continuance of any Event of Default, to execute any form required by any Secretary of State to permit Lender to act on behalf of such Loan Party in transferring title and registration of the Purchased Title Vehicles; and

          (g) upon the occurrence and during the continuance of any Default, such Loan Party to take or cause to be taken all actions necessary to perform or comply or cause performance or compliance with the terms of this Agreement, including, without limitation, access to pay or discharge Taxes or Liens (other than Permitted Encumbrances) levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by Lender in its sole discretion, any such payments made by Lender to become obligations of such Loan Party to Lender, due and payable immediately without demand.

     8.2 No Duty on the Part of Lender. The powers conferred on Lender hereunder are solely to protect the interests of Lender in the Collateral, and shall not impose any duty upon Lender to exercise any such powers. Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Loan Parties for any act or failure to act hereunder, except for its own gross negligence or willful misconduct.

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SECTION 9. REMEDIES.

     9.1 Events of Default.

          (a) Events of Default. If any one or more of the following conditions or events (each an “Event of Default”) shall occur:

          (i) Failure by the Loan Parties to pay (i) when due any installment of principal of or interest on any Promissory Note, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; or (ii) any fee or any other amount due hereunder within thirty days after the date due; or

          (ii) (i) Failure of any Loan Party or any of their respective Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than (x) Indebtedness referred to in Section 9.1(a)(i) and (y) during the pendency of the Cases, Indebtedness incurred prior to the commencement of the Cases) with an aggregate principal amount of $7,500,000 or more, in each case beyond the grace period, if any, provided therefor; or (ii) breach or default by any Loan Party with respect to any other material term of (1) one or more items of Indebtedness in the aggregate principal amount referred to in clause (i) above or (2) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness, in each case beyond the grace period, if any, provided therefor, if the effect of such breach or default is to cause that Indebtedness to become or be declared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or

          (iii) Failure of any Loan Party to perform or comply with any term or condition contained in Section 6.2(c), (d), (1), or (q); or

          (iv) Any representation, warranty, certification or other statement made or deemed made by any Loan Party in any Loan Document or in any statement or certificate at any time given by any Loan Party or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect as of the date made or deemed made; or

          (v) Any Loan Party shall default in the performance of or compliance with any term contained herein or any of the other Loan Documents, other than any such term referred to in any other Section of this Section 9.1 (a), and such default shall not have been remedied or waived within thirty days after the earlier of (i) an Authorized Officer of such Loan Party becoming aware of such default or (ii) receipt by any Loan Party of notice from Lender of such default; or

          (vi) Other than the Cases, (i) a court of competent jurisdiction shall enter a decree or order for relief in respect of Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) in an involuntary case or application under the Bankruptcy Code, Canadian Insolvency Law or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal, state, or provincial law; or

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(ii) an involuntary case or application shall be commenced against Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) under the Bankruptcy Code, Canadian Insolvency Law or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, receiver-manager, interim receiver, monitor, administrator, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Holdings or any of its Subsidiaries, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of a receiver, receiver-manager, interim receiver, monitor, administrator, liquidator, sequestrator, trustee, or other custodian of Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Holdings or any of its Subsidiaries (other than any Inactive Subsidiary), and any such event described in this clause (ii) shall continue for sixty days without having been dismissed, bonded or discharged; or

          (vii) Other than the Cases, (i) Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) shall have an order for relief entered with respect to it or shall commence a voluntary case or application under the Bankruptcy Code, Canadian Insolvency Law or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, including, without limitation, filing a notice of intention to make a proposal pursuant to the BIA or shall consent to the entry of an order for relief in an involuntary case or application, or to the conversion of an involuntary case or application to a voluntary case or application, under any such law, or shall consent to the appointment of or taking possession by a receiver, receiver-manager, interim receiver, monitor, administrator, liquidator, sequestrator, trustee or other custodian for all or a substantial part of its property; or Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) shall make any assignment for the benefit of creditors; or (ii) Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the board of directors (or similar governing body) of Holdings or any of its Subsidiaries (other than any Inactive Subsidiary) (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to herein or in Section 8.1(f); or

          (viii) Any money judgment, writ or warrant of attachment or similar process involving in the aggregate at any time an amount in excess of $7,500,000 (in either case to the extent not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Holdings or any of its Subsidiaries or any of their respective assets (other than the allowance of claims in the Cases) and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty days (or in any event later than five days prior to the date of any proposed sale thereunder); or

          (ix) Any order, judgment or decree shall be entered against any Loan Party decreeing the winding up, dissolution or split up of such Loan Party and such order shall remain undischarged or unstayed for a period in excess of thirty days; or

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          (x) A Change of Control shall occur; or

          (xi) At any time after the execution and delivery thereof, (i) the Guaranty for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void or any Guarantor shall repudiate its obligations thereunder, (ii) this Agreement or any Loan Document ceases to be in full force and effect (other than by reason of a release of Collateral in accordance with the terms hereof or thereof or the satisfaction in full of the Obligations in accordance with the terms hereof) or shall be declared null and void, or Lender shall not have or shall cease to have a valid and perfected Lien in any Collateral purported to be covered by this Agreement with the priority required by this Agreement, in each case for any reason other than the failure of Lender to take any action within its control, or (iii) any Loan Party shall contest the validity or enforceability of any Loan Document in writing or deny in writing that it has any further liability, including with respect to future advances by Lender, under any Loan Document to which it is a party or shall contest the validity or perfection of any Lien in any Collateral purported to be covered by the Loan Documents; or

          (xii) any Case shall be dismissed or converted to a case under Chapter 7 of the Bankruptcy Code, or any Loan Party shall file any pleading requesting dismissal or there shall be filed a motion or other pleading seeking the termination of any of the proceedings pursuant to section 18.6 of the CCAA in respect of any of the Canadian Loan Parties; or a motion, any plan of reorganization or disclosure statement shall be filed by any Loan Party or any other action shall be taken by any Loan Party in any of the Cases, for the approval of (i) additional financing under Section 364(c) or (d) of the Bankruptcy Code not otherwise permitted pursuant to this Agreement or (ii) the granting of any Lien (other than Permitted Encumbrances or Liens expressly permitted in the Interim Approval Order, the Final Approval Order, the Canadian Interim Approval Order or the Canadian Final Approval Order) upon or affecting any Collateral which are pari passu or senior to the Liens on the Collateral in favor of Lender, or (iii) any other action or actions adverse to Lender’s interests under any Loan Document or its rights and remedies hereunder or its interest in the Collateral; or

          (xiii) the Bankruptcy Court shall enter an order in any of the Cases granting (i) any other claim having priority senior to or pari passu with the claims of Lender under the Loan Documents or any other claim having priority over any or all administrative expenses of the kind specified in clause (b) of Section 503 or clause (b) of Section 507 of the Bankruptcy Code or (ii) any Lien on the Collateral having a priority senior to or pari passu with the Liens and security interests granted herein, except (x) as expressly provided herein, in the Interim Approval Order, the Final Approval Order, the Canadian Interim Approval Order or the Canadian Final Approval Order and (y) any such order required under the Existing Credit Agreement as in effect on the date hereof; or

          (xiv) any Loan Party shall pay any prepetition Claim without the consent of Lender unless otherwise permitted pursuant to Section 6.17 of the Existing Credit Agreement; or

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          (xv) the Bankruptcy Court or Canadian Court shall enter an order granting relief from the automatic stay applicable under Section 362 of the Bankruptcy Code or the Canadian Stay Order to any holder of any security interest to permit foreclosure on any assets having a book value in excess of $1,000,000 in the aggregate; or

          (xvi) (i) any Loan Party shall fail to comply with the terms of the Interim Approval Order, the Final Approval Order, the Canadian Interim Approval Order or the Canadian Final Approval Order in any material respect, (ii) the Interim Approval Order, the Final Approval Order, the Canadian Interim Approval Order or the Canadian Final Approval Order shall be amended, supplemented, stayed, reversed, vacated or otherwise modified in any respect adverse to Lender without the written consent of Lender, or (iii) any Loan Party shall file a motion for reconsideration with respect to the Interim Approval Order, the Final Approval Order, the Canadian Interim Approval Order or the Canadian Final Approval Order; or

          (xvii) the Bankruptcy Court shall enter an order appointing a trustee under Chapter 7 or Chapter 11 of the Bankruptcy Code, or a responsible officer or an examiner with enlarged powers relating to the operation of the business (powers beyond those set forth in subclauses (3) and (4) of clause (a) of Section 1106 of the Bankruptcy Code) under clause (b) of Section 1106 of the Bankruptcy Code in the Cases; or, in Canada, the appointment of a receiver, receiver-manager, interim receiver or trustee in bankruptcy in respect of any Loan Party; or

          (xviii) either (x) a plan of reorganization (other than the Approved Plan and a plan of reorganization filed in connection with the exercise by the Debtor of its rights under Section 12(c) of the Stipulation Regarding Continued Exclusivity) is filed by any Debtor or (y) a plan of reorganization (other than the Approved Plan) is confirmed and, with respect to any plan of reorganization described in subclause (x) or (y), both (i) the treatment of the Lender and all Affiliates of the Lender in such plan of reorganization is not approved by Lender and all Affiliates of the Lender in their sole and absolute discretion and (ii) such plan of reorganization does not provide for the payment in full in cash of the Obligations on or prior to the date of consummation thereof; or

          (xix) the Loan Parties or any of their Subsidiaries shall seek to, or shall support (in any such case by way of any motion or other pleading filed with the Bankruptcy Court or the Canadian Court or any other writing to another party-in-interest executed by or on behalf of the Loan Parties or any of their Subsidiaries) any other Person’s motion to, disallow in whole or in part the Lenders’ claim in respect of the Obligations or to challenge the validity and enforceability of the Liens in favor of Lender; or

          (xx) for any reason, the Debtors shall withdraw their support for the plan of reorganization filed with the Bankruptcy Court on March 2, 2007 (as such plan or reorganization shall be modified in a manner acceptable to Lender and its Affiliates) except as permitted pursuant to paragraph 12(c) of the Stipulation Regarding Continued Exclusivity;

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          (xxi) the Final Approval Order is not entered by the Bankruptcy Court on or before the expiration of the Interim Approval Order;

          (xxii) the Canadian Interim Approval Order is not entered by the Canadian Court on or before April 10, 2007;

          (xxiii) the Canadian Final Approval Order is not entered by the Canadian Court on or before the expiration of the Canadian Interim Approval Order.

          (b) Repurchase Option

          (i) Lender shall have the option (the “Repurchase Option”), exercisable by Lender at any time if (x) an Event of Default has occurred and is continuing; or (y) a plan or reorganization (other than the Approved Plan) has been filed and the treatment of the Lender and all Affiliates of Lender in such plan of reorganization is not approved by Lender and all of its Affiliates in their sole and absolute discretion; or (z) the Debtors have exercised their right under and pursuant to paragraph 12(c) of the Stipulations Regarding Continued Exclusivity to withdraw their support of the “Plan” (as such term is defined in the Stipulation Regarding Continued Exclusivity), to repurchase all or any portion of the Purchased Title Vehicles in accordance with the payment provisions set forth in Section 9.1(b)(ii) below. The Repurchase Option shall be exercisable by Lender, without any further court approval of any kind (including no need for any relief from stay), by five Business Days written notice (a “Repurchase Notice”) to Borrower (A) identifying the Purchased Title Vehicles with respect to which Lender has elected to exercise the Repurchase Option (the “Repurchased Vehicles”) and (B) specifying the time(s) and date(s) (a “Delivery Date”) and location(s) (a “Delivery Location”) for the delivery to Lender or its designee of the Repurchased Vehicles; provided, however, that no Delivery Date shall be less than ten (10) days, nor more than ninety (90) days, following the date on which Lender has delivered the applicable Repurchase Notice to Borrower.

          (ii) The purchase price to be paid by Lender with respect to any Repurchased Vehicle shall be an amount equal to the “Purchase Price” for such Repurchased Title Vehicle, as set forth, in the appropriate Equipment Schedule together with a pro rata portion of the
out-of-pocket expenses of Lender set forth on such Equipment Schedule plus the amount of the Initial Repair Costs for such Repurchased Vehicle (such amounts, collectively, the “Repurchase Price”). Lender shall pay the purchase price by surrendering to Borrower for cancellation one or more Promissory Notes in a principal amount equal to the Repurchase Price, and if the principal amount of the Promissory Notes so surrendered for any purchase of Repurchased Vehicles is greater than the aggregate Repurchase Price for such Repurchased Vehicles, Borrower shall deliver to Lender an originally executed Promissory Note, in substantially the form of the Initial Promissory Note, issued by Borrower in favor of Lender, for a principal amount equal to the principal amount of the Promissory Notes surrendered minus the Repurchase Price for the Repurchased Vehicles.

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          (iii) Borrower shall, at Borrower’s sole cost and expense, deliver all Repurchased Vehicles, or cause all Repurchased Vehicles to be delivered, at each Delivery Location, and on each Delivery Date, specified in the Repurchase Notice delivered by Lender in accordance with Section 9.1(b)(i) above. Upon delivery thereof, each Repurchased Vehicle shall (A) be in sound mechanical shape and, if mobile, shall be in good working order under full payload; (B) have no missing parts, components, or glass; (C) have no damage to parts, components, or glass (other than damage for which the aggregate cost of repair does not exceed $500, per Repurchased Vehicle or $25,000 (or pro rata portion thereof if there is a partial exercise of the Repurchase Option) in the aggregate for all Repurchased Vehicles repurchased by Lender pursuant to the exercise of the Repurchase Option); and (D) have no structural damage. The condition of each item of Repurchased Vehicle shall be determined by an inspection report (the “Inspection Report”), prepared by Borrower and delivered to Lender no later than five days prior to the applicable Delivery Date. In the event that such Inspection Report indicates that the damage to the Repurchased Vehicles exceeds $25,000 (or the appropriate pro rata portion thereof), Borrower shall, if requested by Lender, promptly provide Lender and/or its designees and their respective employees, agents and representatives access to the Repurchased Vehicles at the Delivery Location, or at such other location as may be specified by Lender in writing, no less than three days prior to the Delivery Date, and Lender shall thereafter have the option, at Lender’s election and in lieu of accepting such Repurchased Vehicle in such condition, to require Borrower to repair such Repurchased Equipment prior to accepting delivery thereof or making any payment to Borrower with respect thereto.

          (iv) Borrower shall deliver title to all Repurchased Vehicles to Lender or Lender’s designee(s) free and clear of all claims, Liens and legal processes of creditors of Borrower. In connection with any exercise of the Repurchase Option, Borrower shall, at Borrower’s sole cost and expense, (A) prepare and execute one or more certificates of title or other instruments necessary to convey title to the Repurchased Vehicles to Lender or Lender’s designee(s), as well as such other instruments as Lender may reasonably request to vest all right, title and interest in and to the Repurchased Vehicles to Lender or Lender’s designee(s) and (B) ensure, as and to the extent requested by Lender, that all registrations or other filings with respect to such Repurchased Vehicles be made or filed in any applicable jurisdiction within five days of Lender’s request therefore.

          (v) Upon receipt of any Repurchase Notice delivered by Lender in accordance with Section 9.1(b)(i) above, Borrower shall promptly cease to use or operate the Repurchased Vehicles specified in such Repurchase Notice, except to the extent necessary to deliver such Repurchased Vehicles to the Delivery Location in accordance with Section 9.1(b)(iii) above. Notwithstanding any exercise by Lender of the Repurchase Option hereunder and until such time as delivery of any Repurchased Vehicles has been made to Lender or Lender’s designee(s) in accordance with Section 9.1(b)(iii) above, all covenants and obligations of Borrower set forth in this Agreement and the other Loan Documents (including, without limitation, those relating to insurance, maintenance and registrations) shall remain in full force and effect with respect to such Repurchased Vehicles, and any risk of loss with respect thereto shall remain the exclusive liability and obligation of Borrower.

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          (vi) Any exercise by Lender of any Repurchase Option pursuant to this Section 9.1(b) shall not affect in any way the super priority status of any administrative claim that may remain under this Agreement and the other Loan Documents, if and to the extent that any Obligations remain outstanding after the exercise by Lender of the Repurchase Option.

          (c) Sale of Collateral. If an Event of Default has occurred and is continuing, Lender may be the purchaser of any or all of the Collateral at any public or private (to the extent to the portion of the Collateral being privately sold is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations) sale in accordance with the UCC and Lender shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such sale made in accordance with the UCC, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by Lender at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Loan Party, and each Loan Party hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Loan Party agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to such Loan Party of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Lender shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Loan Party agrees that it would not be commercially unreasonable for Lender to dispose of the Collateral or any portion thereof by using Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets. Each Loan Party hereby waives any claims against Lender arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Lender accepts the first offer received and does not offer such Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, each Loan Party shall be liable for the deficiency and the fees of any attorneys employed by Lender to collect such deficiency. Each Loan Party further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to Lender, that Lender has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against such Loan Party, and each Loan Party hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section shall in any way alter the rights of Lender hereunder.

          (d) Warranties. Lender may sell the Collateral without giving any warranties as to the Collateral. Lender may specifically disclaim or modify any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

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          (e) No Marshalling. Lender shall have no obligation to marshal any of the Collateral.

          (f) No Surcharge. Debtor hereby waive any right to surcharge against the Collateral under Section 506 of the Bankruptcy Code.

     9.2 Application of Proceeds. Except as expressly provided elsewhere in this Agreement, all proceeds received by Lender in respect of any sale, any collection from, or other realization upon all or any part of the Collateral shall be applied in full or in part by Lender against, the Secured Obligations in the order selected by Lender, and to the extent that there is any excess of such proceeds, to the payment to or upon the order of the applicable Loan Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

     9.3 Sales on Credit. If Lender sells any of the Collateral upon credit, the Loan Parties will be credited only with payments actually made by purchaser and received by Lender and applied to indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Lender may resell the Collateral and the Loan Parties shall be credited with proceeds of the sale.

     9.4 Cash Proceeds. Upon the occurrence and during the continuation of an Event of Default, all proceeds of any Collateral received by any Loan Party consisting of cash, checks and other non-cash items (collectively, “Cash Proceeds”) shall be held by such Loan Party in trust for Lender, segregated from other funds of such Loan Party, and shall, forthwith upon receipt by such Loan Party be turned over to Lender in the exact form received by such Loan Party (duly indorsed by such Loan Party to Lender, if required) and held by Lender in the Collateral Account. Any Cash Proceeds received by Lender (whether from any Loan Party or otherwise): (i) if no Event of Default shall have occurred and be continuing, shall be held by Lender, as collateral security for the Secured Obligations (whether matured or unmatured) and (ii) if an Event of Default shall have occurred and be continuing, may, in the sole discretion of Lender, (A) be held by Lender, as collateral security for the Secured Obligations (whether matured or unmatured) and/or (B) then or at any time thereafter may be applied by Lender against the Secured Obligations.

SECTION 10. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.

          This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the payment in full of all Secured Obligations, be binding upon each Loan Party, its successors and assigns, and inure, together with the rights and remedies of Lender hereunder, to the benefit of Lender and its successors, transferees and assigns. Without limiting the generality of the foregoing, Lender may assign or otherwise transfer any Promissory Notes held by it to any Affiliate of Lender or, if an Event of Default then exists, to any other Person, and such Affiliate or other Person shall thereupon become vested with all the benefits in respect thereof granted to Lender herein or otherwise. Notwithstanding the foregoing, Lender shall have the right at any time to sell one or more participations to any Person in all or any part of the Promissory Notes or in any other Obligation. Upon the payment in full of all Secured Obligations (including a conversion pursuant to Section 2.3), the security interest

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granted hereby shall automatically terminate hereunder and of record and all rights to the Collateral shall revert to the Loan Parties. Upon any such termination Lender shall, at the Loan Parties’ expense, execute and deliver to the Loan Parties or otherwise authorize the filing of such documents as any Loan Party shall reasonably request, including financing statement amendments to evidence such termination.

SECTION 11. STANDARD OF CARE; LENDER MAY PERFORM.

          The powers conferred on Lender hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Lender shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Lender shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Lender accords its own property. Neither Lender nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Loan Party or otherwise. If any Loan Party fails to perform any agreement contained herein, Lender may itself perform, or cause performance of, such agreement, and the expenses of Lender incurred in connection therewith shall be payable by Borrower under Section 12.1.

SECTION 12. MISCELLANEOUS.

     12.1 Reimbursement of Expenses. Each Loan Party agrees to pay promptly (a) all the actual, reasonable, and documented costs and expenses of Lender for the preparation of the Loan Documents and any consents, amendments, waivers or other modifications thereto; (b) the actual, reasonable, and documented fees, expenses and disbursements of counsel to Lender (in each case including reasonable allocated costs of internal counsel) in connection with the negotiation, preparation, execution and administration of the Loan Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by the Loan Parties; (c) all the actual costs and reasonable expenses of creating, perfecting and recording Liens in favor of Lender, including filing and recording fees, expenses and Transfer Taxes, stamp or documentary taxes, search fees, title insurance premiums and reasonable fees, expenses and disbursements of counsel to Lender and of counsel providing any opinions that Lender may reasonably request in respect of the Collateral or the Liens created pursuant to the Loan Documents; (d) all the actual costs and reasonable expenses (including the reasonable fees, expenses and disbursements of any appraisers, consultants, advisors and agents employed or retained by Lender and its counsel) in connection with the custody or preservation of any of the Collateral; and (e) after the occurrence of a Default or an Event of Default, all reasonable costs and expenses, including reasonable attorneys’ fees (including reasonable allocated costs of internal counsel) and reasonable costs of settlement, incurred by Lender in enforcing any Obligations of or in collecting any payments due from any Loan Party hereunder or under the other Loan Documents by reason of such Default or Event of Default (including in connection with the sale, lease or license of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty) or in connection with any refinancing or

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restructuring of the credit arrangements provided hereunder in the nature of a “work-out” or pursuant to any insolvency or bankruptcy cases or proceedings.

     12.2 Notices.

          (a) Any notice or other communication herein required or permitted to be given to a Loan Party or Lender, shall be sent to such Person’s address as set forth on Schedule 12.2, or otherwise indicated to Borrower or Lender, as applicable, in writing. Except as otherwise set forth in paragraph (b) below, each notice hereunder shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail (certified, return receipt) or courier service and shall be deemed to have been given when delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed.

          (b) Lender or Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless Borrower and Lenders otherwise agree, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

          (c) Each of the Loan Parties understands that the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution and agrees and assumes the risks associated with such electronic distribution, except to the extent caused by the willful misconduct or gross negligence of Administrative Agent.

     12.3 No Waiver. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available.

     12.4 Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

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     12.5 Independence. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists.

     12.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Lender and the Loan Parties and their respective successors and assigns. The Loan Parties shall not, without the prior written consent of Lender assign any right, duty or obligation hereunder.

     12.7 Entire Agreement. This Agreement and the other Loan Documents embody the entire agreement and understanding between the Loan Parties and Lender and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof. Accordingly, the Loan Documents may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties.

     12.8 Counterparts. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.

     12.9 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAWS).

SECTION 13. GUARANTY

     13.1 Guaranty of the Obligations. Subject to Section 13.12, Guarantors jointly and severally hereby irrevocably and unconditionally guarantees to Lender the due and punctual payment in full of all Obligations when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a) or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect) (collectively, the “Guaranteed Obligations”).

     13.2 Payment by Guarantors. Subject to Section 13.12, Guarantors hereby jointly and severally agree, in furtherance of the foregoing and not in limitation of any other right which Lender may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of Borrower to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or

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otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a) or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect), Guarantors will upon demand pay, or cause to be paid, in Cash, to Lender, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for Borrower’s becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against Borrower for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to Lender as aforesaid.

     13.3 Liability of Guarantors Absolute. Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, Guarantor agrees as follows:

          (a) this Guaranty is a guaranty of payment when due and not of collectability. This Guaranty is a primary obligation of each Guarantor and not merely a contract of surety;

          (b) Lender may enforce this Guaranty upon the occurrence of an Event of Default notwithstanding the existence of any dispute between Borrower and Lender with respect to the existence of such Event of Default;

          (c) the obligations of each Guarantor hereunder are independent of the obligations of Borrower and the obligations of any other guarantor (including any other Guarantor) of the obligations of Borrower, and a separate action or actions may be brought and prosecuted against Guarantor whether any or not any action is brought against Borrower or any of such other guarantors and whether or not Borrower is joined in any such action or actions;

          (d) payment by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge any Guarantor’s liability for any portion of the Guaranteed Obligations which has not been paid. Without limiting the generality of the foregoing, if Lender is awarded a judgment in any suit brought to enforce any Guarantor’s covenant to pay a portion of the Guaranteed Obligations, such judgment shall not be deemed to release such Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit and such judgment shall not, except to the extent satisfied by such Guarantor, limit, affect, modify or abridge any other Guarantor’s liability hereunder in respect of the Guaranteed Obligations;

          (e) Lender, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and

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accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person (including any other Guarantor) with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of Lender in respect hereof or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that Lender may have against any such security, in each case as Lender in its discretion may determine consistent herewith and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantor against Borrower or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the Loan Documents; and

          (f) this Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under the Loan Documents, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) hereof, any of the other Loan Documents or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or such Loan Document, or any agreement relating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Loan Documents or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as collateral for indebtedness other than the Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed Obligations, even though Lender might have elected to apply such payment to any part or all of the Guaranteed Obligations; (v) Lender’s consent to the change, reorganization or termination of the corporate structure or existence of Holdings or any of its Subsidiaries and to any corresponding restructuring of the Guaranteed Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) any defenses, set-offs or counterclaims which Borrower may allege or assert against Lender in respect of the Guaranteed Obligations, including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any Guarantor as an obligor in respect of the Guaranteed Obligations.

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     13.4 Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of Lender: (a) any right to require Lender, as a condition of payment or performance by Guarantor, to (i) proceed against Borrower, any other guarantor (including any other Guarantor) of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from Borrower, any such other guarantor or any other Person, (iii) proceed against or have resort to any balance of any Deposit Account or credit on the books of Lender in favor of Borrower or any other Guarantor or any other Person, or (iv) pursue any other remedy in the power of Lender whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Borrower or any other Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Borrower or any other Guarantor from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon Lender’s errors or omissions in the administration of the Guaranteed Obligations, except behavior which amounts to willful misconduct, gross negligence or bad faith; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantor’s obligations hereunder, (ii) the benefit of any statute of limitations affecting such Guarantor’s liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that Lender protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default hereunder, or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to Borrower, and notices of any of the matters referred to in Section 13.3 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof.

     13.5 Guarantors’ Rights of Subrogation, Contribution, etc. Until the Guaranteed Obligations (other than contingent indemnification obligations for which no claim has been made) shall have been indefeasibly paid in full, each Guarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against Borrower or any other Guarantor or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against Borrower with respect to the Guaranteed Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that Lender now has or may hereafter have against Borrower, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by Lender. In addition, until the Guaranteed Obligations (other than contingent indemnification obligations for which no claim has been made) shall have been indefeasibly paid in full, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor (including any other Guarantor) of the Guaranteed Obligations, including any such right of contribution as contemplated by Section 13.12. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the

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exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against Borrower or against any collateral or security, and any rights of contribution Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights Lender may have against Borrower, to all right, title and interest Lender may have in any such collateral or security, and to any right Lender may have against such other guarantor. If any amount shall be paid to any Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Guaranteed Obligations (other than contingent indemnification obligations for which no claim has been made) shall not have been finally and indefeasibly paid in full, such amount shall be held in trust for Lender and shall forthwith be paid over to Lender to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof.

     13.6 Subordination of Other Obligations. Any Indebtedness of Borrower or any Guarantor now or hereafter held by any Guarantor (the “Obligee Guarantor”) is hereby subordinated in right of payment to the Guaranteed Obligations, and any such Indebtedness collected or received by the Obligee Guarantor after an Event of Default has occurred and is continuing shall be held in trust for Lender and shall forthwith be paid over to Lender to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other provision hereof.

     13.7 Continuing Guaranty. This Guaranty is a continuing guaranty and shall remain in effect until all of the Guaranteed Obligations shall have been paid in full. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guaranteed Obligations.

     13.8 Authority of Guarantors or Borrower. It is not necessary for Lender to inquire into the capacity or powers of Guarantor or Borrower or the officers, directors or any agents acting or purporting to act on behalf of any of them.

     13.9 Financial Condition of Borrower. Any loan under any Promissory Note may be made to Borrower or continued from time to time without notice to or authorization from any Guarantor regardless of the financial or other condition of Borrower at the time of any such grant or continuation. Lender shall not have any obligation to disclose or discuss with any Guarantor its assessment, or any Guarantor’s assessment, of the financial condition of Borrower. Each Guarantor has adequate means to obtain information from Borrower on a continuing basis concerning the financial condition of Borrower and their ability to perform its obligations under the Loan Documents, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of Borrower and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty on the part of Lender to disclose any matter, fact or thing relating to the business, operations or conditions of Borrower now known or hereafter known by Lender.

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     13.10 Bankruptcy, etc.

          (a) So long as any Guaranteed Obligations (other than contingent indemnification obligations for which no claim has been made) remain outstanding, no Guarantor shall, without the prior written consent of Lender, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency case or proceeding of or against Borrower or any other Guarantor. The obligations of Guarantors hereunder shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any case or proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Borrower or any other Guarantor or by any defense which Borrower or any other Guarantor may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding.

          (b) Each Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any case or proceeding referred to in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of Guarantors and Lender that the Guaranteed Obligations which are guaranteed by Guarantors pursuant hereto should be determined without regard to any rule of law or order which may relieve Borrower of any portion of such Guaranteed Obligations. Guarantors will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar Person to pay Lender, or allow the claim of Lender in respect of, any such interest accruing after the date on which such case or proceeding is commenced.

          (c) In the event that all or any portion of the Guaranteed Obligations are paid by Borrower, the obligations of Guarantors hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from Lender as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder.

     13.11 Discharge of Guaranty Upon Sale of Guarantors.

          (a) If all of the Equity Interests of any Guarantor or any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or consolidation) in accordance with the terms and conditions or the Existing Credit Agreement, the Guaranty of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released without any further action by Lender or any other Person effective as of the time of sale of Equity Interests.

          (b) Notwithstanding anything to the contrary in this Agreement or the other Loan Documents, if at any time after the Closing Date, the Guaranty of any Canadian Subsidiary that is a Controlled Foreign Subsidiary causes, or is reasonably expected to cause, material adverse tax consequences to Holdings and its Domestic Subsidiaries, taken as a whole, then the Guaranty of such Canadian Subsidiary shall be discharged and released by Lender without any further action by Lender or any other Person; provided that in the event (whether as a result of an amendment of the Internal Revenue Code or otherwise) a Guaranty by such Canadian Subsidiary

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thereafter would not result in material adverse tax consequences to Holdings and its Domestic Subsidiaries, upon the request of Lender, such Canadian Subsidiary shall again become a Guarantor hereunder by executing a Counterpart Agreement.

     13.12 Contribution by Guarantors. All Guarantors desire to allocate among themselves (collectively, the “Contributing Guarantors”), in a fair and equitable manner, their obligations arising under this Guaranty. Accordingly, in the event any payment or distribution is made on any date by a Guarantor (a “Funding Guarantor”) under this Guaranty such that its Aggregate Payments exceeds its Fair Share as of such date, such Funding Guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in an amount sufficient to cause each Contributing Guarantor’s Aggregate Payments to equal its Fair Share as of such date. “Fair Share” means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (a) the ratio of (i) the Fair Share Contribution Amount with respect to such Contributing Guarantor to (ii) the aggregate of the Fair Share Contribution Amounts with respect to all Contributing Guarantors multiplied by (b) the aggregate amount paid or distributed on or before such date by all Funding Guarantors under this Guaranty in respect of the obligations Guaranteed. “Fair Share Contribution Amount” means, with respect to a Contributing Guarantor as of any date of determination, the maximum aggregate amount of the obligations of such Contributing Guarantor under this Guaranty that would not render its obligations hereunder or thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; provided, solely for purposes of calculating the “Fair Share Contribution Amount” with respect to any Contributing Guarantor for purposes of this Section 7.2, any assets or liabilities of such Contributing Guarantor arising by virtue of any rights to subrogation, reimbursement or indemnification or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Contributing Guarantor. “Aggregate Payments” means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (1) the aggregate amount of all payments and distributions made on or before such date by such Contributing Guarantor in respect of this Guaranty (including in respect of this Section 13.2), minus (2) the aggregate amount of all payments received on or before such date by such Contributing Guarantor from the other Contributing Guarantors as contributions under this Section 13.2. The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. The allocation among Contributing Guarantors of their obligations as set forth in this Section 13.2 shall not be construed in any way to limit the liability of any Contributing Guarantor hereunder. Each Guarantor is a third party beneficiary to the contribution agreement set forth in this Section 13.2.

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          IN WITNESS WHEREOF, the Loan Parties and Lender have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

ALLIED SYSTEMS, LTD. (L.P.), as Borrower
By:	/s/ Thomas H. King
	Thomas H. King
	Executive Vice President and Assistant Treasurer
ALLIED HOLDINGS, INC. as Guarantor
By:	/s/ Thomas H. King
	Thomas H. King
	Executive Vice President and Chief Financial Officer

AH INDUSTRIES INC. ALLIED AUTOMOTIVE GROUP, INC. ALLIED FREIGHT BROKER LLC ALLIED SYSTEMS (CANADA) COMPANY AXIS CANADA COMPANY AXIS GROUP, INC. COMMERCIAL CARRIERS, Inc. CORDIN TRANSPORT LLC C T SERVICES, INC. F.J. BOUTELL DRIVEAWAY LLC GACS INCORPORATED QAT, INC. RMX LLC TERMINAL SERVICES LLC TRANSPORT SUPPORT LLC
By:	/s/ Thomas H. King
Thomas H. King
Executive Vice President and Assistant Treasurer

S-1

ACE OPERATIONS, LLC AXIS NETHERLANDS, LLC
By:	/s/ Thomas H. King
	Thomas H. King
	Executive Vice President and Assistant Treasurer
AXIS ARETA, LLC LOGISTIC SYSTEMS, LLC LOGISTIC TECHNOLOGY, LLC By: AX International Limited, Its Sole Member and Manager
By:	/s/ Thomas H. King
	Thomas H. King
	Executive Vice President and Assistant Treasurer

S-2

YUCAIPA TRANSPORTATION, LLC,

as Lender

By:

Name:

Title:

S-3

EXECUTION VERSION

SECURED CONVERTIBLE PROMISSORY NOTE

$564,000	Los Angeles, California
	April 5, 2007

          FOR VALUE RECEIVED, the undersigned, Allied Systems Ltd. (L.P.), a Georgia limited partnership (“Borrower”), promises to pay to Yucaipa Transportation, LLC, a Delaware limited liability company (“Lender”), or order, the principal amount of Five Hundred Sixty-Four Thousand Dollars ($564,000), with interest from the date hereof on the unpaid principal balance under this Note at the rate each month equal to the sum of (i) the three month LIBOR rate as determined by Lender on such day (or if such day was not a Business Day, the first Business Day immediately preceding such day) based on rates for deposits in dollars (as set forth by Bloomberg L.P.-page BTMM or any other comparable publicly available service as may be selected by Lender plus (ii) four percent (4.00%) per annum (on the basis of a 360-day year and the actual number of days elapsed). The principal amount of this Note shall be due and payable on the Maturity Date (as defined in that certain Loan and Security Agreement and Guaranty entered into as of April 5, 2007 (as amended, modified and supplemented from time to time, the “Loan Agreement”), by and between Borrower, Allied Holdings, Inc., a Georgia corporation and a debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (“Holdings” and the other Subsidiaries (as defined below) of Holdings party hereto (such Subsidiaries and together with Borrower and Holdings, collectively, the “Loan Parties”, and individually, a “Loan Party”) and Lender). Capitalized terms used in this Note without definition shall have the meanings provided in the Loan Agreement. On the first day of each calendar quarter, commencing with July 1, 2007, the interest rate payable hereunder shall be adjusted based on the then applicable LIBOR rate (as described above) and all accrued interest under this Note shall be added to principal, and shall thereafter bear interest at the same rate as the principal of this Note. On the Maturity Date the entire remaining unpaid principal balance of this Note, together with any and all accrued and unpaid interest (including, without limitation, all interest that has been added to principal hereunder) and any and all costs and expenses provided for under this Note and the other Loan Documents, shall be due and payable. This Note may not be prepaid at any time.

          All payments under this Note shall be made to Lender or its order, in lawful money of the United States of America and in immediately available funds delivered to Lender by wire transfer of immediately available funds to such account within the United States as Lender or any holder hereof shall designate in writing for such purpose from time to time. If a payment under this Note otherwise would become due and payable on a day that is not a Business Day, the due date thereof shall be extended to the next Business Day and interest shall be payable thereon during such extension. All amounts due under this Note and the other Loan Documents shall be payable without defense, set off or counterclaim.

          Each payment under this Note shall be applied in the following order: (i) to the payment of costs and expenses which Borrower is required to pay pursuant to the provisions of this Note or any of the other Loan Documents; (ii) to the payment of accrued and unpaid interest; and (iii) to the payment of outstanding principal. Lender and each holder hereof shall have the

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continuing and exclusive right to apply or reverse and reapply any and all payments under this Note.

          Upon the occurrence of any Event of Default, the obligations under this Note shall become due and payable in accordance with the provisions of the Loan Agreement, and Lender shall have all other remedies available under the Loan Agreement. In addition, upon the occurrence of an Event of Default, interest shall thereafter accrue on the entire unpaid principal balance under this Note, including without limitation (x) any accrued interest which has been added to the principal balance and (y) any delinquent interest which has been added to the principal amount due under this Note pursuant to the terms hereof, at the rate set forth herein plus two percent (2.00%) per annum (on the basis of a 360-day year and the actual number of days elapsed). On the first day of each calendar quarter, all interest which has become payable and is then delinquent shall, without curing the default under this Note by reason of such delinquency, be added to the principal amount due under this Note, and shall thereafter bear interest at the same rate as is applicable to principal, with interest on overdue interest to bear interest, in each case to the fullest extent permitted by applicable law, both before and after default, maturity, foreclosure, judgment and the filing of any petition in a bankruptcy proceeding. In no event shall interest be charged under this Note which would violate any applicable law. If the rate of interest provided for herein would otherwise exceed the maximum rate permitted by applicable law, then the interest rate shall be reduced to the maximum rate permitted by applicable law.

          This Note is secured under the Loan Agreement. Reference is hereby made to the Loan Agreement for a description of the nature and extent of the security for this Note and the rights and remedies available to the holder of this Note. Nothing herein shall be deemed to limit the rights of Lender under this Note or the Loan Agreement, all of which rights and remedies are cumulative.

          No waiver or modification of any of the terms of this Note shall be valid or binding unless set forth in a writing specifically referring to this Note and signed by a duly authorized officer of Lender or any holder of this Note, and then only to the extent specifically set forth therein.

          If any default occurs in any payment due under this Note, Borrower and all guarantors and endorsers hereof, and their successors and assigns, promise to pay all costs and expenses, including attorneys’ fees, incurred by each holder hereof in collecting or attempting to collect the indebtedness under this Note, whether or not any action or proceeding is commenced. None of the provisions hereof and none of the holder’s rights or remedies under this Note on account of any past or future defaults shall be deemed to have been waived by the holder’s acceptance of any past due installments or by any indulgence granted by the holder to Borrower.

          Borrower and all guarantors and endorsers hereof, and their successors and assigns, hereby waive presentment, demand, diligence, protest and notice of every kind (except such notices as may be required under the Loan Agreement), and agree that they shall remain liable for all amounts due under this Note notwithstanding any extension of time or change in the terms of payment of this Note granted by any holder hereof, any change, alteration or release of any property now or hereafter securing the payment hereof or any delay or failure by the holder

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hereof to exercise any rights under this Note or the Loan Agreement. Borrower and all guarantors and endorsers hereof, and their successors and assigns, hereby waive the right to plead any and all statutes of limitation as a defense to a demand under this Note to the full extent permitted by law.

          This Note shall inure to the benefit of Lender, its successors and assigns and shall bind the heirs, executors, administrators, successors and assigns of Borrower. Each reference herein to powers or rights of Lender shall also be deemed a reference to the same power or right of such assignees, to the extent of the interest assigned to them.

          In the event that any one or more provisions of this Note shall be held to be illegal, invalid or otherwise unenforceable, the same shall not affect any other provision of this Note and the remaining provisions of this Note shall remain in full force and effect.

          Upon the effective date of and pursuant to an Approved Plan, the principal and interest due and owing under this Note (including, without limitation, any interest which has been added to principal pursuant to this Note) may be converted in accordance with Section 2.3 of the Loan Agreement.

          This Note shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles thereof relating to conflicts of law; provided, that Lender and each holder hereof reserves any and all rights it may have under federal law, including without limitation those relating to the charging of interest.

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     IN WITNESS WHEREOF, Borrower has caused this Secured Promissory Note to be duly executed the day and year first above written.

ALLIED SYSTEMS LTD. (L.P.), a Georgia limited partnership
By:	/s/ Thomas H. King
Name:	Thomas H. King
Title:	EVP

S-1

EX-10.13

Exhibit 10.13

SEVERANCE AGREEMENT AND FULL RELEASE

     This Severance Agreement and Full Release (“Agreement”) is made and entered into this 30th day of April 2007 (“Execution Date”) by and between Hugh E. Sawyer (“Executive”) and Allied Holdings, Inc., a Georgia corporation (“Company”).

     WHEREAS, Executive has been employed by Company as its President and Chief Executive Officer under the terms of a written employment agreement dated June 4, 2001, as amended (“Executive’s Employment Agreement”), and

     WHEREAS, Company and certain of its affiliates (collectively “Allied”) are presently in bankruptcy proceedings in the United States Bankruptcy Court for the Northern District of Georgia, and

     WHEREAS, A Plan of Reorganization (the “Plan”) proposed by Allied, Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP, and by Teamsters National Automobile Transportation Industry Negotiating Committee is proceeding to confirmation, and

     WHEREAS, the Plan is conditioned upon Company’s terminating Executive’s employment on or before the date when the Plan of Reorganization becomes effective (“Emergence Date”), and

     WHEREAS, consistent with the Plan’s requirements, the Company has decided as of the Execution Date to terminate Executive’s employment without good cause and without executive’s consent, but desires to retain the services of Executive for some period of time thereafter, but in no event after the Emergence Date, and

     WHEREAS, Executive has agreed to accept the severance benefit provided for in the Allied Holdings, Inc. Amended Severance Pay and Retention and Emergence Bonus Plan for Key Employees dated as of August 1, 2005 (the “KERP”), in lieu of any other severance benefits to which he might otherwise be entitled under the Executive’s Employment Agreement or otherwise;

     NOW, THEREFORE, for and in consideration of the mutual promises and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties mutually agree as follows:

1. Termination of Employment

     The Company hereby terminates Executive’s employment without Cause (as defined in the KERP) and without Executive’s consent. Such termination shall become effective (“Effective Date”) as of the Emergence Date or on such earlier date after June 1, 2007 as Company determines, in its sole discretion, is in the best interests of Company. The parties

agree that Executive’s Employment Agreement is hereby cancelled and of no further effect as of the Execution Date. Following the Execution Date, Executive shall be employed at will and nothing contained herein shall create any contract of employment for a definite term.

2. No Admission by Company

     Company and Executive agree that the entry of the parties into this Agreement is not and shall not be construed to be an admission of liability or wrongdoing on the part of Company.

3. Continuation of Compensation and Benefits

     Company agrees to compensate Executive for services rendered after the Execution Date until the Effective Date (“Transitional Period”) at the semi-monthly rate of $29,166.67, subject to ordinary and lawful deductions. During the Transitional Period, Company further agrees to provide Executive with insurance coverage, other benefits of employment, and business expense reimbursement to the same extent as Executive enjoyed prior to the Execution Date.

4. Future Cooperation

     Executive agrees that Executive will make himself reasonably available after the Effective Date upon reasonable notice by Company or its designated representatives for the purposes of: (1) Providing information regarding the projects, files and/or customers with whom Executive worked for the purpose of transitioning such projects, files and/or customers to other Company executives as the result of Executive’s termination; (2) Providing information and/or testimony regarding any other matter, file, project and or customers with whom Executive was involved while employed by Company; provided however that Company shall advance to Executive all costs and expenses that are associated with Executive making himself available pursuant to this Section 4. Executive agrees to provide future cooperation pursuant to this Section 4 without compensation so long as Executive is not called upon by the Company to spend more than two hours during the first week following the Effective Date. If the Company desires to call upon Executive to spend time in excess of these two hours for services other than testimony, Executive agrees to make himself reasonably available upon reasonable notice in return for compensation to Executive at the rate of $347.00 per hour for an additional period, not to exceed eight additional hours. If the Company desires to call upon Executive to spend time in excess of these limits for services other than testimony, the Company agrees that the Executive will not be required to spend such excess time unless the Executive and the Company are able to reach a further agreement concerning such services (including the scheduling of such services and the compensation to be paid to Executive for such services) upon terms that are mutually agreeable to Executive and the Company.

     Executive agrees that notwithstanding Executive’s termination on the Effective Date, Executive will thereafter make himself reasonably available upon reasonable notice by Company or its designated representatives without compensation for the purpose of testimony.

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5. Severance Payment to Executive

     So long as Executive does not elect to revoke this Agreement within the seven-day period following the Execution Date as provided in Section 19, Company shall, as required by the KERP, pay Executive a lump sum of one million fifty thousand dollars ($1,050,000), subject to ordinary and lawful deductions by wire transfer on the eighth day after the Execution Date. Executive acknowledges that this is consideration to which Executive would not otherwise be entitled absent execution of this Agreement.

6. Retirement and COBRA Rights

     Nothing in this Agreement shall:

a.	alter or reduce any vested, accrued benefits (if any) to which Executive may be entitled under any retirement or 401(k) plan established by Company.
b.	affect Executive’s right to elect and pay for continuation of Executive’s health insurance coverage under the Company’s health benefit plan after the Effective Date pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”).

7. Executive’s Full Release of All Claims Against Company

     In consideration for the undertakings and promises of Company set forth in this Agreement and except for the obligations of the Company hereunder, Executive unconditionally releases, discharges, and holds harmless Company, its corporate affiliates, successors and assigns, and their respective officers, directors, shareholders, employees, agents, insurers and attorneys as individuals (collectively referred to as “Releasees”), from each and every claim, cause of action, right, liability or demand of any kind and nature, and from any claims which may be derived therefrom (collectively referred to as “Released Claims”), that Executive had, has, or might claim to have against Releasees on or before the date that Executive executes this Agreement, including but not limited to any and all claims:

     a. related to or arising out of Executive’s Employment Agreement, pay, bonuses, vacation or any other employee benefits, and other terms and conditions of employment or employment practices of Company;

     b. related to or arising out of the termination of Executive’s employment with Company or the surrounding circumstances thereof;

     c. based on discrimination or harassment on the basis of race, color, religion, sex, national origin, handicap, disability, age or any other category protected by law under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, Executive Order 11246, the Age Discrimination in Employment Act, the Older Workers Benefits Protection Act, the Equal Pay Act, the Americans With Disabilities Act, the Equal Pay Act, the Americans With Disabilities Act, the Rehabilitation Act of 1973, the Consolidated Omnibus Budget Reconciliation Act of

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1985, (as any of these laws may have been amended) or any other similar labor, employment or anti-discrimination law under state, federal or local law;

     d. based on any contract, tort, whistleblower, personal injury wrongful discharge theory or other common law theory.

8. Executive’s Covenant Not to Sue or Accept Recovery

     Executive covenants not to sue Company or any Releasee on account of any Released Claims, or to incite, assist or encourage others to bring claims of any sort against Company. Executive further covenants not to accept, recover or receive any monetary damages or any other form of relief which may arise out of or in connection with any administrative remedies which may be filed with or pursued independently by any governmental agency or agencies, whether federal, state or local.

9. No Reinstatement

     Executive hereby acknowledges and agrees that Executive will not seek reinstatement, reemployment or employment with Company following the Effective Date.

10. Confidentiality of Agreement

     Except as otherwise expressly provided in this paragraph, and except to the extent that Company has been required by law to publicly disclose the terms of this Agreement, Executive agrees that the terms, amount of consideration and conditions of this Agreement are and shall be deemed to be confidential and hereafter shall not be disclosed by Executive to any other person or entity. The only exceptions are: (a) as may be required by law or in any action for breach of this Agreement by Company; (b) Executive may disclose the terms and conditions of this Agreement to Executive’s attorneys and tax advisers; and (c) Executive may disclose the terms and conditions of this Agreement to Executive’s spouse (if any); provided, however, that Executive makes the foregoing persons aware of the confidentiality provisions of this paragraph and Executive will be responsible for any breaches of this confidentiality agreement by his spouse, attorneys or tax advisers to the same extent as if Executive had directly breached this agreement.

11. No Harassing Conduct

     Executive further agrees and promises that Executive will not induce or incite claims of discrimination, wrongful discharge, breach of contract, tortious acts, or any other claims against Company or Releasees by any other person or entity, that Executive shall not undertake any harassing or disparaging conduct directed at any of the parties, and that Executive shall refrain from making any negative or derogatory statements concerning Company at any time in the future. Provided, however, this provision may not be used to restrict the exercise of Executive’s rights under local, state or federal law or in connection with any claim for breach of this Agreement by Company.

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12. Post-Employment Restrictions

     a. Definitions. For purposes of this Agreement, the following terms shall have the following respective meanings:

i.	“Business of the Company” means “ transporting finished automobiles and light trucks in North America and related logistics, brokerage and distribution services to the new and used vehicle distribution market and other segments of the automotive industry in North America.
ii.	“Confidential Information” means information about Company and its employees, customers and/or vendors which is not generally known outside of Company nor publicly available, which Executive learns of in connection with Executive’s employment with Company, and which would be useful to competitors of Company or otherwise damaging to the Company if disclosed. Confidential Information may include, but is not necessarily limited to, business and employment policies, employee compensation, marketing methods and the targets of those methods, finances, business plans, promotional materials and pricing information. Confidential Information does not include any information (i) which was in the public domain at the time of disclosure by Company to Executive; (ii) which was publicized or otherwise became part of the public domain after the time of disclosure by Company to Executive other than by reason of the fault of Executive; (iii) which was in Executive’s possession at the time of disclosure by Company and was not acquired, directly or indirectly, from Company or from any third party under any obligation of confidence to Company; or (iv) which Executive received after the time of disclosure by Company from a third party who did not require Executive to hold it in confidence and who did not acquire it, directly or indirectly, from Company under any obligation of confidence.
iii.	“Material Contact” means contact in person, by written or electronic correspondence or by telephone in furtherance of the Business of Company, or imputed contact through employees supervised by Executive who have contact in person, by written or electronic correspondence, or by telephone in furtherance of the Business of Company.
iv.	“Restricted Period” means the one-year period following the Effective Date.
v.	“Trade Secrets” means Confidential Information which meets the additional requirements of the Georgia Trade Secrets Act.

     b. Confidentiality. Executive agrees that for a period of three (3) years following the Effective Date, he will not, directly or indirectly, use, copy, disclose, distribute or otherwise make use of any Confidential Information of Company other than in the furtherance of Executive’s duties for Company. Executive further agrees that if Executive is questioned about

5

information subject to this agreement by anyone not authorized to receive such information, Executive will promptly notify Executive supervisor(s) or an officer of Company. Nothing contained herein shall limit Company’s rights under statutory or common law, which may provide for longer restrictions on use or disclosure.

     c. Non-Solicitation of Customers and Vendors. Executive agrees that during the Restricted Period, he will not directly or indirectly solicit or attempt to solicit any business in competition with the Business of Company from any of Company’s customers (including any actively sought prospective customers) with whom Executive had Material Contact during Executive’s employment with Company. Executive further agrees that during the Restricted Period, he will not directly or indirectly solicit or attempt to solicit the purchase of any products or services in support of any business in competition with the Business of Company from any of Company’s vendors (including any actively sought prospective vendors) with whom Executive had Material Contact during Executive’s employment with Company.

     d. Non-Recruitment of Employees. Executive agrees that during the Restricted Period, Executive will not directly or indirectly solicit or attempt to solicit any employee of Company with whom Executive had Material Contact during Executive’s employment with Company, to terminate or resign such employee’s employment with Company.

     e. Return of Property and Information. Executive agrees not to remove any Company property or information from the Company’s premises, except when authorized by the Company. Executive agrees to return all of the Company’s property and information (irrespective of its confidential nature) within seven (7) days following the Effective Date. Such property includes, but is not limited to, the original and any copy (regardless of the manner in which it is recorded) of all information provided by the Company to Executive or which Executive has developed or collected in the scope of Executive’s employment, as well as all Company-issued equipment, supplies, accessories, vehicles, keys, instruments, tools, devices, computers, cell phones, pagers, materials, documents, plans, records, notebooks, drawings, or papers. Upon request by Company, Executive shall certify in writing that all copies of information subject to this agreement located on Executive’s computers or other electronic storage devices have been permanently deleted. Provided, however, Executive may retain copies of documents relating to the Company’s employee benefit plans applicable to Executive and income records to the extent necessary for Executive to prepare Executive’s individual tax returns.

     f. Acknowledgments. Executive hereby acknowledges and agrees that the covenants contained in subsections 12(b),(c),(d)&(e) (the “Protective Covenants”) are reasonable as to time, scope and territory given Company’s need to protect its business, personnel, Trade Secrets and Confidential Information and given Executive’s position as CEO of Company. Executive acknowledges and represents that Executive has substantial experience and knowledge such that Executive can obtain subsequent employment which does not violate this Agreement.

     g. Specific Performance. Executive acknowledges and agrees that any breach of any of the Protective Covenants by him will cause irreparable damage to Company, the exact

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amount of which will be difficult to determine, and that the remedies at law for any such breach will be inadequate. Accordingly, Executive agrees that, in addition to any other remedy that may be available at law, in equity, or hereunder, Company shall be entitled to specific performance and injunctive relief, without posting bond or other security to enforce or prevent any violation of any of the Protective Covenants by Executive.

13. Construction of Agreement

     The Protective Covenants shall be presumed to be enforceable, and any reading causing unenforceability shall yield to a construction permitting enforcement. In the event a court should determine not to enforce a Protective Covenant or other provision of this Agreement as written due to overbreadth, illegality, violation of public policy or any other reason, the parties specifically authorize such reviewing court to enforce said Protective Covenant or other provision to the maximum extent possible, whether said revisions be in time, territory, scope of prohibited activities, or in other respects. If such Protective Covenant or other, provision, word, clause or phrase in this Agreement cannot be judicially modified, it shall be severed and the remaining Protective Covenants and other provisions of this Agreement shall be enforced in accordance with the tenor of the Agreement. This Agreement shall be deemed to have been jointly drafted by the parties, and shall not be construed against any party.

14. Remedies and Forum

     The parties agree that they will not file any action arising out of or relating to this Agreement in any way whatsoever other than in the United States District Court for the Northern District of Georgia or the State or Superior Courts of DeKalb County, Georgia. The parties consent to personal jurisdiction and venue solely within these forums and waive all otherwise possible objections thereto. The prevailing party shall be entitled to recover its costs and attorney’s fees in any such proceeding. The existence of any claim or cause of action by Executive against Company, including any dispute relating to This agreement, shall not constitute a defense to enforcement of the Protective Covenants by injunction. Any disputes regarding the enforceability, interpretation, performance, breach and rights of the parties under this agreement shall be determined by the laws of the State of Georgia, without regard to its conflicts of law principles.

15. No Reliance Upon Other Statements or Agreements

     This Agreement is entered into without reliance upon any statement or representation of any party hereto or parties hereby released other than the statements and representations contained in writing in this Agreement. The parties acknowledge that this Agreement contains the entire understanding of the parties with respect to the termination of Executive’s employment with Company, and that it may not be modified other than in a writing signed by Executive and an authorized representative of Company.

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16. Assignment

     Executive consents to the assignment of this agreement by Company (provided that Company guarantees to Executive the prompt performance of all obligations of Company hereunder) and agrees that it shall inure to the benefit of Company’s successors in interest. Executive’s duties under this Agreement shall not be delegated to others, but this Agreement shall otherwise remain binding on Executive’s heirs and successors in interest.

17. No Waiver

     Any failure by any party to enforce any of their rights and privileges under this Agreement shall not be deemed to constitute waiver of any rights and privileges contained herein.

18. Full and Knowing Release

     By signing this Agreement, Executive certifies that:

     a. Executive has carefully read and fully understands the provisions of this Agreement;

     b. Executive was advised by Company in writing, via this Agreement, to consult with an attorney before signing this Agreement;

     c. Executive understands that Company will allow him a minimum period of 21 days in which to consider whether he wishes to sign this release, should he so desire; and

     d. Executive agrees to its terms knowingly, voluntarily and without intimidation, coercion or pressure.

19. Revocation of Agreement

     Executive may revoke this Agreement within seven (7) calendar days after signing it. To be effective, such revocation must be transmitted in writing to Thomas M. Duffy, Executive Vice President and General Counsel, at the offices of Allied Holdings, Inc., at 160 Clairemont Ave., Suite 200, Decatur, Georgia 30030. Revocation can be made by hand delivery, telegram, facsimile, or postmarking before the expiration of this seven (7) days period.

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     IN WITNESS WHEREOF the undersigned hereunto set their hands to this Agreement on the dates written below.

     Executed this                  day of                                         , 2007.

Hugh E. Sawyer	Allied Holdings, Inc.
	By:	Robert J. Rutland, Chairman and
		Chief Executive Officer

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EX-10.24

Exhibit 10.24

EXHIBIT A

SETTLEMENT AGREEMENT

     This Settlement Agreement (the “Settlement Agreement”) is entered into by and among (a) Allied Holdings, Inc. and its affiliates that are debtors and debtors in possession (collectively, the “Debtors”), (b) Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP (collectively, “Yucaipa”), (c) the Official Committee of Unsecured Creditors in the Bankruptcy Cases (the “Creditors’ Committee”), (d) Sopris Capital Advisors, LLC, Aspen Advisors LLC and Armory Advisors LLC (collectively, the “Equity Holders”), (e) Andrews & Kurth LLP, (f) Sonnenschein Nath & Rosenthal LLP, (g) Kilpatrick Stockton LLP and (h) Jefferies & Company, Inc. The entities listed in (a) through (d) of this introductory paragraph are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS

     A. WHEREAS, the Debtors filed petitions for relief on July 31,2005, commencing jointly administered cases 05-12515 through 05-12526 and 05-12528 though 05-12537 in the United States Bankruptcy Court for the Northern District of Georgia (collectively, the “Bankruptcy Cases”); and

     B. WHEREAS, in or about January, 2006, the Equity Holders, together with Virtus Capital LP and Hawk Opportunity Fund, L.P., formed an ad hoc committee of equity holders (the “Ad Hoc Equity Committee’’); and

     C. WHEREAS, the Debtors, Yucaipa and The Teamsters National Automobile Transportation Industry Negotiating Committee filed their First Amended Joint Plan of Reorganization for the Debtors (dated as of April 5,2007) (as may be amended, the “Plan”); and

     D. WHEREAS, the bankruptcy court supervising the Bankruptcy Cases (the “Bankruptcy Court”) has scheduled a hearing on confirmation of the Plan commencing May 9, 2007; and

     E. WHEREAS, the Equity Holders and the Ad Hoc Equity Committee have filed in the Bankruptcy Cases complaints, motions and objections to, among other things, pending motions for approval of financing, have moved to stay certain orders pending appeal (before die Bankruptcy Court and the District Court for the Northern District of Georgia), have filed notices of appeal and have served deposition subpoenas and document requests in connection with their opposition to confirmation of the Plan; and

     F. WHEREAS, the Parties anticipate more than 10 depositions and the review of tens of thousands of documents prior to confirmation, including without limitation depositions of experts regarding the Debtors’ reorganization value (the “Valuation”); and

     G. WHEREAS, the Equity Holders and the Ad Hoc Equity Committee have vigorously contested various matters in the Bankruptcy Cases and their objection to the Valuation and confirmation of the Plan will lead to substantial additional administrative claims in the Bankruptcy Cases; and

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     H. WHEREAS, the Equity Holders disputed the Valuation set forth in the Disclosure Statement relating to the Plan; and

     I. WHEREAS, in light of the expenses and uncertainty in litigation, the Parties have agreed that a settlement on the terms set forth below is in the best interest of the Debtors’ estates.

     NOW THEREFORE, IN LIGHT OF THE FOREGOING AND FOR VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, THE PARTIES HEREBY AGREE:

     1. The recitals set forth above are incorporated by reference and are explicitly made part of the Settlement Agreement.

     2. Promptly after the Bankruptcy Court enters an order approving the Settlement Agreement (the “Approval Order”), the Plan shall be modified to provide for the terms and conditions set forth in this Settlement Agreement, and the effectiveness of the Plan shall be expressly conditioned on implementation of the Settlement Agreement. This condition to effectiveness of the Plan may only be waived by the Equity Holders.

     3. On the Effective Date of the Plan, Reorganized Allied Holdings (as defined in the Plan) will pay up to $325,000.00 (the “Fee Payment”) in the aggregate of actual and documented fees of Andrews Kurth LLP, Sonnenschein Nam & Rosenthal LLP, Jefferies & Company, Inc. and Kilpatrick Stockton LLP (collectively, the “Equity Holder Professionals”) for work done on behalf of any one or more of the Equity Holders in connection with the Bankruptcy Cases. The Debtors, the Creditors Committee and Yucaipa agree that invoices from any one or more of the Equity Holder Professionals, accompanied by a written representation from a representative of each such professional that reasonable time entries (if appropriate) or other detailed support exists to substantiate such invoices, shall constitute adequate documentation for the purposes of this paragraph. The allocation of the Fee Payment to and among the Equity Holder Professionals shall be made in the sole discretion of the Equity Holders.

     4. Within two business days following execution of the Settlement Agreement, the Equity Holders (for themselves and their respective partners, affiliates and subsidiaries) will dismiss and withdraw any complaints, requests for shareholder meetings, motions (other than motions for admission pro hac vice), appeals, discovery, oppositions or objections that have been filed or served by or on behalf of the Equity Holders in or related to the Bankruptcy Cases (with the exception of the appeal related to the Stay Motion, as defined in paragraph 11, as to which appellants will take no further action, except as set forth in paragraph 11, pending the Bankruptcy Court’s ruling on approval of this Settlement Agreement) (the “Dismissals”). The Settlement Agreement shall in no way impact discovery to the extent that it has been served by or on behalf of entities that are not parties to this Settlement Agreement (or partners, affiliates or subsidiaries of such parties).

     5. Within one business day following the filing of the Dismissals, Andrews Kurth LLP will file with the Bankruptcy Court a notice, in the form of an amended notice under

2

Bankruptcy Rule 2019 (the “Rule 2019 Statement”) that states (i) that the Equity Holders have resigned from the Ad Hoc Equity Committee, (ii) that the Ad Hoc Equity Committee has been dissolved and (iii) that Andrews Kurth LLP and Jefferies & Company, Inc. no longer represent the Ad Hoc Equity Committee or any of its members in connection with the Debtors or the Bankruptcy Cases. The Equity Holders and the Equity Holder Professionals shall not form another ad hoc equity committee or comparable committee in the Bankruptcy Cases and shall not give any assistance or encouragement to any entity or person who attempts to or does reform or form an ad hoc equity committee or comparable committee in the Bankruptcy Cases. It is a condition to the Settlement Agreement that the Approval Order (i) authorize and direct the Parties and the Equity Holder Professionals to take the actions (or refrain from action, as applicable) as described in this Settlement Agreement, and (ii) contain such other findings and/or directions as any Party may reasonably request in furtherance of the effective implementation of the terms of the Settlement Agreement.

     6. Within two business days following execution of the Settlement Agreement, the Debtors, the Creditors Committee and Yucaipa will dismiss and withdraw any discovery served on any of the Equity Holders.

     7. Following execution of the Settlement Agreement, and except as provided herein: (i) the Equity Holders (and any of their respective partners, affiliates or subsidiaries) and the Equity Holder Professionals shall not appear in or take any action in the Bankruptcy Cases, other than in connection with the approval of the Settlement Agreement or in response to a motion or action specifically directed to or against them (but not equity holders generally), and each of them covenant to take no action to impede or preclude the entry of the order confirming the Plan (as modified consistent with the Settlement Agreement), the administration of the Bankruptcy Cases (including any motions or actions supported by Yucaipa and the Debtors that do not contravene the terms of the Settlement Agreement) or oppose in any way the implementation and administration of the Plan (or give any assistance or encouragement to any entity or person taking any of the actions prohibited by subsection (i) of this paragraph 7); (ii) none of the Debtors, Yucaipa or the Creditors Committee shall make, propose or allow any changes to the Plan which would be inconsistent with the agreement embodied in this Settlement Agreement. To the extent the Plan is modified or amended, the Equity Holders (and any of their respective partners, affiliates and subsidiaries) and the Equity Holder Professionals will continue to abide by the terms and conditions of the Settlement Agreement so long as such modifications or amendments are not inconsistent with the agreement embodied in this Settlement Agreement, and so long as the effectiveness of the Plan, as so modified or amended, remains conditioned upon approval by the Bankruptcy Court of the terms and conditions of this Settlement Agreement; and (iii) the Equity Holders will (a) retain ownership of their equity interests in the Debtors (the “Equity Securities”) through the effective date of the Plan, and (b) vote their Equity Securities in favor of the slate of directors proposed by the Debtors’ current management in the event that there is a shareholder meeting before the effective date of the Plan. The Equity Holders (and their respective partners, affiliates and subsidiaries) and the Equity Holder Professionals will not share any work product, valuations or analyses of any kind relating in any way to the Debtors or the Bankruptcy Cases with any individuals or entities; provided however, that Andrews Kurth LLP may share such of its work product, valuations or analyses existing as of the date hereof with the members of the Ad Hoc Committee as reflected on the Rule 2019

3

Statement filed by Andrews Kurth LLP on March 23, 2007 to the extent Andrews Kurth LLP reasonably determines is appropriate under (x) existing engagement arrangements between Andrews Kurth LLP and such members who are not Equity Holders, and (y) applicable ethics rules; provided however that if such work product, valuations or analyses was created for a specific member of the Ad Hoc Committee it may only be shared with such specific member. If any of the Equity Holders (or their respective partners, affiliates and subsidiaries) or the Equity Holder Professionals are legally compelled to produce such work product, valuations or analyses they may do so, provided that any Equity Holder or Equity Holder Professional so compelled shall provide reasonable notice, under the circumstances, of such legal process to the Debtors, Yucaipa and the Creditors Committee so as to enable each of them to oppose the production of such work product, valuations or analyses.

     8. Upon the effectiveness of the Plan, (i) the Debtors, Yucaipa and the Creditors Committee (collectively, and together with their respective current and former agents, officers, directors, advisors, employees, members, shareholders, attorneys and any of their respective affiliates, partners, subsidiaries, successors and assigns, the “Plan Proponent Releasees”) on the one hand, and (ii) the Equity Holders and the Equity Holder Professionals (collectively, and together with their respective current and former agents, officers, directors, advisors, employees, members, shareholders, attorneys and any of their respective affiliates, partners, subsidiaries, successors and assigns, the “Equity Holder Releasees”) on the other hand, mutually release each other from any and all claims, demands, suits, liabilities, causes of action or damages of any type whatsoever, whether known or unknown, in law, admiralty or equity, which (a) any of the Plan Proponent Releasees had or may have against any of the Equity Holder Releasees, or (b) any of the Equity Holder Releasees had or may have against any of the Plan Proponent Releasees, in either case from the beginning of time through the date of this Settlement Agreement and which are or were related in any way to the Debtors, the Equity Securities or the Bankruptcy Cases. All Parties hereto hereby represent and warrant (severally and not jointly) that each of them now holds all right, title to and interest in any Claim released hereunder (the “Released Claims”), and that none of them has assigned or otherwise transferred any right, title or interest in any Released Claims. Each Party agrees to forever indemnify and hold forever harmless each and every other Party hereto from all Released Claims, including, but not limited to, reasonable attorneys’ fees and expert fees, incurred as a result of any person or entity asserting any such Released Claims against such other Party pursuant to any such assignment or transfer.

     9. The Equity Holders (and their respective affiliates, partners and subsidiaries) and the Equity Holder Professionals will provide no support, encouragement, information or any assistance whatsoever to any person or entity in his/hers/its opposition to any action taken by the Debtors or Yucaipa in the Bankruptcy Cases, including, without limitation the Teamsters for a Democratic Union.

     10. The proposed treatment of claims in Class 4D of the Plan will be amended to provide that at least $40 million in face amount of claims may be tendered into that class in return for cash payouts of at least $0.25 on the claim dollar, and that if such tendered claims exceed $40 million in face amount, the treatment for tendered claims in that class will be a cash payout equal to a pro rata share of the total cash consideration allotted for payout of those claims. Yucaipa will share its participation in Class 4D of the Plan with the Equity Holders as follows:

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the Equity Holders (in the aggregate, and subject to allocation among and between them in their sole discretion) will have the right to purchase from Yucaipa up to twenty (20) percent of the Class 4D Claims that participate in the “Cash Out” option provided through Class 4D of the Plan. On the Effective Date of the Plan, the Equity Holders will pay their pro rata share of the cash necessary to fund the Cash Out option to Reorganized Allied, which will in turn distribute such cash (and other cash provided by Yucaipa) to holders of Allowed Class 4D Claims as soon as practicable after the Effective Date, and, as soon as practicable following the Effective Date, the Equity Holders will receive that same pro rata share of either the claims that were tendered into Class 4D, or the equity of the reorganized Debtors into which those claims are converted under the Plan.

     11. In the event that: (i) the Settlement Agreement is disapproved by the Bankruptcy Court, or (ii) following entry of the Approval Order the Court does not approve confirmation of the Plan, or (iii) following confirmation of the Plan, the Plan does not become effective according to its terms, the Parties agree that, upon any such occurrence, they will each revert to the status quo ante with respect to all of their legal rights as though this Settlement Agreement had never been executed. Notwithstanding the foregoing, upon such occurrence, the Parties will not be able to reverse any court orders entered in reliance on the Approval Order between the date of the Approval Order and the date of any event listed in paragraph 11 (i) through (iii). In addition, upon execution of the Settlement Agreement by the Parties, the appropriate Equity Holders shall request that the United States District Court for the Northern District of Georgia continue the hearing on the emergency motion for a stay of the order approving that certain financing provided by Yucaipa Transport LLP to the Debtors (the “Stay Motion”) until such time as the Bankruptcy Court enters the Approval Order, at which point the Stay Motion shall be withdrawn.

     12. The Parties have participated jointly in the negotiation and drafting of the Settlement Agreement. If an ambiguity or question of intent or interpretation arises, the Settlement Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof will arise favoring or disfavoring any Party hereto because of the authorship of any provision of the Settlement Agreement.

     13. Each of the Parties and, as applicable, the Equity Holder Professionals, represents that it has full requisite power and authority to execute and deliver and to perform its obligations under the Settlement Agreement, and the execution, delivery and performance hereof, and the instruments and documents required to be executed by it in connection herewith (a) have been duly and validly authorized by it, (b) have been duly executed and delivered by its authorized signatory, and (c) are not in contravention of its organizational documents or any agreements specifically applicable to it. The Debtors and Yucaipa further represent that they have authority to amend the Plan to incorporate the terms of this Settlement Agreement.

     14. The Settlement Agreement is the complete, final and exclusive statement of the agreement between the Parties with respect to the subject matter hereof. The Settlement Agreement supersedes all prior or contemporaneous agreements, negotiations, representations, understandings, and discussions between the Parties and/or their respective counsel with respect to the subject matter covered hereby. The Settlement Agreement may not be modified, amended

5

or supplemented except by a written agreement executed by each Party to be affected by such modification, amendment or supplement.

     15. The Parties recognize and acknowledge that each of the Parties hereto has had the opportunity to consult with counsel and that such Party received independent legal advice with respect to the advisability of entering into the Settlement Agreement. Each of the Parties acknowledges that the negotiations leading up to the Settlement Agreement were conducted at arm’s length and each Party knows all of the relevant facts and its rights in connection therewith.

     16. The Settlement Agreement shall be construed and governed in accordance with the laws of the State of New York and the United States of America, except with respect to choice of law provisions. Any action, suit or proceeding between any of the Parties with respect to the terms and conditions of the Settlement Agreement or the enforcement thereof shall be brought before the Bankruptcy Court presiding in the Bankruptcy Cases, and each Party hereby irrevocably consents to such jurisdiction with respect to any such action, suit or proceeding.

     17. In the event any Party prevails in an action, motion, application, and/or petition to enforce any of the terms of the Settlement Agreement, preserve its rights under the Settlement Agreement, or in the event of breach by any Party of obligations under the Settlement Agreement, said moving and prevailing Party shall be entitled to reimbursement of its reasonable costs and expenses incurred in enforcing the terms of the Settlement Agreement, including, without limitation, reasonable attorneys’ fees, expert fees, and other expenses.

     18. The obligations and duties of the Settlement Agreement shall be binding upon the Parties, their successors and assigns. Nothing in the Settlement Agreement, express or implied, is intended or shall be construed to confer upon, or to give to, any person other than the Parties hereto (and beneficiaries of the releases and exculpation provisions set forth in the Plan) and their respective successors and assigns, any right, remedy or claim under or by reason of the Settlement Agreement.

     19. It is understood and agreed by the Parties that money damages alone may not be a sufficient remedy for a breach of the Settlement Agreement by any Party, and each non-breaching Party shall be entitled to seek specific performance and injunctive or other equitable relief as a remedy in the event of such a breach.

     20. If any clause or provision of the Settlement Agreement is declared illegal, invalid or unenforceable under present or future laws effective during the term hereof, it is the intention of the Parties hereto to reach agreement to terms that will lawful carry out the intended purpose of any such clause or provision, and to take such action as may be necessary to do so. The Parties further intend that the remainder of the Settlement Agreement shall not be affected thereby, and shall remain in full force and effect

     21. The Settlement Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall, together, constitute a single instrument.

6

     22. All demands, notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) when personally delivered by courier service or messenger, (ii) upon actual receipt (as established by confirmation of receipt or otherwise) during normal business hours, otherwise on the first business day thereafter, (iii) three (3) business days after being duly deposited in the mail, by certified or registered mail, postage prepaid—return receipt requested, to the following addresses, or such other addresses as may be furnished hereafter by notice in writing, to the following Parties:

The Debtors	The Creditors Committee
Ezra H. Cohen, Esq.	Jonathan B. Alter, Esq.
Jeffrey W. Kelley, Esq.	William F. Govier, Esq.
Harris B. Winsberg, Esq.	Richard H. Agins, Esq.
Troutman Sanders LLP	Bingham McCutchen LLP
600 Peachtree Street, N.E. — Suite 5200	One State Street
Atlanta, Georgia 30308	Hartford, CT 06105
Facsimile No.: (404) 885-3900	Facsimile No.: (860) 240-2818

The Equity Holders	Yucaipa and the Reorganized Debtors
If to Sopris Capital Advisors, LLC or	Robert A. Klyman, Esq.
Aspen Advisors LLC:	Latham & Watkins LLP
	633 West Fifth Street, Suite 4000
Peter D. Wolfson, Esq.	Los Angeles, CA 90071
John A. Bicks, Esq.	Facsimile No.: (213)891-8763
Sonnenschein Nath & Rosenthal LLP
1221 Avenue of the Americas
New York, NY 10020
Facsimile No.: (212) 768-6800
If to Armory Advisors LLC:
Paul N. Silverstein, Esq.
Jonathan Levine, Esq.
Andrews Kurth LLP
450 Lexington Avenue
New York, NY 10017
Facsimile No.: (212) 850-2929

     23. Each of the Parties agrees to execute and deliver, or to cause to be executed and delivered, all such instruments, and to take all such action as the other Parties reasonably request in order to effectuate the intent and purposes of, and to carry out the terms of, the Settlement Agreement

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     IN WITNESS WHEREOF, the Parties have caused this Settlement Agreement to be executed on their behalf by their officers thereunto duly authorized, as of April                     ,2007.

Allied Holdings, Inc., as agent and attorney-in fact for each of the Debtors

By:	/s/ Thomas Duffy
Name: Thomas Duffy
Title: Executive Vice President and General Counsel

Yucaipa Transport, LLC, Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP

By:	/s/ Robert P. Bermingham
Name: Robert P. Bermingham
Title: Vice President

Official Committee of Unsecured Creditors

By:

Name:

Title:

Sopris Capital Advisors, LLC on behalf of itself, its affiliates, assigns, and subsidiaries

By:	/s/ Nikos Hecht
Name: Nikos Hecht
Title: Managing Member

Aspen Advisors LLC on behalf of itself, its affiliates, assigns, and subsidiaries

By:	/s/ Nikos Hecht
Name: Nikos Hecht
Title: Managing Member

8

Armory Advisors on behalf of itself, its affiliates, assigns, and subsidiaries

By:	/s/ Jay Burnham
Name: Jay Burnham
Title: Managing Partner

AND AS TO SPECIFIC PARAGRAPHS THAT REQUIRE ACTION BY EQUITY HOLDER PROFESSIONALS:

ANDREWS KURTH LLP

By /s/ Paul N. Silverstein

Name: Paul N. Silverstein

Title: Attorney

SONNENSCHEIN NATH & ROSENTHAL LLP

By /s/ John A. Bicks

Name: John A. Bicks

Title: of Counsel

KILPATRICK STOCKTON LLP

By /s/ Alfred S. Lurey

Name: Alfred S. Lurey

Title: Partner

JEFFERIES & COMPANY, LLP

By /s/ Joseph Allgor

Name: Joseph Allgor

Title: Assistant General Counsel

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EX-21.1

EXHIBIT 21

The subsidiaries of Allied Holdings, Inc. and the place of incorporation or
organization are as follows:

Allied Automotive Group, Inc.	Georgia
Axis Group, Inc.	Georgia
Allied Systems, Ltd., LP	Georgia
Allied Systems (Canada) Company	Nova Scotia
GACS Incorporated	Georgia
Allied Freight Broker, LLC	Delaware
QAT, Inc.	Florida
Terminal Services, LLC	Delaware
F.J. Boutell Driveaway, LLC	Delaware
RMX, LLC	Delaware
Transport Support, LLC	Delaware
Commercial Carriers, Inc.	Michigan
Haul Insurance Limited	Cayman Islands
AH Industries, Inc.	Alberta
Kar-Tainer International Limited	Bermuda
Axis Netherlands, LLC	Georgia
Axis Areta, LLC	Georgia
Arrendadora de Equipo para el	Mexico
Transporte de Automoviles, s. de R.L.
de C.V.
Axis Logistica, S. de R.L. de C.V.	Mexico
Logistic Technology, LLC — Georgia	Georgia
Logistic Systems, LLC	Georgia
Axis Canada Company	Nova Scotia
CT Services, Inc.	Michigan
Cordin Transport, LLC	Delaware
Axis Operadora Hermosillo	Mexico
ACE Operations, LLC	Georgia
Axis Operadora Mexico S.A. DE C.V.	Mexico
Axis Traslados, S. DE R.L. DE C.V.	Mexico
Axis Operadora Guadalajara S.A. DE C.V.	Mexico
Axis Operadora Monterrey S.A. DE C.V.	Mexico

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Allied Holdings, Inc.:

We consent to the incorporation by reference in the registration statements (No. 333-72053, No. 333- 51104, No. 333-62440, No. 333-91942, No 333-107455 and No. 333-124203) on Form S-8 of Allied Holdings, Inc. of our report dated May 23, 2007, with respect to the consolidated balance sheets of Allied Holdings, Inc. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, changes in stockholders’ (deficit) equity and cash flows for each of the years in the three-year period ended December 31, 2006, and the related financial statement schedule, which report appears in the December 31, 2006 Annual Report on Form 10-K of Allied Holdings, Inc.

Our report dated May 23, 2007 contains an explanatory paragraph that states that the Company has incurred losses from operations, has an accumulated deficit, and has filed voluntary petitions seeking to reorganize under Chapter 11 of the Federal bankruptcy laws, which raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements and financial statement schedule do not include any adjustments that might result from the outcome of these uncertainties.

As discussed in Notes 2 and 20 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment. Also, as discussed in Notes 2 and 16 to the consolidated financial statements, the Company adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans as of December 31, 2006. As discussed in Note 1 to the consolidated financial statements, the Company adopted the provisions of the Securities and Exchange Commission's Staff Accounting Bulletin No. 108, Considering the Effects of Prior-Year Misstatements when Quantifying Misstatements in Current -Year Financial Statements.

As discussed in Note 2 to the consolidated financial statements, in 2005 the Company adopted the provisions of Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.

/S/ KPMG LLP

Atlanta, Georgia
May 23, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Hugh E. Sawyer, certify that:

1.	I have reviewed this annual report on Form 10-K of Allied Holdings, Inc;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 23, 2007	/s/ Hugh E Sawyer
Date	Hugh E. Sawyer
	Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Thomas H. King, certify that:

1. I have reviewed this annual report on Form 10-K of Allied Holdings, Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 23, 2007	/s/ Thomas H. King
Date	Thomas H. King
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

     The undersigned, as the President and Chief Executive Officer of Allied Holdings, Inc., certifies that, to the best of his knowledge and belief, the Annual Report on Form 10-K for the year ended December 31, 2006, which accompanies this certification fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of Allied Holdings, Inc. at the dates and for the periods indicated. The foregoing certification is made pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) and shall not be relied upon for any other purpose.

     This 23rd day of May 2007

/s/ Hugh E. Sawyer

Hugh E. Sawyer

President and Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Allied Holdings, Inc. and will be retained by Allied Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The information in this Exhibit 32.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

EX-32.2

Exhibit 32.2

Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

     The undersigned, as the Executive Vice President and Chief Financial Officer of Allied Holdings, Inc., certifies that, to the best of his knowledge and belief, the Annual Report on Form 10-K for the year ended December 31, 2006 which accompanies this certification fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of Allied Holdings, Inc. at the dates and for the periods indicated. The foregoing certification is made pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) and shall not be relied upon for any other purpose.

     This 23rd of May 2007.

/s/ Thomas H. King

Thomas H. King

Executive Vice President and
Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Allied Holdings, Inc. and will be retained by Allied Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The information in this Exhibit 32.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.