Document Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA NEWNAN DIVISION In re: ALLIED HOLDINGS, INC., et al. Debtors. Chapter 11 Case Nos. 05- through 05- Jointly Administered Judge MOTION FOR ESTABLISHMENT OF PROCEDURES FOR MONTHLY COMPENSATION AND REIMBURSEMENT OF EXPENSES OF PROFESSIONALS Allied Holdings, Inc., Allied Automotive Group, Inc., Allied Systems, Ltd. (L.P.), Allied Systems (Canada) Company, QAT, Inc., RMX LLC, Transport Support LLC, F.J. Boutell Driveaway LLC, Allied Freight Broker LLC, GACS Incorporated, Commercial Carriers, Inc., Axis Group, Inc., Kar-Tainer International LLC, Axis Netherlands, LLC, Axis Areta, LLC, Logistic Technology, LLC, Logistic Systems, LLC, CT Services, Inc., Cordin Transport LLC, Terminal Services LLC, Axis Canada Company, Ace Operations, LLC, and AH Industries Inc., debtors and debtors-in-possession herein (collectively, the Debtors or Allied ), respectfully submit this Motion for Establishment of Procedures for Monthly Compensation and Reimbursement of Expenses of Professionals (the Motion ). In support of the Motion, the Debtors show the Court as follows: Jurisdiction 1. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. 1334. Consideration of this Motion is a core proceeding pursuant to 28 U.S.C. 157(b). Venue of this proceeding is proper before this Court pursuant to 28 U.S.C. 1408 and 1409. The statutory predicates for the relief sought herein are Sections 330 and 105(a) of the Bankruptcy Code.
Document Page 2 of 12 Background 2. On the date hereof (the Petition Date ), each of the Debtors filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code ). The Debtors intend to continue in the possession of their respective properties and the management of their respective businesses as debtors-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. The Debtors simultaneously filed a motion seeking to have their Chapter 11 cases consolidated for procedural purposes and jointly administered. 3. Allied is likely the largest transporter of new and used vehicles in North America. Its business operations fall into two main categories. The largest category of business operations is providing short-haul delivery services for new and used vehicles over a distance averaging less than three hundred miles. These short-haul vehicle delivery services fall within the business operations of Allied Automotive Group, Inc. and its direct and indirect subsidiaries (collectively, the Automotive Group ) which uses specialized tractor-trailer units known as Rigs to transport the vehicles. The other category of business operations is providing various support services with respect to vehicle transportation and distribution. These support services fall within the business operations of Axis Group, Inc. and its direct and indirect subsidiaries (collectively, the Axis Group ). 4. There are numerous factors contributing to the Debtors need for bankruptcy relief. These factors are discussed in detail in the Declaration of Thomas H. King in Support of Chapter 11 Petitions and First Day Motions filed on the same day as this Motion. In general terms, the Debtors need for bankruptcy relief has been caused by a continuing pattern of decreasing revenues, increasing expenses and the consequent difficulty of servicing debt and maintaining adequate liquidity. The primary causes of the decrease in revenues have been a - 2 -
Document Page 3 of 12 decrease in original equipment manufacture ( OEM ) production by certain of Allied s significant customers and an increase in competition in the vehicle haulaway market. While there are multiple areas where the Debtors expenses have been rising, increases in fuel expenses, labor expenses, maintenance and repair expenses, debt service expenses, insurance expenses and the need for ongoing significant increases for capital expenses for the Rigs have had the most significant impact. Finally, the Debtors have not been able to maintain adequate liquidity because of recent amendments to the Debtors credit facility which have restricted the Debtors ability to borrow the funds necessary to support their business operations. 5. For the reasons stated, as well as other reasons, in order to maintain and sustain their business operations and preserve the going concern value of their assets and enterprise value of their businesses, and, further, in an effort to maximize the recoveries for their constituencies, the Debtors determined it would be in their best interests and the best interests of their creditors and estates to initiate these Chapter 11 proceedings. These proceedings will afford the Debtors the opportunity to, among other things, increase their revenues, lower their expenses and reduce their debt burden. Relief Requested 6. By this Motion, the Debtors respectfully request the entry of an order, pursuant to Sections 105(a) and 331 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 2014, establishing procedures by which the professionals retained under Section 327 of the Bankruptcy Code in these cases may obtain monthly payment of a portion of their fees and expenses, subject to review and adjustment in connection with regular fee applications filed with the Court. - 3 -
Document Page 4 of 12 Basis for Relief 7. Contemporaneously with the filing of this Motion, the Debtors are seeking approval of the retention, under Section 327(a) of the Bankruptcy Code, of Troutman Sanders LLP as their legal counsel; Miller Buckfire & Co., LLC as financial advisor and investment banker; Hays Financial Consulting, LLC as administrative compliance consultants; Kekst and Company, Incorporated as corporate communications consultants; Mercer Human Resource Consultants, Inc. as human resource consultants; and Lamberth, Cifelli, Stokes & Stout, P.A. as additional conflicts counsel. Additionally, the Debtors are seeking approval of the employment, under Section 327(e) of the Bankruptcy Code of Ogletree, Deakins, Nash, Smoak & Stewart, P.C. as special labor law counsel (collectively, the Professionals ). The Debtors anticipate that they may need to retain other professionals as these cases progress. In addition, an official committee of unsecured creditors probably will be appointed in these cases and likely will retain counsel, and possibly other professionals, to assist it. 8. The Debtors believe that the relief requested in this Motion will streamline the Professionals compensation process and enable the Court and all other parties to monitor the professional fees incurred in these cases more effectively. 9. The requested procedures would permit each Professional to serve on counsel for the Debtors, the Office of the United States Trustee, counsel for the post-petition secured lenders, and counsel for any official committee appointed in these cases, a statement of fees and expenses incurred by the Professional during the immediately preceding month (a Monthly Statement ). The Debtors would be authorized to pay each Professional eighty percent of fees and one hundred percent of expenses requested in the Monthly Statement in the absence of an objection received within twenty days after service of the Monthly Statement. All fees and - 4 -
Document Page 5 of 12 expenses of each Professional, whether or not paid or objected to in connection with a Monthly Statement, would remain subject to review and approval by the Court in connection with interim and final fee applications under Sections 330 and 331 of the Bankruptcy Code. 10. The Debtors propose that these procedures also apply to members of any official committee appointed in these cases seeking reimbursement of expenses pursuant to Section 503(b)(3)(F) of the Bankruptcy Code. However, these procedures will not apply to professionals retained in the ordinary course of business pursuant to a separate motion filed contemporaneously herewith, or those retained pursuant to 28 U.S.C. 156 (in the case of the claims agent). 11. Section 331 of the Bankruptcy Code, which generally permits professionals to file fee applications every 120 days, expressly contemplates that professionals may be compensated more frequently if the court permits. More than twenty-three years ago, this Court recognized that it is inequitable to require that the attorneys for the debtors in possession fund this reorganization proceeding. In re International Horizons, Inc., 10 B.R. 895, 897 (Bankr. N.D. Ga. 1981). In that case, the Court authorized professionals to seek and receive compensation on a monthly basis. Id. at 898. Similar relief is regularly granted in large and complex Chapter 11 cases. See, e.g., In re Rhodes, Inc., Case No. 04-78434 (Bankr. N.D. Ga. Nov. 5, 2004); In re Centennial HealthCare Corp., Case No. 02-74974 (Bankr. N.D. Ga. Feb. 5, 2003) (Massey, J.); In re The New Power Co., Case No. 02-10835 (Bankr. N.D. Ga. July 25, 2002) (Drake, J.); and in re Wolf Camera, Inc., Case No. 01-83470 (Bankr. N.D. Ga. June 22, 2001). 12. In addition to minimizing the financial hardship on the Professionals, who must invest significant resources in these cases, monthly compensation procedures will enable the - 5 -
Document Page 6 of 12 Debtors to monitor the costs of administration of their estates, forecast level cash flows, and implement efficient cash management procedures. Moreover, these procedures will allow the Court and parties in interest, including the United States Trustee, to ensure the reasonableness and necessity of compensation sought in these cases. 13. For the foregoing reasons, the Debtors believe that granting the relief requested herein is appropriate and in the best interests of their estates. NOTICE 14. Notice of this Motion has been provided to the Office of the United States Trustee, the Securities and Exchange Commission, counsel for the collateral agent for the Debtors prepetition secured lenders, the indenture trustee for Debtors senior note holders, counsel for the ad hoc committee of senior note holders, counsel to the Agent for the Debtors proposed debtor-in-possession lenders and the Debtors forty largest unsecured creditors on a consolidated basis. In light of the nature of the relief requested, the Debtors submit that no further notice is necessary. - 6 -
Document Page 7 of 12 Conclusion WHEREFORE the Debtors respectfully request entry of an order granting the relief requested herein, and granting the Debtors such other and further relief as may be just. This 31st day of July 2005. /s/ Jeffrey W. Kelley Ezra H. Cohen (GA State Bar No. 173800) Jeffrey W. Kelley (GA State Bar No. 412296) Harris B. Winsberg (GA State Bar No. 770892) TROUTMAN SANDERS LLP Bank of America Plaza 600 Peachtree Street, N.E. - Suite 5200 Atlanta, Georgia 30308-2216 Telephone No.: (404) 885-3000 Facsimile No.: (404) 885-3900 - and - Mitchel H. Perkiel, Esq. (Pro Hac Vice Pending) TROUTMAN SANDERS LLP The Chrysler Building 405 Lexington Avenue New York, New York 10174 Telephone No.: (212) 704-6000 Facsimile No.: (212) 704-6288 PROPOSED ATTORNEYS FOR THE DEBTORS - 7 -
Document Page 8 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA NEWNAN DIVISION In re: ALLIED HOLDINGS, INC., et al. Debtors. Chapter 11 Case Nos. 05- through 05- Jointly Administered Judge ORDER ESTABLISHING PROCEDURES FOR MONTHLY COMPENSATION AND REIMBURSEMENTOF EXPENSES OF PROFESSIONALS This matter is before the Court on the motion of Allied Holdings, Inc., Allied Automotive Group, Inc., Allied Systems, Ltd. (L.P.), Allied Systems (Canada) Company, QAT, Inc., RMX LLC, Transport Support LLC, F.J. Boutell Driveaway LLC, Allied Freight Broker LLC, GACS Incorporated, Commercial Carriers, Inc., Axis Group, Inc., Kar-Tainer International LLC, Axis Netherlands, LLC, Axis Areta, LLC, Logistic Technology, LLC, Logistic Systems, LLC, CT Services, Inc., Cordin Transport LLC, Terminal Services LLC, Axis Canada Company, Ace Operations, LLC, and AH Industries Inc., debtors and debtors-in-possession herein (collectively, the Debtors ) for the establishment of procedures for monthly compensation and reimbursement of expenses of professionals in these cases (the Motion ). The Court has considered the Motion, the Declaration of Thomas H. King in Support of Chapter 11 Petitions and First Day Motions, and the matters reflected in the record of the hearing held on the Motion. It appears that the Court has jurisdiction over this proceeding; that this is a core proceeding; that notice of this Motion has been provided to the Office of the United States Trustee, the Securities and Exchange Commission, counsel for the collateral agent for the Debtors prepetition secured lenders, the indenture trustee for Debtors senior note holders,
Document Page 9 of 12 counsel for the ad hoc committee of senior note holders, counsel to the Agent for the Debtors proposed debtor-in-possession lenders and the Debtors forty largest unsecured creditors on a consolidated basis; that no further notice is necessary; that the relief sought in the motion is in the best interests of the Debtors, their estates, and their creditors; and that good and sufficient cause exists for such relief. Accordingly, it is hereby ORDERED as follows: 1. The Motion is GRANTED. 2. Except as may otherwise be provided in an order of this Court authorizing the retention of a specific professional, any professional whose retention is approved by this Court pursuant to Section 327 of the Bankruptcy Code (a Professional ) may seek monthly compensation in accordance with the following procedures: (a) Within thirty days after the end of a month for which compensation is sought, each Professional seeking compensation shall serve a monthly statement (the Monthly Statement ), by hand or overnight delivery, on (i) Harris B. Winsberg, Esq. Troutman Sanders LLP, 600 Peachtree Street, N.E. Atlanta, Georgia 30308; (ii) the Office of the United States Trustee, 75 Spring Street, S.W., Atlanta, Georgia 30303; (iii) counsel for any official committee appointed in these cases; and (iv) counsel for the agent for the Debtors post-petition secured lenders. (b) Each Monthly Statement shall contain a list of individuals and their respective titles who provided services during the statement period, their respective billing rates, the aggregate hours spent by each individual, contemporaneously - 2 -
Document Page 10 of 12 maintained time entries for each individual in increments of tenths of an hour, and a reasonably detailed breakdown of disbursements incurred. (c) In the event that an interested party has an objection to the compensation or reimbursement sought in a particular Monthly Statement, he or she shall, within twenty days after service of the Monthly Statement, serve upon the professional whose statement is objected to and the other persons designated in paragraph (a) above a written Notice of Objection to Fee Statement, setting forth the nature of the objection and the amount of fees or expenses at issue. (d) After the expiration of the twenty day period described above, the Debtors shall promptly pay eighty percent of the fees and one hundred percent of the expenses identified in each Monthly Statement to which no objection has been served. (e) If the Debtors receive an objection to a particular Monthly Statement, they shall withhold payment of that portion of the Monthly Statement to which the objection is directed and shall promptly pay the remainder of the fees and expenses in the percentages set forth in the preceding paragraph. (f) If any objecting party resolves a dispute with a Professional, the objecting party (or the Debtors, with the consent of the objection party) shall serve written notice on the persons designated in paragraph (a) above that the objection is withdrawn and shall describe the terms of the resolution. The Debtors shall promptly pay that portion of the Monthly Statement at issue that is no longer subject to an objection in the percentages set forth in paragraph (d) above. (g) Any objection that is not resolved by the parties shall be preserved and presented to the Court at the next interim or final fee application hearing. - 3 -
Document Page 11 of 12 (h) The service or lack of an objection in accordance with paragraph (c) above shall not prejudice the objecting party s right to object to any fee application made to the Court in accordance with the Bankruptcy Code on any ground, whether raised in the objection or not. Furthermore, the decision by any party not to object to a Monthly Statement shall not be a waiver of any kind or prejudice that party s right to objection to any fee application subsequently made to the Court. (i) Approximately every 120 days, but no more than approximately every 180 days, each Professional shall serve and file with the Court, pursuant to Sections 330 and 331 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 2016, an application for interim or final approval and allowance of compensation and reimbursement of expenses, including compensation previously paid by the Debtors on the basis of a Monthly Statement. (j) Any Professional that fails to file a timely application seeking approval of compensation and expenses previously paid on the basis of a Monthly Statement shall be ineligible to receive further monthly payments of compensation or reimbursement of expenses as provided herein absent a further order of the Court. (k) Neither the payment of, nor the failure to pay, in whole or in part, monthly compensation and reimbursement as provided herein shall have any effect on this Court s interim or final allowance of compensation or reimbursement of expenses of any Professional. (1) Counsel for any official committee appointed in these cases may, in accordance with the foregoing procedures, collect and submit statements of expenses - 4 -
Document Page 12 of 12 allowable under Section 503(b)(3)(F) of the Bankruptcy Code, with supporting vouchers, from members of such committee. 3. The provisions of this Order shall not apply to any professional retained pursuant to the Order Authorizing Debtors to Retain and Compensate Professionals in the Ordinary Course of Business entered in these cases. 4. The Court shall retain jurisdiction to hear and determine all matters arising from the implementation of this Order. SO ORDERED this day of 2005. Prepared and presented by: /s/ Jeffrey W. Kelley Ezra H. Cohen (GA State Bar No. 173800) Jeffrey W. Kelley (GA State Bar No. 412296) Harris B. Winsberg (GA State Bar No. 770892) TROUTMAN SANDERS LLP Bank of America Plaza 600 Peachtree Street, N.E. - Suite 5200 Atlanta, Georgia 30308-2216 Telephone No.: (404) 885-3000 Facsimile No.: (404) 885-3900 - and - Mitchel H. Perkiel, Esq. (Pro Hac Vice Pending) TROUTMAN SANDERS LLP The Chrysler Building 405 Lexington Avenue New York, New York 10174 Telephone No.: (212) 704-6000 Facsimile No.: (212) 704-6288 PROPOSED ATTORNEYS FOR THE DEBTORS UNITED STATES BANKRUPTCY JUDGE - 5 -