10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004

Form 10-K

þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended August 31, 2006

or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from            to

Commission File No. 1-13146

THE GREENBRIER COMPANIES, INC.

(Exact name of Registrant as specified in its charter)

Oregon	3743	93-0816972
(State or other jurisdiction) of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

CO-REGISTRANTS AND SUBSIDIARY GUARANTORS

Autostack Company LLC	Oregon	4741	93-0981840
Greenbrier-Concarril, LLC	Delaware	3743	93-1262344
Greenbrier Leasing Company LLC	Oregon	4741	31-0789836
Greenbrier Leasing L.P.	Oregon	4741	91-1960693
Greenbrier Leasing Limited Partner, LLC	Delaware	4741	93-1266038
Greenbrier Management Services, LLC	Delaware	4741	93-1266040
Greenbrier Railcar, LLC	Delaware	4741	93-0971066
Gunderson LLC	Oregon	3743	93-0180205
Gunderson Marine LLC	Oregon	3743	93-1127982
Gunderson Rail Services LLC	Oregon	4789	93-1123815
Gunderson Specialty Products, LLC	Delaware	3743	93-0180205

The Greenbrier Companies, Inc. One Centerpointe Drive, Suite 200 Lake Oswego Oregon 97035-8612 (503) 684-7000	Autostack Company LLC One Centerpointe Drive, Suite 200 Lake Oswego Oregon 97035-8612 (503) 684-7000	Greenbrier-Concarril, LLC One Centerpointe Drive, Suite 200 Lake Oswego Oregon 97035-8612 (503) 684-7000	Greenbrier Leasing Company LLC One Centerpointe Drive, Suite 200 Lake Oswego Oregon 97035-8612 (503) 684-7000
Greenbrier Leasing, L.P. One Centerpointe Drive, Suite 200 Lake Oswego, Oregon 97035-8612 (503) 684-7000	Greenbrier Leasing Limited Partner, LLC One Centerpointe Drive, Suite 200 Lake Oswego, Oregon 97035-8612 (503) 684-7000	Greenbrier Management Services, LLC One Centerpointe Drive, Suite 200 Lake Oswego, Oregon 97035-8612 (503) 684-7000	Greenbrier Railcar LLC One Centerpointe Drive, Suite 200 Lake Oswego, Oregon 97035-8612 (503) 684-7000
Gunderson LLC 4350 NW Front Avenue Portland, Oregon 97210 (503) 972-5700	Gunderson Marine LLC 4350 NW Front Avenue Portland, Oregon 97210 (503) 972-5700	Gunderson Rail Services LLC One Centerpointe Drive, Suite 200 Lake Oswego, Oregon 97035-8612 (503) 684-7000	Gunderson Specialty Products, LLC 4350 NW Front Avenue Portland, Oregon (503) 972-5700

(Address, including zip code and telephone number

including area code of registrant’s principal executive offices)

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

(Title of Each Class)	(Name of Each Exchange on Which Registered)
Common Stock without par value	New York Stock Exchange

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

None

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

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

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  X     No    

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one).

Large accelerated filer        Accelerated filer  X    Non-accelerated filer    

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

Aggregate market value of the Registrant’s Common Stock held by non-affiliates as of February 28, 2006 (based on the closing price of such shares on such date) was $598,437,126.

The number of shares outstanding of the Registrant’s Common Stock on October 25, 2006 was 15,963,535, without par value.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of Registrant’s Proxy Statement dated November 20, 2006 prepared in connection with the Annual Meeting of Stockholders to be held on January 9, 2007 are incorporated by reference into Parts II and III of this Report.

The Greenbrier Companies, Inc.

Form 10-K

TABLE OF CONTENTS

		PAGE
PART I
Item 1.	BUSINESS		3
Item 1a.	RISK FACTORS		8
Item 1b.	UNRESOLVED STAFF COMMENTS		14
Item 2.	PROPERTIES		15
Item 3.	LEGAL PROCEEDINGS		16
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		16
PART II
Item 5.	MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS		16
Item 6.	SELECTED FINANCIAL DATA		18
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		19
Item 7a.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		26
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		27
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		59
Item 9a.	CONTROLS AND PROCEDURES		60
PART III
Item 10.	DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT		62
Item 11.	EXECUTIVE COMPENSATION		62
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		62
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		62
Item 14.	PRINCIPAL ACCOUNTANTS FEES AND SERVICES		62
PART IV
Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES		63
	SIGNATURES		67
	CERTIFICATIONS		68
EXHIBIT 10.12
EXHIBIT 10.34
EXHIBIT 12
EXHIBIT 21.1
EXHIBIT 23
EXHIBIT 31.1(A)
EXHIBIT 31.2(B)
EXHIBIT 32.1(C)
EXHIBIT 32.2(D)

2                                        The Greenbrier Companies 2006 Annual Report

PART I

Item 1. BUSINESS

Introduction

We are one of the leading designers, manufacturers and marketers of railroad freight car equipment in North America and Europe and a leading provider of leasing and other services to the railroad and related transportation industries in North America. Our mission is to provide complete freight car solutions to our customers through a comprehensive set of high quality freight car products and related services.

In North America, we operate an integrated business model that combines freight car manufacturing, repair and refurbishment, leasing and fleet management services to provide customers with a comprehensive set of freight car solutions. This model allows us to utilize synergies between our various business activities and to generate enhanced returns by providing creative solutions to a customer’s freight car needs, while generating profits from multiple elements of the transaction.

We operate in two primary business segments: manufacturing and leasing & services. Financial information about our business segments for the years ended August 31, 2006, 2005 and 2004 is located in Note 22 to our Consolidated Financial Statements.

We are a corporation formed in 1981. Our principal executive offices are located at One Centerpointe Drive, Suite 200, Lake Oswego, Oregon 97035, our telephone number is (503) 684-7000 and our internet website is located at http://www.gbrx.com.

Products and Services Manufacturing

North American Railcar Manufacturing - We are the leading North American manufacturer of intermodal railcars with an average market share of approximately 60% over the last five years. In addition to our strength in intermodal railcars, we manufacture a broad array of other railcar types in North America and have demonstrated an ability to capture high market shares in several of the car types we produce. We have commanded an average market share of approximately 40% in flat cars and 30% in boxcars over the last five years. We also may manufacture new railcars through the use of subcontractors. The primary products produced for the North American market are:

Intermodal Railcars - We manufacture a comprehensive range of intermodal railcars. Our most important product is our articulated double-stack railcars. The double-stack railcar is designed to transport containers stacked two-high on a single platform.

An articulated double-stack railcar is comprised of up to five platforms each of which is linked by a common set of wheels and axles.

Our comprehensive line of articulated and non-articulated double-stack intermodal railcars offers varying load capacities and configurations. The double-stack railcar provides significant operating and capital savings over other types of intermodal railcars. These savings are the result of:

• increased train density (two containers are carried within the same longitudinal space conventionally used to carry one trailer or container);

• reduced railcar weight of up to 50% per container;

• easier terminal handling characteristics;

• reduced equipment costs of up to 40% less than the cost of providing the same carrying capacity with conventional equipment;

• superior ride quality compared to conventional equipment, leading to reduced damage claims; and

• increased fuel efficiency resulting from weight reduction and improved aerodynamics.

The Greenbrier Companies 2006 Annual Report                                         3

Our current double-stack products include:

Unit sizes carried(1)

Number of

Well

Cargo

Product

Type

wells

size

type

20’

40’

45’

48’

53’

Trailer

Maxi-Stack I

Articulated

5

40’

Container

Top

x

x

x

x

Bottom

x

x

Maxi-Stack IV

Articulated

3

53’

Container

Top

x

x

x

x

Bottom

x

x

x

x

x

All Purpose Husky

Stand-alone or

Stack 53’

Drawbar

1 or 3  unit

53’

Container

Top

x

x

x

x

connected

drawbar

Bottom

x

x

x

x

x

53’

Trailer

x

Husky Stack 53’

Stand-alone or Drawbar

1 or 3  unit

connected

drawbar

53’

Container

Top

x

x

x

x

Bottom

x

x

x

x

x

⁽¹⁾  Carrying capability may be dependent on unit size being carried in the adjoining well.

Conventional Railcars - We produce a wide range of boxcars, which are used in forest products, automotive, perishables and general merchandise applications. We also produce a variety of covered hopper cars for the grain, cement and plastics industries as well as gondolas and coil cars for the steel and metals markets and various other conventional railcar types. Our flat car products include center partition cars for the forest products industry, bulkhead flat cars, flat cars for automotive transportation and solid waste service flat cars.

European Railcar Manufacturing - Our European manufacturing operation produces a variety of railcar types, including a comprehensive line of pressurized tank cars for liquid petroleum gas and ammonia and non-pressurized tank cars for light oil, chemicals and other products. In addition, we produce flat cars, coil cars for the steel and metals market, coal cars for both the continental European and United Kingdom markets, gondolas, sliding wall cars and rolling highway cars. Although no formal statistics are available for the European market, we believe we are one of the largest new freight car manufacturers with an estimated market share in excess of 20%.

Railcar Repair, Refurbishment and Component Parts Manufacturing - We believe we operate one of the largest repair and refurbishment networks in North America, operating in 13 locations as of August 31, 2006. Our network of railcar repair and refurbishment shops competes in heavy railcar repair and refurbishment and routine railcar maintenance. We are actively engaged in the repair and refurbishment of railcars for third parties, as well as our own leased and managed fleet. Subsequent to year end, we purchased four additional repair and refurbishment facilities through our acquisition of Rail Car America, Inc. (RCA).

We also perform wheel and axle servicing through our four wheel shops in North America. In addition, we produce boxcar sliding doors and roof products as well as sideframes, bolsters, couplers and yokes. Subsequent to year end, we entered the railcar cushioning unit business through our acquisition of RCA and its American Hydraulics division.

Marine Vessel Fabrication - Our Portland, Oregon manufacturing facility, located on a deep-water port on the Willamette River, includes marine facilities with the largest side-launch ways on the West Coast. The marine facilities also enhance steel plate burning and fabrication capacity providing flexibility for railcar production. We manufacture ocean going conventional deck barges, double-hull tank barges, railcar/deck barges, barges for aggregates and other heavy industrial products and ocean-going dump barges. We have increased our barge capacity by over 40% as a result of our recently completed expansion project that included additional crane capacity and increased production space.

4                                        The Greenbrier Companies 2006 Annual Report

Leasing & Services

Leasing - Our relationships with financial institutions, combined with our ownership of a lease fleet of approximately 9,000 railcars, enables us to offer flexible financing programs including traditional direct finance leases, operating leases and car hire leases to our customers. Frequently, we originate leases with railroads or shippers, remarket them to financial institutions and subsequently provide management services under multi-year agreements.

As equipment owner, we participate principally in the operating lease segment of the market. The majority of our leases are “full service” leases whereby we are responsible for maintenance, taxes and administration. Maintenance of the fleet is provided, in part, through our own facilities and engineering and technical staff.

Assets from our owned lease fleet are periodically sold to take advantage of market conditions, manage risk and maintain liquidity.

		Fleet Profile(1)
		As of August 31, 2006
		Owned		Managed		Total
		Units(2)		Units		Units
Customer Profile:
	Class I Railroads		4,233		113,544		117,777
	Non-Class I Railroads		1,635		11,682		13,317
	Shipping Companies		2,800		3,038		5,838
	Leasing Companies		261		7,056		7,317
	Enroute to Customer Location		122		–		122
	Off-Lease		260		–		260
Total Units			9,311		135,320		144,631

⁽¹⁾  Each platform of a railcar is treated as a separate unit.

⁽²⁾  Percent of owned units on lease is 97.2%; average age of owned units is 16 years; average remaining lease term is 3.3 years.

Approximately 500 units in our owned lease fleet were acquired through a 1990 agreement with Union Pacific Railroad Company (Union Pacific) which contains a fixed-price purchase option exercisable upon lease expiration. Union Pacific has notified us of its intention to exercise this option as leases expire over the next year on all remaining railcars in this program.

Management Services - Our management services business offers a broad range of services that enhance our ability to generate lease transactions. These services include railcar maintenance management, railcar accounting services such as billing and revenue collection, car hire receivable and payable administration and railcar remarketing. We currently own or provide management services for a fleet of approximately 145,000 railcars in North America for railroads, shippers, carriers and other leasing and transportation companies.

Backlog

The following table depicts our reported railcar backlog in number of railcars and estimated future sales value attributable to such backlog at the end of the periods shown:

	August 31,
	2006		2005		2004
New railcar backlog units(1)		14,700		9,600		13,100
Estimated value (in millions)	$	1,000	$	550	$	760

⁽¹⁾  Each platform of a railcar is treated as a separate unit.

The backlog for 2006 includes 12,000 units that will be delivered to the customer over a multi-year period ending in calendar year 2010. Approximately 7,700 units under this contract are for delivery beyond fiscal and calendar 2007 and are subject to our fulfillment of certain competitive conditions.

The backlog is based on customer purchase or lease orders that we believe are firm and does not include production for our own lease fleet. Customer orders, however, may be subject to cancellation and other customary industry terms and conditions. Historically, little variation has been experienced between the number of railcars ordered and the number of railcars actually delivered. The backlog is not necessarily indicative of future results of operations.

Customers

Our manufacturing and leasing & services customers include Class I railroads, regional and short-line rail-roads, other leasing companies, shippers, carriers and other transportation companies. We have strong, long-term relationships with many of our customers.

The Greenbrier Companies 2006 Annual Report                                         5

We believe that our customers’ preference for high quality products, our technological leadership in developing innovative products and competitive pricing of our railcars have helped us maintain our long standing relationships with our customers.

In 2006, revenue from two customers, Burlington Northern and Santa Fe Railway Company (BNSF) and TTX Company (TTX) accounted for approximately 29% and 17% of total revenue and 30% and 19% of manufacturing revenue. One customer, Mitsui Rail Capital, accounted for slightly more than 10% of total manufacturing revenue. Approximately 27% of leasing & services revenue was from BNSF.

Raw Materials and Components

Our products require a supply of materials including steel and specialty components such as brakes, wheels and axles. Specialty components purchased from third parties represent approximately half of the cost of an average freight car. Our customers often specify particular components and suppliers of such components. Although the number of alternative suppliers of certain specialty components has declined in recent years, there are at least two suppliers for most such components and we are not reliant on any one supplier for any component. Inventory levels are continually monitored to ensure adequate support of production. We periodically make advance purchases to avoid possible shortages of material due to capacity limitations of component suppliers and possible price increases. We do not typically enter into binding long-term contracts with suppliers because we rely on established relationships with major suppliers to ensure the availability of raw materials and specialty items.

Certain materials and components continue to be in short supply, including castings, wheels, axles and couplers, which could potentially impact production at our new railcar and refurbishment facilities. In an effort to mitigate shortages and reduce supply chain costs, we have entered into strategic alliances for the global sourcing of certain components, increased our replacement parts business and continue to pursue strategic opportunities to protect and enhance our supply chain.

Competition

There are currently six major railcar manufacturers competing in North America. We believe one of these producers builds railcars principally for its own fleet and the other producers compete with us principally in the general railcar market. We compete on the basis of reputation, quality, price, reliability of delivery and customer service and support.

We believe that the top five European manufacturers, including us, maintain over 80% market share. European freight car manufacturers are largely located in central and eastern Europe where labor rates are lower and work rules are more flexible.

In railcar leasing & services, there are about twenty institutions that provide products and services similar to ours. Many of them are also customers which buy leased railcars and new railcars from our manufacturing facilities. More than half of these institutions have resources greater than us. We compete primarily on the basis of reputation, quality, price, delivery, service offerings and deal structuring ability. We believe our strong servicing capability, integrated with our manufacturing, repair shops, railcar specialization and expertise in particular lease structures provide a strong competitive position.

Marketing and Product Development

In North America, we utilize an integrated marketing and sales effort to coordinate relationships in our manufacturing and leasing & services operations. We provide our customers with a diverse range of equipment and financing alternatives designed to satisfy each customer’s unique needs, whether the customer is buying new equipment, refurbishing existing equipment or seeking to outsource the maintenance or management of equipment. These custom programs may involve a combination of railcar products, leasing, refurbishing and remarketing services. In addition, we provide customized maintenance management, equipment management and accounting services.

In Europe, we maintain relationships with customers through a network of country specific sales representatives. Our engineering and technical staff work closely with their customer counterparts on the design and certification of railcars. Many European railroads are state owned and are subject to European Union (EU) regulations covering tendering of government contracts.

Through our customer relationships, insights are derived into the potential need for new products and services. Marketing and engineering personnel collaborate to evaluate opportunities and identify and develop new products. Research and development costs incurred for new product development during

6                                        The Greenbrier Companies 2006 Annual Report

2006, 2005 and 2004 were $2.2 million, $1.9 million and $3.0 million.

Patents and Trademarks

We have a number of United States (U.S.) and non-U.S. patents of varying duration and pending applications, registered trademarks, copyrights and trade names that are important to our products and product development efforts. The protection of our intellectual property is important to our business. We have implemented a proactive program aimed at protecting our intellectual property and the results from our research and development.

Environmental Matters

We are subject to national, state, provincial and local environmental laws and regulations concerning, among other matters, air emissions, wastewater discharge, solid and hazardous waste disposal and employee health and safety. Prior to acquiring manufacturing facilities, we usually conduct investigations to evaluate the environmental condition of subject properties and may negotiate contractual terms for allocation of environmental exposure arising from prior uses. We endeavor to maintain compliance with applicable environmental laws and regulations. Environmental studies have been conducted of our owned and leased properties that indicate additional investigation and some remediation on certain properties may be necessary. Our Portland, Oregon manufacturing facility is located adjacent to the Willamette River. The United States Environmental Protection Agency (EPA) has classified portions of the river bed, including the portion fronting our facility, as a federal “National Priority List” or “Superfund” site due to sediment contamination (the Portland Harbor Site). We, and more than 60 other parties, have received a “General Notice” of potential liability from the EPA relating to the Portland Harbor Site. The letter advised us that we may be liable for the costs of investigation and remediation (which liability may be joint and several with other potentially responsible parties) as well as for natural resource damages resulting from releases of hazardous substances to the site. At this time, ten private and public entities including us, have signed an Administrative Order on Consent to perform a remedial investigation/feasibility study of the Portland Harbor Site under EPA oversight, and four additional entities have not signed such consent, but are nevertheless contributing money to the effort. The study is expected to be completed in 2009. In May 2006, the EPA notified several additional entities, including other federal agencies that it is prepared to issue unilateral orders compelling additional participation in the remedial investigation. In addition, we have entered into a Voluntary Clean-Up Agreement with the Oregon Department of Environmental Quality in which we agreed to conduct an investigation of whether, and to what extent, past or present operations at our Portland property may have released hazardous substances to the environment. Under this oversight, we also are conducting groundwater remediation relating to a historical spill on our property which antedates our ownership.

Because these environmental investigations are still underway, we are unable to determine the amount of our ultimate liability relating to these matters. Based on the results of the pending investigations and future assessments of natural resource damages, we may be required to incur costs associated with additional phases of investigation or remedial action, and we may be liable for damages to natural resources. In addition, we may be required to perform periodic maintenance dredging in order to continue to launch vessels from our launch ways in Portland, Oregon on the Willamette River, and the river’s classification as a Superfund site could result in some limitations on future dredging and launch activities. Any of these matters could adversely affect our business and results of operations, or the value of our Portland property.

Regulation

The Federal Railroad Administration in the United States and Transport Canada in Canada administer and enforce laws and regulations relating to railroad safety. These regulations govern equipment and safety appliance standards for freight cars and other rail equipment used in interstate commerce. The Association of American Railroads (AAR) promulgates a wide variety of rules and regulations governing the safety and design of equipment, relationships among railroads and other railcar owners with respect to railcars in interchange, and other matters. The AAR also certifies railcar builders and component manufacturers that provide equipment for use on North American railroads. These regulations require us to maintain our certifications with the AAR as a railcar builder and component manufacturer, and products sold and leased by us in North America must meet AAR, Transport Canada and Federal Railroad Administration standards.

Harmonization of the EU regulatory framework is an ongoing process. The regulatory environment in

The Greenbrier Companies 2006 Annual Report                                         7

Europe consists of a combination of EU regulations and country specific regulations.

Employees

As of August 31, 2006, we had 3,661 full-time employees, consisting of 3,533 employees in manufacturing and 128 employees in leasing & services. At our manufacturing facility in Trenton, Nova Scotia, Canada, 557 employees are covered by collective bargaining agreements that expired in October 2006 and are currently being negotiated. At the manufacturing facility in Swidnica, Poland, 400 employees are represented by unions. In addition, under our services agreement with Bombardier, 931 union employees work at our Mexico facility. A discretionary bonus program is maintained for salaried and most hourly employees not covered by collective bargaining agreements. A stock incentive plan and a stock purchase plan are available for certain North American employees. We believe that our relations with our employees are generally good.

Subsequent to year end, approximately 500 employees at our manufacturing facility in Canada were laid off due to a suspension of operations upon completion of an order. Approximately 400 employees were added at various locations throughout the United States, with the acquisition of the assets of RCA in September 2006.

Additional Information

We are a reporting company and file annual, quarterly, special reports, proxy statements and other information with the Securities and Exchange Committee (SEC). You may read and copy these materials at the Public Reference Room maintained by the SEC at Room 1580, 100 F Street N.E., Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for more information on the operation of the public reference room. The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Copies of our annual, quarterly, special reports, Audit Committee Charter, Compensation Committee Charter, Nominating/ Corporate Governance Committee Charter and the Company’s Corporate Governance Guidelines are available on our web site at http://www.gbrx.com or free of charge by contacting our Investor Relations Department at The Greenbrier Companies, Inc., One Centerpointe Drive, Suite 200, Lake Oswego, Oregon 97035.

Item 1a. RISK FACTORS

Risks Related to Our Business

During economic downturns or a rising interest rate environment, the cyclical nature of our business results in lower demand for our products and reduced revenue.

The railcar business is cyclical. Overall economic conditions and the purchasing habits of railcar buyers have a significant effect upon our railcar manufacturing and leasing businesses due to the impact on demand for new, refurbished, used and leased products. As a result, during downturns, we operate with a lower level of backlog and may temporarily shut down production at some or all of our facilities. Economic conditions that result in higher interest rates increase the cost of new leasing arrangements, which could cause some of our leasing customers to lease fewer of our railcars or demand shorter terms. An economic downturn or increase in interest rates may reduce demand for railcars, resulting in lower sales volumes, lower prices, lower lease utilization rates and decreased profits or losses.

The failure of the railcar business to grow as forecasted by industry analysts may have an adverse effect on our financial condition and results of operations.

Our future success depends in part upon continued growth in the railcar industry. If growth rates do not materialize as forecasted by industry analysts, railcar replacement rates do not increase or industry demand for railcar products does not continue at current levels due to price increases or other reasons, our financial condition and results of operations could be adversely affected.

We compete in a highly competitive and concentrated industry, and this competition or industry consolidation may adversely impact our financial results.

We face aggressive competition by a concentrated group of competitors in all geographic markets and each industry sector in which we operate. Some of these companies have significantly greater resources than we have. The effect of this competition could reduce our revenues and margins, limit our ability to grow, increase pricing pressure on our products, and otherwise affect our financial results. In addition, because of the concentrated nature of our competitors, customers and suppliers, we face a heightened risk that further consolidation in the

8                                        The Greenbrier Companies 2006 Annual Report

industry among or between our competitors, customers and suppliers could adversely affect our revenues, cost of revenues and profitability.

We derive a significant amount of our revenue from a limited number of customers, the loss of one or more of which could have an adverse effect on our business.

A significant portion of our revenue is generated from two major customers. Although we have some long-term contractual relationships with our major customers, we cannot assure you that our customers will continue to use our products or services or that they will continue to do so at historical levels. In addition, due to our production schedule, any customer may account for a significantly higher percentage of our total manufacturing or leasing revenue in any given period. A reduction in the purchase or leasing of our products or a termination of our services by one or more of our major customers could have an adverse effect on our business and operating results.

Fluctuations in the availability and price of steel and other raw materials could have an adverse effect on our ability to manufacture and sell our products on a cost-effective basis.

A significant portion of our business depends upon the adequate supply of steel at competitive prices and a small number of suppliers provide a substantial amount of our requirements. The cost of steel (including scrap metal) and all other materials used in the production of our railcars represents over two-thirds of our direct manufacturing costs per railcar.

Our businesses depend upon the adequate supply of other raw materials, including castings and specialty components, at competitive prices. Although we believe we have multiple sources for these raw materials, the number of suppliers has generally declined while global demand has increased. We cannot assure you that we will continue to have access to suppliers of necessary components for manufacturing railcars. Our ability to meet demand for our products could be adversely affected by the loss of access to any of these suppliers, the inability to arrange alternative access to any materials, or suppliers limiting allocation of materials to us. In addition, raw material shortages and allocations may result in inefficient operations and an inventory build-up, which could negatively affect our working capital position.

If the price of steel or other raw materials were to increase and we were unable to increase our selling prices or have adequate protection in our contracts to do so or reduce operating costs to offset the price increases, our margins would be adversely affected. The loss of suppliers or their inability to meet our price, quality, quantity and delivery requirements could have an adverse effect on our ability to manufacture and sell our products on a cost-effective basis.

Our backlog may not be necessarily indicative of the level of our future revenues.

Our new railcar backlog is the number of railcars for which we have written orders from our customers in various periods, and estimated potential revenue attributable to the backlog. Although we believe backlog is an indicator of our future revenues, our reported backlog may not be converted to sales in any particular period and actual sales from such contracts may not equal our backlog estimates. Backlog includes approximately 12,000 units that will be delivered to the customer over a multi-year period. Approximately 7,700 units under this contract are for delivery beyond calendar 2007 and are subject to our fulfillment of certain competitive conditions. Therefore, our backlog may not necessarily be indicative of the level of our future revenues.

The timing of our lease remarketing and railcar sales may cause significant differences in our quarterly results and liquidity.

We may build railcars in anticipation of a customer order, or that are leased to a customer and ultimately sold to a third party. The difference in timing of production of the railcars and the sale could cause a fluctuation in our quarterly results and liquidity As a result, comparisons of our quarterly revenues, income and liquidity between quarterly periods within one year and between comparable periods in different years may not be meaningful and should not be relied upon as indicators of our future performance.

A change in our product mix, failure of our new products or technologies to achieve market acceptance or introduction of products by our competitors could have an adverse effect on our profitability and competitive position.

We manufacture and repair a variety of railcars. The demand for specific types of these railcars varies from time to time. These shifts in demand may affect

The Greenbrier Companies 2006 Annual Report                                         9

our margins and could have an adverse effect on our profitability.

We continue to introduce new railcar products and technologies. We cannot ensure that new products or technologies will achieve sustained market acceptance or that the railcars can be profitably manufactured and sold. In addition, new technologies, changes in product mix or the introduction of new railcars and product offerings by our competitors could render our products obsolete or less competitive. As a result, our ability to compete effectively could be harmed.

We may be unable to remarket leased railcars on favorable terms upon lease termination or realize the expected residual values, which could reduce our revenue and decrease our overall return.

We re-lease or sell railcars we own upon the expiration of existing lease terms. The total rental payments we receive under our operating leases do not fully amortize the acquisition costs of the leased equipment, which exposes us to risks associated with remarketing the railcars. Our ability to remarket leased railcars profitably is dependent upon several factors, including, among others, market and industry conditions, cost of and demand for newer models, costs associated with the refurbishment of the railcars and interest rates. Our inability to re-lease or sell leased railcars on favorable terms could result in reduced revenues and decrease our overall return.

A reduction in negotiated or arbitrated car hire rates could reduce future car hire revenue.

A significant portion of our leasing and services revenue is derived from “car hire,” which is a fee that a railroad pays for the use of railcars owned by other railroads or third parties. Until 1992, the Interstate Commerce Commission directly regulated car hire rates by prescribing a formula for calculating these rates. The system of government prescribed rates has been superseded by a system known as deprescription, whereby railcar owners and users have the right to negotiate car hire rates. If the railcar owner and railcar user cannot come to an agreement on a car hire rate, then either party has the right to call for arbitration, in which either the owner’s or user’s rate is selected by the arbitrator to be effective for a one-year period. Substantially all railcars in our fleet are subject to deprescription. There is a risk that car hire rates could be negotiated or arbitrated to lower levels in the future. A reduction in car hire rates could reduce future car hire revenue and adversely affect our financial results. Car hire revenue amounted to $25.3 million, $25.3 million and $27.2 million in 2006, 2005 and 2004.

Risks related to our operations outside of the United States could adversely impact our operating results.

Our operations outside of the United States are subject to the risks associated with cross-border business transactions and activities. Political, legal, trade or economic changes or instability could limit or curtail our foreign business activities and operations. Some foreign countries in which we operate have regulatory authorities that regulate railroad safety, railcar design and railcar component part design, performance and manufacturing. If we fail to obtain and maintain certifications of our railcars and railcar parts within the various foreign countries where we operate, we may be unable to market and sell our railcars in those countries. In addition, unexpected changes in regulatory requirements, tariffs and other trade barriers, more stringent rules relating to labor or the environment, adverse tax consequences and price exchange controls could limit operations and make the manufacture and distribution of our products difficult. The uncertainty of the legal environment in these and other areas could limit our ability to enforce our rights effectively. Any international expansion or acquisition that we undertake could amplify these risks related to operating outside of the United States.

Fluctuations in foreign currency exchange rates may lead to increased costs and lower profitability.

Outside of the United States, we operate in Canada, Mexico, Germany and Poland, and our non-U.S. businesses conduct their operations in local currencies and other regional currencies. We also source materials worldwide. Fluctuation in exchange rates may affect demand for our products in foreign markets or our cost competitiveness and may adversely affect our profitability. Although we attempt to mitigate a portion of our exposure to changes in currency rates through currency rate hedges, similar financial instruments and other activities, these efforts cannot fully eliminate the risks associated with the foreign currencies. In addition, some of our borrowings are in foreign currency, giving rise to risk from fluctuations in exchange rates. A material or adverse change in exchange rates could result in significant deterioration of profits or in losses for us.

10                                        The Greenbrier Companies 2006 Annual Report

We have potential exposure to environmental liabilities, which may increase costs or have an adverse effect on results of operations.

We are subject to extensive national, state, provincial and local environmental laws and regulations concerning, among other things, air emissions, water discharge, solid and hazardous substances handling and disposal and employee health and safety. These laws and regulations are complex and frequently change. We may incur unexpected costs, penalties and other civil and criminal liability if we fail to comply with environmental laws. We also may incur costs or liabilities related to off-site waste disposal or cleaning up soil or groundwater contamination at our properties. In addition, future environmental laws and regulations may require significant capital expenditures or changes to our operations.

Our Portland facility is located adjacent to a portion of the Willamette River that has been designated as a federal “National Priority List” or “Superfund” site due to sediment contamination. We, and more than 60 other parties, have received a “General Notice” of potential liability related to the Portland facility. The letter advised that we may be liable for the cost of investigation and remediation (which liability may be joint and several with other potential responsible parties) as well as natural resource damages resulting from the release of hazardous substances to the site. As a result of the above described matters, we have incurred, and expect to incur in the future, costs associated with an EPA-mandated remedial investigation and the State of Oregon’s mandate to control groundwater discharges. Because this work is still underway, we are unable to determine the amount of our ultimate liability relating to these matters. In addition, we may be required to perform periodic maintenance dredging in order to continue to launch vessels from our launch ways on the river, and the river’s classification as a Superfund site could result in some limitations on future dredging and launch activities. The outcome of these matters could have an adverse effect upon our business, results of operations and on our ability to realize value from a potential sale of the land.

Our manufacturer’s warranties expose us to potentially significant claims.

We offer our customers limited warranties for many of our products. Accordingly, we may be subject to significant warranty claims in the future, such as multiple claims based on one defect repeated throughout our production process or claims for which the cost of repairing the defective part is highly disproportionate to the original cost of the part. These types of warranty claims could result in costly product recalls, customers seeking monetary damages, significant repair costs and damage to our reputation.

If warranty claims are not recoverable from third-party component manufacturers due to their poor financial condition or other reasons, we may be subject to warranty claims and other risks for using these materials on our railcars.

We may be liable for physical damage or product liability claims that exceed our insurance coverage.

The nature of our business subjects us to physical damage and product liability claims, especially in connection with the repair and manufacture of products that carry hazardous or volatile materials. We maintain reserves and liability insurance coverage at commercially reasonable levels compared to similarly-sized heavy equipment manufacturers. However, an unusually large physical damage or product liability claim or a series of claims based on a failure repeated throughout our production process may exceed our insurance coverage or result in damage to our reputation.

Some of our employees belong to labor unions and strikes or work stoppage could adversely affect our operations.

We are a party to collective bargaining agreements with various labor unions in Canada and Poland, representing approximately 25% of our workforce, and the agreement with the labor union in Canada expires in October 2006. Disputes with regard to the terms of these agreements or our potential inability to negotiate acceptable contracts with these unions in the future could result in, among other things, strikes, work stoppages or other slowdowns by the affected workers. We cannot assure you that our relations with our workforce will remain positive or that union organizers will not be successful in future attempts to organize at some of our other facilities. If our workers were to engage in a strike, work stoppage or other slowdown, or other employees were to become unionized or the terms and conditions in future labor agreements were renegotiated, we could experience a significant disruption of our operations and higher ongoing labor costs. In addition, we could face higher labor costs in the future as a result of severance or other charges associated with lay-offs, shutdowns or reductions in the size and scope of our operations.

The Greenbrier Companies 2006 Annual Report                                         11

Shortages of skilled labor may adversely impact our operations.

We depend on skilled labor in the manufacture of railcars. Some of our facilities are located in areas where demand for skilled laborers often exceeds supply. Shortages of some types of skilled laborers such as welders may restrict our ability to increase production rates and increase our labor costs.

Our level of indebtedness and terms of our indebtedness could adversely affect our business, financial condition and liquidity.

We expect to incur substantial indebtedness, in part, to finance the acquisition of Meridian Rail Holdings Corp. and its subsidiaries. The majority of our long-term debt is non-amoritizing with a balloon payment. There can be no assurance that we will be able to refinance such debt upon maturity, or if refinanced, that it will be at favorable rates and terms. If we are not successful in refinancing our balloon debt, we could experience liquidity issues that would have a significant impact on our financial condition. If we are unable to successfully refinance our debt, we cannot assure you that we will have adequate liquidity to fund our ongoing cash needs. In addition, our high level of indebtedness could limit our ability to borrow additional amounts of money for working capital, capital expenditures, or other purposes. It could also limit our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service debt. The high amount of debt increases our vulnerability to general adverse economic and industry conditions and could limit our ability to capitalize on business opportunities and to react to competitive pressures.

We depend on a third party to provide most of the labor services for our Mexico operations and if such third party fails to provide the labor, it could adversely effect our operations.

In Mexico, we depend on a third party to provide us with most of the labor services for our Mexico operations under a services agreement with a term of four years expiring on December 1, 2008, with two three-year options to renew. All of the labor provided is subject to collective bargaining agreements with the third party, over which we have no control. If the third party fails to provide us with the services required by our agreement for any reason, including labor stoppages or strikes or a sale of facilities owned by the third party, our operations could be adversely affected. In addition, we do not have significant experience in hiring labor in Mexico and, if required to provide our own labor, could face significantly higher labor costs, which also could have an adverse effect on our operations.

Our relationships with our alliance partners may not be successful, which could adversely affect our business.

In recent years, we have entered into several agreements with other companies to increase our sourcing alternatives, reduce costs, and pursue opportunities for growth through design improvements. We may seek to expand our relationships or enter into new agreements with other companies. If these relationships are not successful in the future, our manufacturing costs could increase, we could encounter production disruptions, or growth opportunities may not materialize, any of which could adversely affect our business.

We may have difficulty integrating the operations of any companies that we acquire, which may adversely affect our results of operations.

The success of our acquisition strategy will depend upon our ability to successfully complete acquisitions and integrate any businesses that we acquire into our existing business. The integration of acquired business operations including the RCA acquisition and following the closing of the acquisition of Meridian and other recent acquisitions could disrupt our business by causing unforeseen operating difficulties, diverting management’s attention from day-to-day operations and requiring significant financial resources that would otherwise be used for the ongoing development of our business. The difficulties of integration may be increased by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. In addition, we may not be effective in retaining key employees or customers of the combined businesses. We may face integration issues pertaining to the internal controls and operational functions of the acquired companies and we also may not realize cost efficiencies or synergies that we anticipated when selecting our acquisition candidates. Any of these items could adversely affect our results of operations.

We may not be able to procure insurance on a cost-effective basis in the future.

The ability to insure our businesses, facilities and rail assets are important aspects of our ability to manage

12                                        The Greenbrier Companies 2006 Annual Report

risk. As there is only one provider of this insurance to the railcar industry, there is no guarantee that such insurance will be available on a cost-effective basis in the future.

An adverse outcome in any pending or future litigation could negatively impact our business and results of operations.

We are a defendant of several pending cases in various jurisdictions. If we are unsuccessful in resolving these claims, our business and results of operations could be adversely affected. In addition, future claims that may arise relating to any pending or new matters could distract management’s attention from business operations and increase our legal and defense costs, which may also negatively impact our business and results of operations.

Our failure to comply with regulations imposed by federal and foreign agencies could negatively affect our financial results.

Our railcar operations are subject to extensive regulation by governmental regulatory and industry authorities and by federal and foreign agencies. These organizations establish rules and regulations for the railcar industry, including construction specifications and standards for the design and manufacture of railcars; mechanical, maintenance and related standards; and railroad safety. New regulatory rulings and regulations from these federal or foreign agencies may impact our financial results and the economic value of our assets. In addition, if the cost of compliance is too high or we fail to comply with the requirements and regulations of these agencies, we could face sanctions and penalties that could negatively affect our financial results.

Our implementation of a new enterprise resource planning (ERP) system may result in problems that could negatively impact our business.

We have hired a third party vendor to assist with the design and implementation of a company-wide ERP system that supports substantially all of our operating and financial functions, including inventory management, billing, customer management, vendor management, accounting and financial reporting systems. We intend to begin implementation of the system during 2007. We may experience problems in connection with such implementations, including but not limited to, potential bugs in the system, component or supply delays, training requirements and other integration challenges and delays. A significant implementation problem, if encountered, could negatively impact our business by disrupting our operations. Additionally, a significant problem with the implementation or ongoing management and operation of the ERP system could have an adverse effect on our ability to generate and interpret accurate management and financial reports and other information on a timely basis, which could have a material adverse effect on our financial reporting system and internal controls and adversely effect our ability to manage our business.

Our governing documents contain some provisions that may prevent or make more difficult an attempt to acquire us.

Our Articles of Incorporation and Bylaws, as currently in effect, contain some provisions that may be deemed to have antitakeover effects, including:

• a classified board of directors, with each class containing as nearly as possible one-third of the total number of members of the board of directors and the members of each class serving for staggered three-year terms;

• a vote of at least 55% of our voting securities to amend some provisions of our Articles of Incorporation;

• no less than 120 days’ advance notice with respect to nominations of directors or other matters to be voted on by shareholders other than by or at the direction of the board of directors;

• removal of directors only with cause; and

• the calling of special meetings of stockholders only by the president, a majority of the board of directors or the holders of not less than 25% of all votes entitled to be cast on the matters to be considered at such meeting.

We also maintain a stockholder rights plan pursuant to which each stockholder has received a dividend distribution of one preferred stock purchase right per share of common stock owned. The stockholder rights plan and the other provisions discussed above may have antitakeover effects because they may delay, defer or prevent an unsolicited acquisition proposal that some, or a majority, of our stockholders might believe to be in their best interests or in which stockholders might receive a premium for their common stock over the then-prevailing market price.

The Oregon Control Share Act and business combination law may limit parties who acquire a significant amount of voting shares from exercising control over us for specific periods of time. These

The Greenbrier Companies 2006 Annual Report                                         13

acts may length en the period for a proxy contest or for a person to vote their shares to elect the majority of our Board and change management.

Failure of any one of our manufacturing facilities to be competitive could negatively impact our business.

The competitiveness of our individual manufacturing facilities depends upon a variety of factors, including:

• efficiency of the facility and the local work force;

• prevailing wage rates and labor costs;

• geographical location in relation to customers and suppliers;

• relative currency values; and

• product mix and suitability of the facility for manufacture of particular types of railcars.

The company continually evaluates the competitiveness of each of its facilities. A decision to close or discontinue operations of a facility could result in an impairment charge or reduction in the carrying value of the facility and other related costs on the Company’s consolidated financial statements.

Item 1b. UNRESOLVED STAFF COMMENTS

None

14                                        The Greenbrier Companies 2006 Annual Report

ITEM 2.          PROPERTIES

We operate at the following material facilities as of August 31, 2006:

Description	Size	Location	Status
Manufacturing Segment
Railcar and marine manufacturing facility and wheel reconditioning shop	63 acres including 908,000 sq. ft. of manufacturing space and a 750-ft. side-launch ways for launching ocean going vessels	Portland, Oregon	Owned
Railcar manufacturing facility	100 acres with 764,000 sq. ft. of manufacturing space	Trenton, Nova Scotia Canada	Owned
Railcar manufacturing facility	88 acres with 676,000 sq. ft. of manufacturing space	Swidnica, Poland	Owned
Railcar manufacturing and wheel reconditioning shop	462,000 sq. ft. of manufacturing space, which includes a 152,000 sq. ft. wheel reconditioning shop	Sahagun, Mexico	Leased
Railcar repair facility	70 acres	Cleburne, Texas	Leased with purchase option
Railcar repair facility	51.7 acres	Kansas City, Missouri	Leased
Railcar repair facility	40 acres	Finley, Washington	Leased with purchase option
Railcar repair facility	32 acres	Dothan, Alabama	Owned
Railcar repair facility	18 acres	Atchison, Kansas	Owned
Railcar repair facility	11.6 acres	Hodge, Louisiana	Owned
Railcar repair facility	5.4 acres	Springfield, Oregon	Leased
Railcar repair facility	0.9 acres	Empire, California	Leased
Railcar repair facility	3.3 acres	Golden, Colorado	Leased
Wheel reconditioning shop	5.6 acres	Tacoma, Washington	Leased
Wheel reconditioning shop	0.5 acres	Pine Bluff, Arkansas	Leased
Leasing & Services Segment
Executive offices, railcar marketing and leasing activities	37,000 sq. ft.	Lake Oswego, Oregon	Leased

We believe that our facilities are in good condition and that the facilities, together with anticipated capital improvements and additions, are adequate to meet our operating needs for the foreseeable future. We continually evaluate the need for expansion and upgrading of our railcar manufacturing and refurbishment facilities in order to remain competitive and to take advantage of market opportunities.

The Greenbrier Companies 2006 Annual Report                                         15

Item 3.          LEGAL PROCEEDINGS

From time to time, Greenbrier is involved as a defendant in litigation in the ordinary course of business, the outcome of which cannot be predicted with certainty. The most significant litigation is as follows:

On April 20, 2004, BC Rail Partnership initiated litigation against us in the Supreme Court of Nova Scotia, alleging breach of contract and negligent manufacture and design of railcars which were involved in a 1999 derailment. No trial date has been set.

On November 3, 2004, and November 4, 2004, in the District Court of Tarrant County, Texas, and in the District Court of Lancaster County, Nebraska, respectively, litigation was initiated against us by Burlington Northern Sante Fe (BNSF). BNSF stayed the Nebraska action electing to proceed in Texas. BNSF alleges the failure of a supplier-provided component part on a railcar manufactured by us in 1988, resulted in a derailment and a chemical spill and claims $14.0 million in damages. On June 24, 2006, the District Court of Tarrant County, Texas, entered an order granting our motion for summary judgment as to all claims. On August 7, 2006, BNSF gave notice of appeal.

A customer, SEB Finans AB (SEB), and we have raised performance concerns related to a component that we installed on 372 railcar units with an aggregate sales value of approximately $20.0 million produced under a contract with SEB. On December 9, 2005, SEB filed a Statement of Claim in an arbitration proceeding in Stockholm, Sweden, against us alleging that the cars are defective and cannot be used for their intended purpose. SEB seeks damages in an undisclosed amount and in addition late delivery penalties in the amount of 1.1 million Euros. In a Statement of Defense and Counterclaim filed with the Arbitral Tribunal on February 1, 2006, we denied that there were defects in the railcar units delivered for which we are liable and filed counterclaims against SEB in total amounting to approximately $11.0 million plus interest representing payments in default under the contract. We believe that applicable law provides an opportunity to remedy the performance issues and that an engineering solution is likely. The component supplier has filed for the United Kingdom equivalent of bankruptcy protection. Accordingly, our recourse against the supplier may be of limited or no value. Arbitration hearings tentatively scheduled for early November have been rescheduled to May 2007 by mutual agreement. The parties continue to discuss alternative resolutions of the dispute.

Management intends to vigorously defend its position in each of the open foregoing cases and believes that any ultimate liability resulting from the above litigation will not materially affect our Consolidated Financial Statements.

We are involved as a defendant in other litigation initiated in the ordinary course of business. While the ultimate outcome of such legal proceedings cannot be determined at this time, management believes that the resolution of these actions will not have a material adverse effect on our Consolidated Financial Statements.

Item 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

Item 5.          MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock has been traded on the New York Stock Exchange under the symbol GBX since July 14, 1994. There were approximately 429 holders of record of common stock as of October 20, 2006. The following table shows the reported high and low sales price of our common stock on the New York Stock Exchange.

	High		Low
2006
Fourth quarter	$	34.90	$	23.56
Third quarter	$	46.63	$	32.80
Second quarter	$	40.00	$	26.75
First quarter	$	33.56	$	24.67
2005
Fourth quarter	$	30.70	$	25.80
Third quarter	$	37.15	$	25.40
Second quarter	$	36.99	$	25.56
First quarter	$	29.85	$	19.69

Quarterly dividends of $.08 per share have been declared since the fourth quarter of 2005. Quarterly dividends of $.06 per share were declared from the fourth quarter of 2004 through the third quarter of 2005. There is no assurance as to the payment of future dividends as they are dependent upon future earnings, capital requirements and our financial condition.

16                                        The Greenbrier Companies 2006 Annual Report

Equity Compensation Plan Information

The following table provides certain information as of August 31, 2006 with respect to our equity compensation plans under which our equity securities are authorized for issuance.

	Number of securities				Number of securities
	to be issued		Weighted average		remaining available
	upon exercise of		exercise price of		for future issuance
	outstanding options,		outstanding options,		under equity
Plan Category	warrants and rights		warrants and rights		compensation plans
Equity compensation plans approved by security holders (1)		69,396	$	6.96		877,816
Equity compensation plans not approved by security holders		None		None		None

⁽¹⁾  Includes the Stock Incentive Plan 2000 (The 2000 Plan) and the 2005 Stock Incentive Plan.

The Greenbrier Companies 2006 Annual Report                                         17

Item 6.          SELECTED FINANCIAL DATA

YEARS ENDED AUGUST 31,
(Dollar amounts in thousands)		2006			2005		2004			2003		2002
Statement of Operations Data
Revenue:
	Manufacturing	$	851,289		$	941,161	$	653,234		$	461,882	$	295,074
	Leasing & services		102,534			83,061		76,217			70,443		72,250
		$	953,823		$	1,024,222	$	729,451		$	532,325	$	367,324
Earnings (loss) from continuing operations		$	39,536		$	29,822	$	20,039		$	4,317	$	(26,094	)
Earnings from discontinued operations			62	(1)		—		739	(1)		—		—
	Net earnings (loss)	$	39,598		$	29,822	$	20,778		$	4,317	$	(26,094	) (2)
Basic earnings (loss) per common share:
	Continuing operations	$	2.51		$	1.99	$	1.38		$	.31	$	(1.85	)
	Net earnings (loss)	$	2.51		$	1.99	$	1.43		$	.31	$	(1.85	)
Diluted earnings (loss) per common share:
	Continuing operations	$	2.48		$	1.92	$	1.32		$	.30	$	(1.85	)
	Net earnings (loss)	$	2.48		$	1.92	$	1.37		$	.30	$	(1.85	)
Weighted average common shares outstanding:
	Basic		15,751			15,000		14,569			14,138		14,121
	Diluted		15,937			15,560		15,199			14,325		14,121
Cash dividends paid per share		$	.32		$	.26	$	.06			—	$	.06
Balance Sheet Data
Total assets		$	877,314		$	671,207	$	508,753		$	538,948	$	527,446
Notes payable		$	362,314		$	214,635	$	97,513		$	117,989	$	144,131
Subordinated debt		$	2,091		$	8,617	$	14,942		$	20,921	$	27,069
Stockholders’ equity		$	219,281		$	176,059	$	139,289		$	111,142	$	103,139
Other Operating Data
New railcar units delivered			11,400			13,200		10,800			6,500		4,100
New railcar units backlog			14,700			9,600		13,100			10,700		5,200
Lease fleet:
	Units managed		135,320			128,645		122,676			114,701		35,562
	Units owned		9,311			9,958		10,683			12,015		14,317
Cash Flow Data
Capital expenditures:
	Manufacturing	$	18,027		$	16,318	$	7,161		$	7,390	$	4,294
	Leasing & services		122,542			52,805		35,798			4,505		18,365
		$	140,569		$	69,123	$	42,959		$	11,895	$	22,659
Depreciation and amortization:
	Manufacturing	$	12,618		$	12,205	$	9,399			9,081		13,903
	Leasing & services		12,635			10,734		11,441			9,630		9,594
		$	25,253		$	22,939	$	20,840		$	18,711	$	23,497
Ratio of earnings to fixed charges (3)			2.83			3.55		2.84			1.52		(0.86	)

(1)	Consists of a reduction in loss contingency associated with the settlement of litigation relating to the logistics business that was discontinued in 1998. See Note 4 to the Consolidated Financial Statements.
(2)	Includes $11.5 million (net of tax) of special charges, which principally relate to restructuring and write-down of European operations.
(3)	The ratio of earnings to fixed charges is computed by dividing earnings before fixed charges by fixed charges. Earnings before fixed charges consist of earnings (loss) before income tax, minority interest and equity in unconsolidated subsidiaries, plus fixed charges. Fixed charges consist of interest expense, amortization of debt issuance costs and the portion of rental expense that we believe is representative of the interest component of lease expense. For the year ended August 31, 2002, there was a deficiency of earnings to fixed charges of $47.2 million.

18                                        The Greenbrier Companies 2006 Annual Report

Item 7.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

We currently operate two primary business segments: manufacturing and leasing & services. These two business segments are operationally integrated. With operations in the United States, Canada, Mexico and Europe the manufacturing segment produces double-stack intermodal railcars, conventional railcars, tank cars, marine vessels and performs railcar repair, refurbishment and maintenance activities. We produce rail castings through an unconsolidated joint venture and may also manufacture new freight cars through the use of unaffiliated subcontractors. At August 31, 2006, the leasing & services segment owned approximately 9,000 railcars and provided management services for approximately 135,000 railcars for railroads, shippers, carriers and other leasing and transportation companies. Segment performance is evaluated based on margins.

During 2006, we received several significant new orders and continue to focus on railcar types where future demand is anticipated to be robust. Our manufacturing backlog of railcars for sale and lease as of August 31, 2006 was approximately 14,700 railcars with an estimated value of $1.0 billion compared to 9,600 railcars valued at approximately $550.0 million as of August 31, 2005. Current period backlog includes approximately 12,000 units that will be delivered to the customer over a multi-year period ending in 2010. Approximately 7,700 units under this contract are for delivery beyond calendar 2007 and are subject to our fulfillment of certain competitive conditions. Substantially all of the current backlog has been priced to cover anticipated material price increases and surcharges. As these sales prices include an anticipated pass-through of vendor material price increases and surcharges, they are not necessarily indicative of increased margins on future production. There is still risk that material prices could increase beyond amounts used to price our sale contracts which would adversely impact margins in our backlog.

Certain materials and components continue to be in short supply, including castings, wheels, axles and couplers, which could potentially impact production at our new railcar and refurbishment facilities. In an effort to mitigate shortages and reduce supply chain costs, we have entered into strategic alliances for the global sourcing of certain components and continue to pursue strategic opportunities to protect and enhance our supply chain.

We further strengthened our liquidity position with a $100.0 million convertible note offering in May 2006 and a $60.0 million senior unsecured debt offering in November 2005. This additional cash gives us the flexibility to execute on our strategy of growing our core businesses, both organically and through acquisition.

We have been actively managing our railcar leasing portfolio to diversify the railcar types, age of equipment, and length of lease terms. During the year, we sold a portion of our older assets to take advantage of market conditions. We continue to grow the lease portfolio with purchases of both new and used railcars.

In December 2005, all of the Canadian subsidiary shares subject to mandatory redemption of $3.7 million were redeemed for $5.3 million. The redemption resulted in a $0.9 million decrease in accumulated other comprehensive income and a $0.7 million increase in interest expense.

Subsequent to year end, we purchased substantially all of the operating assets of Rail Car America, Inc. (RCA), its American Hydraulics division, and its wholly owned subsidiary, Brandon Corp. for approximately $34.0 million. RCA is a leading provider of intermodal and conventional railcar repair services in North America, operating from four repair facilities throughout the United States. RCA also reconditions and repairs end of railcar cushioning units through its American Hydraulics division and operates a switching railroad in Nebraska through Brandon Corp. This acquisition is anticipated to further leverage synergies across our integrated business units, enhance our intermodal leadership position and expand the geographic reach of our repair network. Demand for intermodal railcar repair and maintenance is accelerating as the intermodal fleet ages, providing strong future growth prospects.

In October 2006, we formed a joint venture with Grupo Industrial Monclova (GIMSA) to build new railroad freight cars for the North American marketplace at GIMSA’s existing manufacturing facility, located in Monclova, Mexico. The initial investment will be less than $10.0 million for one production line and each party will maintain a 50% interest in the joint venture. Production is expected to commence in the second calendar quarter of 2007.

The Greenbrier Companies 2006 Annual Report                                         19

In October 2006, we entered into a definitive agreement to acquire the stock of Meridian Rail Holdings, Corp. for $227.5 million in cash, plus or minus working capital adjustments. Meridian is a leading supplier of wheel maintenance services to the North American freight car industry. Operating out of six facilities, Meridian supplies replacement wheel sets and axles to approximately 170 freight car maintenance locations where worn or damaged wheels, axles, or bearings are replaced. Meridian also operates a coupler reconditioning facility and performs railcar repair at one of its wheel services facilities. The acquisition is expected to close in November 2006, subject to customary closing conditions.

We have entered into a commitment to increase our revolving line of credit in the U.S. and Canada to an aggregate of $275.0 million. The amended five year facility will replace our existing facility aggregating $150.0 million and will be used to support the Meridian acquisition and provide working capital and interim financing of equipment for U.S. and Mexican operations. It is expected to close on or before the closing of the Meridian acquisition.

Results of Operations

Overview

Total revenue was $953.8 million, $1.0 billion and $729.5 million for the years ended August 31, 2006, 2005 and 2004. Net earnings for 2006, 2005 and 2004 were $39.6 million or $2.48 per diluted common share, $29.8 million or $1.92 per diluted common share and $20.8 million or $1.37 per diluted common share.

Manufacturing Segment

Manufacturing revenue includes new railcar, marine, refurbishment and maintenance activities. New railcar delivery and backlog information disclosed herein includes all facilities and orders that may be manufactured by unaffiliated subcontractors.

Our purchase on December 1, 2004 of Bombardier’s equity interest in the railcar manufacturing joint venture located in Mexico brought our ownership percentage to 100%. As a result, the financial results of the subsidiary, formerly accounted for under the equity method, are consolidated beginning December 1, 2004.

Manufacturing revenue was $851.3 million, $941.2 million and $653.2 million for the years ended 2006, 2005 and 2004. Railcar deliveries, which are the primary source of manufacturing revenue, were approximately 11,400 units in 2006 compared to 13,200 units in 2005 and 10,800 units in 2004. Manufacturing revenue decreased $89.9 million or 9.6% in 2006 as compared to 2005 primarily due to lower deliveries resulting from changes in production rates to meet customer delivery requirements, a slower European freight car market, increases in internal production and subcontracted deliveries in the prior period. Manufacturing revenue increased $288.0 million or 44.1% in 2005 as compared to 2004 primarily due to $147.6 million of revenue from our Mexican operation that was accounted for under the equity method in the prior comparable period and the first quarter of 2005. The balance of the increase was principally due to increased deliveries, a higher average railcar sales price associated with scrap and material surcharges and greater volumes of subcontracted production.

Manufacturing margin percentage was 11.4% in 2006 compared to 8.8% in 2005. The increase was primarily due to lower costs on certain materials, operating efficiency improvements at certain of our facilities and a $3.1 million reduction in warranty accruals associated with expiration of warranty periods and the settlement of an outstanding warranty claim. In addition, the prior period was adversely impacted by production issues in Europe, surcharges and price increases on materials that could not be passed onto the customer, temporary production issues at another facility and inclement weather-related closures. Manufacturing margin percentage was 8.8% in 2005 compared to 8.9% in 2004. As sales prices and costs increase by the same amount to cover surcharges, margins as a percentage of revenue decline. In addition, the benefits of higher margin railcar types, efficiencies of long production runs and increased volumes were offset by production issues in Europe, in particular issues surrounding component parts on one railcar type.

Leasing & Services Segment

Leasing & services revenue was $102.5 million, $83.1 million and $76.2 million for the years ended 2006, 2005 and 2004. The $19.4 million increase in revenue from 2005 to 2006 was primarily the result of a $4.1 million increase in gains on sale of assets from the lease fleet, $11.3 million in net new lease additions, $2.7 million in interim rentals on assets held for sale and increased interest income on higher cash balances, partially offset by lower utilization on certain management agreements. The $6.9 million increase in revenue in 2005 from 2004 was primarily

20                                        The Greenbrier Companies 2006 Annual Report

the result of a $6.2 million increase in gains on sale of assets from the lease fleet, higher utilization on managed equipment, the growth of the operating lease portfolio, partially offset by the maturation of the direct finance lease portfolio and reduced car hire revenue associated with lease terminations.

During 2006, we realized $10.9 million in pre-tax earnings on the disposition of leased equipment compared to $6.8 million in 2005 and $0.6 million in 2004. Assets from our lease fleet are periodically sold in the normal course of business in order to take advantage of market conditions, manage risk and maintain liquidity.

Leasing & services margin percentage was 59.0% in 2006 compared to 50.5% in 2005 and 44.6% in 2004. The increase in 2006 was primarily a result of gains on sales from the lease fleet and interim rental on assets held for sale both of which have no associated cost of revenue; renewal of leases at higher lease rates; newer lease equipment with lower maintenance costs; partially offset by decreased utilization on management agreements. The prior period included a rate adjustment due to increased utilization on certain management agreements. Margins increased in 2005 as a result of gains on sales from the lease fleet and the impact of the rate adjustments related to increased utilization on certain management agreements.

Other costs

Selling and administrative expense was $70.9 million, $57.4 million and $48.3 million in 2006, 2005 and 2004. The $13.5 million increase from 2005 to 2006 is primarily the result of increases in employee costs which include new employees, transition costs associated with succession planning, compensation and benefit increases and incentive compensation; $2.8 million in amortization of the value of restricted stock grants; increases in professional fees associated with strategic initiatives; expenses associated with improvements to our technology infrastructure; increases in European research and development costs; partially offset by reduced legal fees as the prior period included $2.5 million in legal and professional expenses associated with litigation and responses related to actions by Alan James, a former member of the board of directors. The $9.1 million increase from 2004 to 2005 is primarily the result of the inclusion of $1.7 million in expenses for our Mexican operation which was accounted for under the equity method in the prior comparable period, higher employee related costs including incentive compensation and increases in professional fees associated with litigation, compliance with Sarbanes-Oxley legislation and strategic initiatives.

Interest and foreign exchange expense was $25.4 mil-lion, $14.8 million and $11.5 million in 2006, 2005 and 2004. The $10.6 million increase from 2005 to 2006 is due to higher outstanding debt levels, $0.8 million in interest on the IRS settlement, $0.7 million in interest paid on the purchase of subsidiary shares subject to mandatory redemption and $0.8 million in debt issuance costs, partially offset by foreign exchange fluctuations. Foreign exchange gains of $1.6 million were recognized in 2006 compared to foreign exchange losses of $0.8 million in 2005. Increases from 2004 to 2005 were primarily the result of increased debt levels and foreign exchange losses.

During 2005, we incurred special charges of $2.9 million consisting of debt prepayment penalties and costs associated with settlement of interest rate swap agreements on certain debt that was refinanced with senior unsecured notes. The year ended August 31, 2004 includes special charges totaling $1.2 million which consist of a $7.5 million write-off of the remaining balance of European designs and patents, partially offset by a $6.3 million reduction of purchase price liabilities associated with the settlement of arbitration regarding the acquisition of European designs and patents.

Income Tax

Our effective tax rate was 35.5%, 39.8% and 29.2% for the years ended August 31, 2006, 2005 and 2004. Tax expense for 2006 includes $2.2 million associated with a settlement with the IRS in conjunction with completion of an audit of our tax returns for the years 1999-2002. In addition, 2006 includes a $3.7 million tax benefit for a realization of a deferred tax asset at our Mexican subsidiary based on financial projections that indicated we will more likely than not be able to fully utilize the net operating loss carryforwards. The 2004 income tax rate was impacted by a $6.3 million non-taxable purchase price adjustment relating to the purchase of European designs and patents.

The fluctuations in the effective tax rate are due to the geographical mix of pre-tax earnings and losses, minimum tax requirements in certain local jurisdictions and operating losses for certain operations with no related accrual of tax benefit. Our tax rate in the United States for the year ended August 31, 2006 represents a tax rate of 41.0% as

The Greenbrier Companies 2006 Annual Report                                         21

compared to 42.0% in the prior comparable periods. The reduction in United States tax rate is due to reduced state income tax rates and the current period implementation of the manufacturing tax deduction included in the American Jobs Creation Act of 2004. All periods include varying tax rates on foreign operations.

During the year, we reached a settlement with the Internal Revenue Service (IRS) relating to an audit of our federal income tax returns for the years ended 1999 through 2002. In connection with the audit, the IRS reviewed our decision to take a deduction in the amount of $52.6 million on our 2002 federal tax return relating to our European operations. As a result of the settlement, we recorded a $3.0 million after-tax charge, consisting of interest of $0.8 million and taxes of $2.2 million, in our 2006 Consolidated Statement of Operations.

Equity in Earnings (Loss) of Unconsolidated Subsidiaries

Equity in earnings of unconsolidated subsidiaries was $0.2 million in 2006, a loss of $0.3 million in 2005 and a loss of $2.0 million in 2004. Earnings in 2006 consist entirely of results from our castings joint venture. The loss in 2005 consists of a $0.7 million loss from our Mexican railcar manufacturer joint venture, partially offset by $0.4 million in earnings from our investment in our castings joint venture. Earnings from the castings joint venture have declined in the current period due to additional warranty accruals and closure costs at one of the two joint venture foundries which operated on a temporary basis until the second more efficient facility was fully operational. Equity in loss of the castings joint venture was a loss of $0.8 million in 2004 primarily due to start-up costs and temporary plant shutdowns associated with equipment issues.

The Mexican railcar manufacturing joint venture contributed approximately $0.7 million and $1.2 million to loss from unconsolidated subsidiaries in 2005 and 2004. As a result of purchasing our joint venture partner’s interest in the venture, the financial results of the entity were consolidated beginning on December 1, 2004. Accordingly, 2005 loss from unconsolidated subsidiaries only includes results of the Mexican operation through November 30, 2004.

Liquidity and Capital Resources

We have been financed through cash generated from operations and borrowings. At August 31, 2006, cash increased $69.7 million to $142.9 million from $73.2 million at the prior year end. Cash increases were primarily the result of the issuance of $60.0 million of senior unsecured notes in November 2005 and $100.0 million in convertible senior notes in May 2006.

On May 22, 2006, we issued at par $100.0 million aggregate principal amount of 2.375% convertible senior notes due 2026. These notes are now publicly registered with the Securities and Exchange Commission (SEC). Interest will be paid semiannually in arrears commencing November 15, 2006. Payment on the notes is guaranteed by substantially all of our domestic subsidiaries.

On November 21, 2005, we issued at par $60.0 million aggregate principal amount of 8³/8% senior unsecured notes due 2015. The transaction was an additional offering under the indenture entered into in connection with our sale of $175.0 million of senior unsecured notes in May 2005. The $235.0 million combined senior unsecured notes (the Notes) have identical terms and are now publically registered with the SEC. Payment on the notes is guaranteed by substantially all of our domestic subsidiaries. Interest is paid in arrears on May 15th and November 15th of each year.

Cash provided by operations for the year ended August 31, 2006, was $39.5 million compared to cash used in operations of $16.7 million in the prior year. Increases in operating cash were the result of improved earnings partially offset by changes in timing of working capital requirements particularly related to inventory. Inventories at August 31, 2006 increased from August 31, 2005 levels primarily as a result of the build-up of inventory for the changeover to new car types and purchases made to take advantage of favorable pricing and availability of parts. The increase in usage in cash from 2004 to 2005 is primarily due to increases in railcars held for sale that were sold in 2006 and changes in timing of working capital including longer payment terms on the sale of certain railcars in August 2005.

Cash used in investing activities for the year ended August 31, 2006 was $111.1 million compared to $21.3 million in 2005 and $14.8 million in 2004. The usage was primarily the result of increases in capital expenditures for the lease fleet offset partially by proceeds from equipment sales of $28.9 million in 2006, $32.5 million in 2005 and $16.2 million in 2004 and $8.4 million of net cash acquired in 2005 in the acquisition of the remaining joint venture interest in Mexico.

22                                        The Greenbrier Companies 2006 Annual Report

Capital expenditures totaled $140.6 million, $69.1 million and $43.0 million in 2006, 2005 and 2004. Of these capital expenditures, approximately $122.6 million, $52.8 million and $35.8 million in 2006, 2005 and 2004 were attributable to leasing & services operations. Capital expenditures have increased over the past several years as a result of purchases of railcars to expand our lease portfolio. Leasing & services capital expenditures for 2007 are expected to be approximately $100.0 million. We regularly sell assets from our lease fleet, some of which may have been purchased within the current year and included in capital expenditures.

Approximately $18.0 million, $16.3 million and $7.2 million of capital expenditures for 2006, 2005 and 2004 were attributable to manufacturing operations. Capital expenditures for manufacturing are expected to be approximately $20.0 million in 2007.

Cash provided by financing activities of $142.5 million for the year ended August 31, 2006 compared to cash provided by financing activities of $97.6 million in 2005 and cash used in financing activities of $37.6 million in 2004. During 2006, we received $154.6 million in net proceeds from a senior unsecured debt offering and a convertible debt offering, repaid $13.2 million in term debt and paid dividends of $5.0 million. During 2005, we received $169.8 million in net proceeds from a senior unsecured debt offering, repaid $67.7 million in term debt and paid dividends of $3.9 million. Cash usage during 2004 was primarily for scheduled repayments of borrowings of $35.5 million in term debt and revolving notes was repaid.

All amounts originating in foreign currency have been translated at the August 31, 2006 exchange rate for the following discussion. Credit facilities aggregated $179.9 million as of August 31, 2006. Available borrowings are based on defined levels of inventory, receivables, leased equipment and property, plant and equipment, as well as total debt to consolidated capitalization, tangible net worth and interest coverage ratios which at August 31, 2006 levels would provide for maximum borrowing of $148.4 million of which $22.4 million is outstanding. A $125.0 million revolving line of credit is available through June 2010 to provide working capital and interim financing of equipment for the United States and Mexican operations. A $27.2 million line of credit is available through June 2010 for working capital for Canadian manufacturing operations. Lines of credit totaling $27.7 million are available principally through June 2008 for working capital for the European manufacturing operation. Advances bear interest at rates that depend on the type of borrowing and the defined ratio of debt to total capitalization. At August 31, 2006, there were no borrowings outstanding under the North American credit facilities and $22.4 million outstanding under the European manufacturing credit lines.

We have entered into a commitment to increase our revolving line of credit in the U.S. and Canada aggregating $275.0 million. The new five-year facility will replace our existing facility and will be used to support the Meridian acquisition and provide additional liquidity. It is expected to close on or before the closing of the Meridian acquisition.

In accordance with customary business practices in Europe, we have $14.6 million in bank and third party performance, advance payment and warranty guarantee facilities, all of which has been utilized as of August 31, 2006. To date no amounts have been drawn under these performance, advance payment and warranty guarantees.

We have advanced $1.7 million in long term advances to an unconsolidated subsidiary which are secured by accounts receivable and inventory. As of August 31, 2006, this same unconsolidated subsidiary had $8.3 million in third party debt for which we have guaranteed 33% or approximately $2.8 million.

We have outstanding letters of credit aggregating $2.1 million associated with material purchases and payroll.

Foreign operations give rise to risks from changes in foreign currency exchange rates. We utilize foreign currency forward exchange contracts with established financial institutions to hedge a portion of that risk. No provision has been made for credit loss due to counter-party non-performance.

Dividends have been paid each quarter since the fourth quarter of 2004 when dividends of $.06 per share were reinstated. The dividend was increased to $.08 per share in the fourth quarter of 2005.

We regularly monitor and evaluate conditions in the capital markets and may issue additional debt or equity from time to time. We expect existing funds and cash generated from operations, together with proceeds from financing activities, including borrowings under existing credit facilities and long term financing, to be sufficient to fund dividends, if any, working capital needs, planned capital expenditures and expected debt repayments for the foreseeable future.

The Greenbrier Companies 2006 Annual Report                                         23

The following table shows our estimated future contractual cash obligations as of August 31, 2006⁽¹⁾:

	Year Ending
(In thousands)	Total		2007		2008		2009		2010		2011		Thereafter
Notes payable	$	362,314	$	4,517	$	3,978	$	4,170	$	5,373	$	3,299	$	340,977
Interest		231,036		23,649		23,439		23,180		22,862		22,514		115,392
Purchase commitments (2)		30,742		30,742		—		—		—		—		—
Revolving notes		22,429		22,429		—		—		—		—		—
Operating leases		14,743		5,718		3,658		2,537		1,189		671		970
Participation		13,564		9,337		3,629		330		109		98		61
Railcar leases		9,102		3,943		2,656		1,351		264		228		660
	$	683,930	$	100,335	$	37,360	$	31,568	$	29,797	$	26,810	$	458,060

⁽¹⁾  Subordinated debt is not included as any amounts due are retired from the sales proceeds of the related railcars.

(2)  Purchase commitments consist of obligations to third parties for railcar purchases.

In 1990, we entered into an agreement for the purchase and refurbishment of over 10,000 used railcars between 1990 and 1997. The agreement provides that, under certain conditions, the seller will receive a percentage of defined earnings of a subsidiary, and further defines the period when such payments are to be made. Such amounts, referred to as participation, are accrued when earned, charged to leasing & services cost of revenue, and unpaid amounts are included as participation in the Consolidated Balance Sheets. Participation expense was $1.7 million, $1.6 million and $1.7 million in 2006, 2005 and 2004. Payment of participation was $12.1 million in 2006.

Off Balance Sheet Arrangements

We do not currently have off balance sheet arrangements that have or are likely to have a material current or future effect on our Consolidated Financial Statements.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires judgment on the part of management to arrive at estimates and assumptions on matters that are inherently uncertain. These estimates may affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes and disclosure of contingent assets and liabilities within the financial statements. Estimates and assumptions are periodically evaluated and may be adjusted in future periods. Actual results could differ from those estimates.

Income taxes - For financial reporting purposes, income tax expense is estimated based on planned tax return filings. The amounts anticipated to be reported in those filings may change between the time the financial statements are prepared and the time the tax returns are filed. Further, because tax filings are subject to review by taxing authorities, there is also the risk that a position taken in preparation of a tax return may be challenged by a taxing authority. If the taxing authority is successful in asserting a position different than that taken by us, differences in tax expense or between current and deferred tax items may arise in future periods. Such differences, which could have a material impact on our financial statements, would be reflected in the financial statements when management considers them probable of occurring and the amount reasonably estimable. Valuation allowances reduce deferred tax assets to an amount that will more likely than not be realized. Our estimates of the realization of deferred tax assets is based on the information available at the time the financial statements are prepared and may include estimates of future income and other assumptions that are inherently uncertain.

Maintenance obligations - We are responsible for maintenance on a portion of the managed and owned lease fleet under the terms of maintenance obligations defined in the underlying lease or management agreements. The estimated maintenance liability is based on maintenance histories for each type and age of railcar. These estimates involve judgment as to the future costs of repairs and the types and timing of repairs required over the lease term. As we cannot predict with certainty the prices, timing and volume of maintenance needed in the future on railcars under long-term leases, this estimate is uncertain and could be materially different from maintenance requirements. The

24                                        The Greenbrier Companies 2006 Annual Report

liability is periodically reviewed and updated based on maintenance trends and known future repair or refurbishment requirements. However, these adjustments could be material in the future due to the inability to predict future maintenance requirements.

Warranty accruals - Warranty costs are estimated and charged to operations to cover a defined warranty period. The estimated warranty cost is based on historical warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historical information for similar product types.

These estimates are inherently uncertain as they are based on historical data for existing products and judgment for new products. If warranty claims are made in the current period for issues that have not historically been the subject of warranty claims and were not taken into consideration in establishing the accrual or if claims for issues already considered in establishing the accrual exceed expectations, warranty expense may exceed the accrual for that particular product. Conversely, there is the possibility that claims may be lower than estimates. The warranty accrual is periodically reviewed and updated based on warranty trends. However, as we cannot predict the amount or timing of future claims, the potential exists for the difference in any one reporting period to be material.

Initial Adoption of Accounting Policies - On September 1, 2005, we adopted Statement of Financial Accounting Standards (SFAS) No. 123R, Share Based Payment. This statement requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments (stock options and restricted stock) granted to employees. The implementation did not have a material effect on the Consolidated Financial Statements as all stock options were vested prior to August 31, 2005. Restricted stock grants are currently being recorded as compensation expense over the vesting period, consistent with prior periods.

Prospective Accounting Changes - In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, Accounting Changes and Error Corrections which replaces Accounting Principles Board (APB) Opinion No. 20, Accounting Changes andSFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. This statement requires retrospective application, unless impracticable, for changes in accounting principles in the absence of transition requirements specific to newly adopted accounting principles. This statement is effective for any accounting changes and corrections of errors made by us beginning September 1, 2006.

In July 2006, the FASB issued FASB interpretation (FIN) No. 48, Accounting for Uncertainties in Income tax - an Interpretation of FASB Statement No. 109. This interpretation clarifies the accounting for uncertainties in income taxes. It prescribes a recognition and measurement threshold for financial statement disclosure of tax positions taken or expected to be taken on a tax return. This interpretation is effective for us for the fiscal year beginning September 1, 2007. Management has not yet determined the impact on the Consolidated Financial Statements.

Forward Looking Statements

From time to time, Greenbrier or its representatives have made or may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements as to expectations, beliefs and strategies regarding the future. Such forward-looking statements may be included in, but not limited to, press releases, oral statements made with the approval of an authorized executive officer or in various filings made by us with the Securities and Exchange Commission. These forward-looking statements rely on a number of assumptions concerning future events. You can identify these forward-looking statements by forward-looking words such as “expect,” “anticipate,” “believe,” “intend,” “plan,” “seek,” “forecast,” “estimate,” “continue,” “may,” “will,” “would,” “could,” “likely” and similar expressions. These forward-looking statements are subject to risks and uncertainties that are difficult to predict, may be beyond our control and could cause actual results to differ materially from those currently anticipated. Important factors that could cause actual results to differ materially from those currently anticipated or suggested by these forward-looking statements and that could adversely affect our future financial performance and stockholder value are identified in “Risk Factors” and may also include the following:

• continued industry demand at current levels for railcar products, given substantial price increases;

• industry overcapacity and our manufacturing capacity utilization;

• ability to utilize beneficial tax strategies;

• decreases in carrying value of assets due to impairment;

The Greenbrier Companies 2006 Annual Report                                         25

• changes in future maintenance requirements;

• effects of local statutory accounting conventions on compliance with covenants in certain loan agreements;

• delays in receipt of orders, risks that contracts may be canceled during their term or not renewed and that customers may not purchase as much equipment under existing contracts as anticipated; and

• ability to replace maturing lease revenue and earnings with revenue and earnings from additions to the lease fleet and management services.

Any forward-looking statement should be considered in light of these factors and reflects our belief only at the time the statement is made. We assume no obligation to update or revise any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting the forward-looking statements.

Item 7a.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

We have operations in Canada, Mexico, Germany and Poland that conduct business in their local currencies as well as other regional currencies. To mitigate our exposure to transactions denominated in currencies other than the functional currency of each entity, we enter into foreign currency forward exchange contracts to protect the margin on a portion of forecast foreign currency sales. At August 31, 2006, $32.2 million of forecast sales were hedged by foreign exchange contracts. Because of the variety of currencies in which purchases and sales are transacted and the interaction between currency rates, it is not possible to predict the impact a movement in a single foreign currency exchange rate would have on future operating results. We believe the exposure to foreign exchange risk is not material.

In addition to exposure to transaction gains or losses, we are also exposed to foreign currency exchange risk related to the net asset position of our foreign subsidiaries. At August 31, 2006, net assets of foreign subsidiaries aggregated $39.6 million and a uniform 10% strengthening of the United States dollar relative to the foreign currencies would result in a decrease in stock-holders’ equity of $4.0 million, 1.8% of total stock-holders’ equity. This calculation assumes that each exchange rate would change in the same direction relative to the United States dollar.

Interest Rate Risk

We have managed our floating rate debt with interest rate swap agreements, effectively converting $13.4 million of variable rate debt to fixed rate debt. At August 31, 2006, the exposure to interest rate risk is limited since 92% of our debt has fixed rates. As a result, we are only exposed to interest rate risk relating to our revolving debt and a portion of term debt. At August 31, 2006, a uniform 10% increase in interest rates would result in approximately $0.2 million of additional annual interest expense.

26                                        The Greenbrier Companies 2006 Annual Report

ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Balance Sheets

AUGUST 31,

(In thousands, except per share amounts)		2006			2005
Assets
	Cash and cash equivalents	$	142,894		$	73,204
	Restricted cash		2,056			93
	Accounts and notes receivable		115,565			122,957
	Inventories		163,151			121,698
	Railcars held for sale		35,216			59,421
	Investment in direct finance leases		6,511			9,974
	Equipment on operating leases		301,009			183,155
	Property, plant and equipment		80,034			73,203
	Other		30,878			27,502
		$	877,314		$	671,207
Liabilities and Stockholders’ Equity
	Revolving notes	$	22,429		$	12,453
	Accounts payable and accrued liabilities		204,793			195,258
	Participation		11,453			21,900
	Deferred income tax		37,472			31,629
	Deferred revenue		17,481			6,910
	Notes payable		362,314			214,635
	Subordinated debt		2,091			8,617
	Subsidiary shares subject to mandatory redemption		–			3,746
	Commitments and contingencies (Notes 24 & 25)		–			–
	Stockholders’ equity:
	Preferred stock - without par value; 25,000 shares authorized; none outstanding		–			–
	Common stock - without par value; 50,000 shares authorized; 15,954 and 15,479 outstanding at August 31, 2006 and 2005		16			15
	Additional paid-in capital		71,124			62,768
	Retained earnings		148,542			113,987
	Accumulated other comprehensive loss		(401	)		(711	)
			219,281			176,059
		$	877,314		$	671,207

The accompanying notes are an integral part of these financial statements.

The Greenbrier Companies 2006 Annual Report                                         27

Consolidated Statements of Operations

YEARS ENDED AUGUST 31,

(In thousands, except per share amounts)		2006			2005			2004
Revenue
	Manufacturing	$	851,289		$	941,161		$	653,234
	Leasing & services		102,534			83,061			76,217
			953,823			1,024,222			729,451
Cost of revenue
	Manufacturing		754,421			857,950			595,026
	Leasing & services		42,023			41,099			42,241
			796,444			899,049			637,267
Margin			157,379			125,173			92,184
Other costs
	Selling and administrative expense		70,918			57,425			48,288
	Interest and foreign exchange		25,396			14,835			11,468
	Special charges		–			2,913			1,234
			96,314			75,173			60,990
Earnings before income tax and equity in unconsolidated subsidiaries			61,065			50,000			31,194
Income tax expense			(21,698	)		(19,911	)		(9,119	)
Earnings before equity in unconsolidated subsidiaries			39,367			30,089			22,075
Equity in earnings (loss) of unconsolidated subsidiaries			169			(267	)		(2,036	)
Earnings from continuing operations			39,536			29,822			20,039
Earnings from discontinued operations (net of tax)			62			–			739
Net earnings		$	39,598		$	29,822		$	20,778
Basic earnings per common share:
	Continuing operations	$	2.51		$	1.99		$	1.38
	Discontinued operations		–			–			0.05
		$	2.51		$	1.99		$	1.43
Diluted earnings per common share:
	Continuing operations	$	2.48		$	1.92		$	1.32
	Discontinued operations		–			–			0.05
		$	2.48		$	1.92		$	1.37
Weighted average common shares:
Basic			15,751			15,000			14,569
Diluted			15,937			15,560			15,199

The accompanying notes are an integral part of these financial statements.

28                                        The Greenbrier Companies 2006 Annual Report

Consolidated Statements of Stockholders’ Equity

and Comprehensive Income (Loss)

													Accumulated
							Additional						Other			Total
(In thousands, except per share	Common Stock						Paid-In			Retained			Comprehensive			Stockholders’
amounts)	Shares			Amount			Capital			Earnings			Income (loss)			Equity
Balance September 1, 2003		14,312		$	14		$	51,073		$	68,165		$	(8,110	)	$	111,142
Net earnings		–			–			–			20,778			–			20,778
Translation adjustment (net of tax effect)		–			–			–			–			444			444
Reclassification of derivative financial instruments recognized in net earnings (net of tax effect)		–			–			–			–			(3,865	)		(3,865	)
Unrealized gain on derivative financial instruments (net of tax effect)		–			–			–			–			5,586			5,586
Comprehensive income																	22,943
Cash dividends ($0.06 per share)		–			–			–			(889	)		–			(889	)
Stock options exercised		572			1			6,092			–			–			6,093
Balance August 31, 2004		14,884			15			57,165			88,054			(5,945	)		139,289
Net earnings		–			–			–			29,822			–			29,822
Translation adjustment (net of tax effect)		–			–			–			–			2,653			2,653
Reclassification of derivative financial instruments recognized in net earnings (net of tax effect)		–			–			–			–			(2,355	)		(2,355	)
Unrealized gain on derivative financial instruments (net of tax effect)		–			–			–			–			4,936			4,936
Comprehensive income																	35,056
Net proceeds from equity offering		5,175			5			127,457			–			–			127,462
Shares repurchased		(5,342	)		(5	)		(127,533	)		–			–			(127,538	)
Cash dividends ($0.26 per share)		–			–			–			(3,889	)		–			(3,889	)
Restricted stock awards		353			–			10,221			–			–			10,221
Unamortized restricted stock		–			–			(9,980	)		–			–			(9,980	)
Stock options exercised		409			–			3,045			–			–			3,045
Tax benefit of stock options exercised		–			–			2,393			–			–			2,393
Balance August 31, 2005		15,479			15			62,768			113,987			(711	)		176,059
Net earnings		–			–			–			39,598			–			39,598
Translation adjustment (net of tax effect)		–			–			–			–			1,570			1,570
Reclassification of derivative financial instruments recognized in net earnings (net of tax effect)		–			–			–			–			(2,566	)		(2,566	)
Unrealized gain on derivative financial instruments (net of tax effect)		–			–			–			–			1,306			1,306
Comprehensive income																	39,980
Cash dividends ($0.32 per share)		–			–			–			(5,043	)		–			(5,043	)
Restricted stock awards		72			–			2,179			–			–			2,179
Unamortized restricted stock		–			–			(1,914	)		–			–			(1,914	)
Restricted stock amortization		–			–			2,550			–			–			2,550
Stock options exercised		403			1			2,941			–			–			2,942
Tax benefit of stock options exercised		–			–			2,600			–			–			2,600
Balance August 31, 2006		15,954		$	16		$	71,124		$	148,542		$	(401	)	$	219,281

The accompanying notes are an integral part of these financial statements.

The Greenbrier Companies 2006 Annual Report                                         29

Consolidated Statements of Cash Flows

YEARS ENDED AUGUST 31,

(In thousands)				2006			2005			2004
Cash flows from operating activities:
	Net earnings			$	39,598		$	29,822		$	20,778
	Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
		Earnings from discontinued operations			(62	)		–			(739	)
		Deferred income taxes			5,893			5,807			9,646
		Tax benefit of stock options exercised			–			2,393			–
		Depreciation and amortization			25,253			22,939			20,840
		Gain on sales of equipment			(10,948	)		(6,797	)		(629	)
		Special charges			–			–			1,234
		Other			278			651			1,332
		Decrease (increase) in assets:
			Accounts and notes receivable		8,948			(32,328	)		(37,786	)
			Inventories		(37,517	)		15,403			(22,355	)
			Railcars held for sale		156			(38,495	)		14,097
			Other		2,577			(5,167	)		2,940
		Increase (decrease) in liabilities:
			Accounts payable and accrued liabilities		5,487			3			30,956
			Participation		(10,447	)		(15,207	)		(18,794	)
			Deferred revenue		10,326			4,285			(37,495	)
	Net cash provided by (used in) operating activities				39,542			(16,691	)		(15,975	)
Cash flows from investing activities:
	Principal payments received under direct finance leases				2,048			5,733			9,461
	Proceeds from sales of equipment				28,863			32,528			16,217
	Investment in and advances to unconsolidated subsidiaries				550			92			(2,240	)
	Acquisition of joint venture interest				–			8,435			–
	Decrease (increase) in restricted cash				(1,958	)		1,007			4,757
	Capital expenditures				(140,569	)		(69,123	)		(42,959	)
	Net cash used in investing activities				(111,066	)		(21,328	)		(14,764	)
Cash flows from financing activities:
	Changes in revolving notes				8,965			2,514			(14,030	)
	Proceeds from notes payable				154,567			169,752			–
	Repayments of notes payable				(13,191	)		(67,691	)		(21,539	)
	Repayments of subordinated debt				(6,526	)		(6,325	)		(5,979	)
	Dividends				(5,042	)		(3,889	)		(889	)
	Net proceeds from equity offering				–			127,462			–
	Re-purchase and retirement of stock				–			(127,538	)		–
	Stock options exercised and restricted stock awards				5,757			3,286			6,093
	Excess tax benefit of stock options exercised				2,600			–			–
	Purchase of subsidiary’s shares subject to mandatory redemption				(4,636	)		–			(1,277	)
	Net cash provided by (used in) financing activities				142,494			97,571			(37,621	)
	Effect of exchange rate changes				(1,280	)		1,542			3,172
Increase (decrease) in cash and cash equivalents					69,690			61,094			(65,188	)
Cash and cash equivalents:
Beginning of period					73,204			12,110			77,298
End of period				$	142,894		$	73,204		$	12,110
Cash paid during the period for:
Interest				$	24,406		$	10,187		$	11,376
Income taxes				$	21,256		$	12,287		$	5,892
Non cash activity:
	Transfer of railcars held for sale to equipment on operating leases			$	23,955		$	–		$	–
Supplemental disclosure of subsidiary acquired:
	Assets acquired, net of cash			$	–		$	(19,051	)	$	–
	Liabilities assumed				–			19,529			–
	Investment previously recorded for unconsolidated joint venture				–			7,957			–
	Cash acquired			$	–		$	8,435		$	–

The accompanying notes are an integral part of these financial statements.

30                                        The Greenbrier Companies 2006 Annual Report

Notes to Consolidated Financial Statements

Note 1 - Nature of Operations

The Greenbrier Companies, Inc. and Subsidiaries (Greenbrier or the Company) currently operates in two primary business segments: manufacturing and leasing & services. The two business segments are operationally integrated. With operations in the United States, Canada, Mexico and Europe, the manufacturing segment produces double-stack intermodal railcars, conventional railcars, tank cars, marine vessels and performs railcar repair, refurbishment and maintenance activities. The Company also produces rail castings through an unconsolidated joint venture and also manufactures new freight cars through the use of unaffiliated subcontractors. The leasing & services segment owns approximately 9,000 railcars and provides management services for approximately 135,000 railcars for railroads, shippers and other leasing and transportation companies.

Note 2 - Summary of Significant Accounting Policies

Principles of consolidation - The financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany transactions and balances are eliminated upon consolidation. Investments in and long-term advances to joint ventures in which the Company has a 50% or less ownership interest are accounted for by the equity method and included in other assets.

Unclassified Balance Sheet - The balance sheets of the Company are presented in an unclassified format as a result of significant leasing activities for which the current or noncurrent distinction is not relevant. In addition, the activities of the leasing & services and manufacturing segments are so intertwined that in the opinion of management, any attempt to separate the respective balance sheet categories would not be meaningful and may lead to the development of misleading conclusions by the reader.

Foreign currency translation - Operations outside the United States prepare financial statements in currencies other than the United States dollar. Revenues and expenses are translated at average exchange rates for the year, while assets and liabilities are translated at year-end exchange rates. Translation adjustments are accumulated as a separate component of stockholders’ equity in other comprehensive income (loss), net of tax.

Cash and cash equivalents - Cash is temporarily invested primarily in bankers’ acceptances, United States Treasury bills, commercial paper and money market funds. All highly-liquid investments with a maturity of three months or less at the date of acquisition are considered cash equivalents.

Accounts Receivable - Accounts receivable are stated net of allowance for doubtful accounts of $3.1 million and $2.5 million as of August 31, 2006 and 2005.

Inventories - Inventories are valued at the lower of cost (first-in, first-out or average cost) or market. Work-in-process includes material, labor and overhead.

Railcars held for sale - Railcars held for sale consist of new railcars in transit to delivery point or on lease with the intent to sell and used railcars that will either be sold or refurbished, placed on lease and then sold.

Equipment on operating leases - Equipment on operating leases is stated at cost. Depreciation to estimated salvage value is provided on the straight-line method over the estimated useful lives of up to thirty-five years.

Property, plant and equipment - Property, plant and equipment is stated at cost. Depreciation is provided on the straight-line method over estimated useful lives which are as follows:

	Depreciable Life
Buildings and improvements		10-25 years
Machinery & equipment		3-15 years
Other		3-7 years

Intangible assets - Loan fees are capitalized and amortized as interest expense over the life of the related borrowings. Goodwill is not significant and is included in other assets. Goodwill is tested for impairment at least annually and more frequently if material changes in events or circumstances arise. Impairment would result in a write-down to fair market value as necessary.

Impairment of long-lived assets - When changes in circumstances indicate the carrying amount of certain long-lived assets may not be recoverable, the assets will be evaluated for impairment. If the forecast

The Greenbrier Companies 2006 Annual Report                                         31

undiscounted future cash flows are less than the carrying amount of the assets, an impairment charge to reduce the carrying value of the assets to fair value will be recognized in the current period.

Maintenance obligations - The Company is responsible for maintenance on a portion of the managed and owned lease fleet under the terms of maintenance obligations defined in the underlying lease or management agreement. The estimated liability is based on maintenance histories for each type and age of railcar. The liability, included in accounts payable and accrued liabilities, is reviewed periodically and updated based on maintenance trends and known future repair or refurbishment requirements.

Warranty accruals - Warranty accruals are estimated and charged to operations to cover a defined warranty period. The estimated warranty cost is based on history of warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historical information for similar product types. The warranty accruals, included in accounts payable and accrued liabilities, are reviewed periodically and updated based on warranty trends.

Contingent rental assistance - The Company has entered into contingent rental assistance agreements on certain railcars, subject to leases, that have been sold to third parties. These agreements guarantee the purchasers a minimum lease rental, subject to a maximum defined rental assistance amount, over remaining periods that range from one to six years. A liability is established when management believes that it is probable that a rental shortfall will occur and the amount can be estimated. All existing rental assistance agreements were entered into prior to December 31, 2002. Any future contracts would use the guidance required by Financial Accounting Standards Board (FASB) Interpretation (FIN) 45.

Income taxes - The liability method is used to account for income taxes. Deferred income taxes are provided for the temporary effects of differences between assets and liabilities recognized for financial statement and income tax reporting purposes. Valuation allowances reduce deferred tax assets to an amount that will more likely than not be realized. The Company also provides for income tax contingencies when management considers them probable of occurring and reasonably estimable.

Accumulated other comprehensive income (loss) -Accumulated other comprehensive income (loss) represents net earnings (loss) plus all other changes in net assets from non-owner sources.

Revenue recognition - Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectibility is reasonably assured.

Railcars are generally manufactured, repaired or refurbished under firm orders from third parties. Revenue is recognized when railcars are completed, accepted by an unaffiliated customer and contractual contingencies removed. Marine revenues are either recognized on the percentage of completion method during the construction period or on the completed contract method based on the terms of the contract. Direct finance lease revenue is recognized over the lease term in a manner that produces a constant rate of return on the net investment in the lease. Operating lease revenue is recognized as earned under the lease terms. Certain leases are operated under car hire arrangements whereby revenue is earned based on utilization, car hire rates and terms specified in the lease agreement. Car hire revenue is reported from a third party source two months in arrears; however, such revenue is accrued in the month earned based on estimates of use from historical activity and is adjusted to actual as reported. Such adjustments historically have not been significant from the estimate.

Research and development - Research and development costs are expensed as incurred. Research and development costs incurred for new product development during 2006, 2005 and 2004 were $2.2 million, $1.9 million and $3.0 million.

32                                        The Greenbrier Companies 2006 Annual Report

Forward exchange contracts - Foreign operations give rise to risks from changes in foreign currency exchange rates. Forward exchange contracts with established financial institutions are utilized to hedge a portion of such risk. Realized and unrealized gains and losses are deferred in other accumulated comprehensive income (loss) and recognized in earnings concurrent with the hedged transaction or when the occurrence of the hedged transaction is no longer considered probable. Even though forward exchange contracts are entered into to mitigate the impact of currency fluctuations, certain exposure remains which may affect operating results.

Interest rate instruments - Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain debt. The net cash amounts paid or received under the agreements are accrued and recognized as an adjustment to interest expense.

Net earnings per share - Basic earnings per common share (EPS) excludes the potential dilution that would occur if additional shares were issued upon exercise of outstanding stock options, while diluted EPS takes this potential dilution into account using the treasury stock method.

Stock-based compensation - Prior to the adoption of SFAS 123R on September 1, 2005, compensation expense for employee stock options was measured using the method prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees. In accordance with APB Opinion No. 25, Greenbrier did not recognize compensation expense for employee stock options because options were only granted with an exercise price equal to the fair value of the stock on the effective date of grant. If the Company had elected to recognize compensation expense using a fair value approach, the pro forma net earnings and earnings per share would have been as follows:

(In thousands, except per share amounts)		2005			2004
Net earnings, as reported		$	29,822		$	20,778
Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax (1)			(235	)		(319	)
Net earnings, pro forma		$	29,587		$	20,459
Basic earnings per share
	As reported	$	1.99		$	1.43
	Pro forma	$	1.97		$	1.40
Diluted earnings per share
	As reported	$	1.92		$	1.37
	Pro forma	$	1.90		$	1.35

⁽¹⁾  Compensation expense was determined using the Black-Scholes-Merton option-pricing model which was developed to estimate value of independently traded options. Greenbrier’s options are not independently traded.

All stock options were vested prior to September 1, 2005 and accordingly no compensation expense was recognized for stock options for the year ended August 31, 2006.

The value, at the date of grant, of stock awarded under restricted stock grants is amortized as compensation expense over the vesting period of two to five years. Compensation expense recognized related to restricted stock grants for 2006 and 2005 was $2.7 million and $0.2 million. No restricted stock grants were awarded prior to 2005.

Management estimates - The preparation of financial statements in accordance with generally accepted accounting principles requires judgment on the part of management to arrive at estimates and assumptions on matters that are inherently uncertain, including evaluating the remaining life and recoverability of long-lived assets. These estimates may affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes. Estimates and assumptions are periodically evaluated and may be adjusted in future periods. Actual results could differ from these estimates.

Reclassifications - Certain reclassifications have been made to prior years’ Consolidated Financial Statements to conform with the 2006 presentation.

The Greenbrier Companies 2006 Annual Report                                         33

Initial Adoption of Accounting Policies - On September 1, 2005, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R, Share Based Payment. This statement requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments (stock options and restricted stock) granted to employees. The implementation did not have a material effect on the Company’s Consolidated Financial Statements as all stock options were vested prior to August 31, 2005. Restricted stock grants are currently being recorded as compensation expense over the vesting period, consistent with prior periods.

Prospective Accounting Changes - In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, Accounting Changes and Error Corrections which replaces Accounting Principles Board (APB) Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. This statement requires retrospective application, unless impracticable, for changes in accounting principles in the absence of transition requirements specific to newly adopted accounting principles. This statement is effective for any accounting changes and corrections of errors made by the Company beginning September 1, 2006.

In July 2006, the FASB issued FASB interpretation (FIN) No. 48, Accounting for Uncertainties in Income Tax - an Interpretation of FASB Statement No. 109. This interpretation clarifies the accounting for uncertainties in income taxes. It prescribes a recognition and measurement threshold for financial statement disclosure of tax positions taken or expected to be taken on a tax return. This interpretation is effective for the Company for the fiscal year beginning September 1, 2007. Management has not yet determined the impact on the Consolidated Financial Statements.

Note 3 - Acquisitions

In September 1998 Greenbrier entered into a joint venture with Bombardier Transportation (Bombardier) to build railroad freight cars at a portion of Bombardier’s existing manufacturing facility in Sahagun, Mexico. Each party held a 50% non-controlling interest in the joint venture. In December 2004, Greenbrier acquired Bombardier’s interest and will pay Bombardier a purchase price of $9.0 million over five years and as a result of the allocation of the purchase price among assets and liabilities, recorded $1.3 million in goodwill. Greenbrier leases a portion of the plant from Bombardier and has entered into a service agreement under which Bombardier provides labor and other services. These operations, previously accounted for under the equity method, were consolidated for financial reporting purposes beginning in December 2004.

The following unaudited pro forma financial information for the years ended August 31, 2005 and 2004 was prepared as if the transaction to acquire Bombardier’s equity in the Mexican operations had occurred at the beginning of each period presented:

(In thousands, except per share amounts)	2005		2004
Revenue	$	1,052,914	$	793,775
Net earnings	$	28,633	$	18,110
Basic earnings per share	$	1.91	$	1.24
Diluted earnings per share	$	1.84	$	1.19

The unaudited pro forma financial information is not necessarily indicative of what actual results would have been had the transaction occurred at the beginning of each period presented.

In December 2005, all of the Canadian subsidiary shares subject to mandatory redemption of $3.7 million were redeemed for $5.3 million. The redemption resulted in a $0.9 million decrease in accumulated other comprehensive income and interest expense of $0.7 million.

34                                        The Greenbrier Companies 2006 Annual Report

Note 4 - Discontinued Operations

In August 2004, the Company reached a settlement agreement on litigation initiated in 1998 by the former shareholders of InterAmerican Logistics, Inc. (InterAmerican) which was acquired in 1996 as part of the Company’s transportation logistics segment. The litigation alleged that Greenbrier violated the agreements pursuant to which it acquired ownership of InterAmerican. A plan to dispose of the transportation logistics segment, which included InterAmerican, was adopted in 1997 and completed in 1998 and accordingly, results of operations for InterAmerican were reclassified to discontinued operations at that time. Upon final disposition in 1998, the balance of the liability for loss on discontinued operations remained pending resolution of this litigation. In August 2004, the litigation was settled resulting in the recognition of a $1.3 million pre-tax gain on discontinued operations ($0.7 million, net of tax) as a result of reversal of substantially all of the remaining contingent liability. A small accrual remained to cover additional expenses. In 2006, the remaining liability of $0.1 million (net of tax) was reversed as all expenses had been paid.

Note 5 - Special Charges

The results of operations for the year ended August 31, 2005 include special charges of $2.9 million for debt prepayment penalties and costs associated with settlement of interest rate swap agreements on $55.7 million in notes payable that were refinanced through a $175.0 million senior unsecured note offering.

The results of operations for the year ended August 31, 2004 include special charges totaling $1.2 million which consist of a $7.5 million write-off of the remaining balance of European designs and patents partially offset by a $6.3 million reduction of purchase price liabilities associated with the settlement of arbitration on the acquisition of European designs and patents.

Note 6 - Inventories

(In thousands)	2006			2005
Manufacturing supplies and raw materials	$	49,631		$	33,653
Work-in-process		118,555			91,637
Lower of cost or market adjustment		(5,035	)		(3,592	)
	$	163,151		$	121,698

(In thousands)	2006			2005			2004
Lower of cost or market adjustment
Balance at beginning of period	$	3,592		$	3,811		$	3,268
Charge to cost of revenue		1,976			1,398			1,617
Usage		(670	)		(2,055	)		(1,238	)
Currency translation effect		137			258			164
Acquisition		–			180			–
Balance at end of period	$	5,035		$	3,592		$	3,811

Note 7 - Investment in Direct Finance Leases

(In thousands)	2006			2005
Future minimum receipts on lease contracts	$	12,792		$	8,394
Maintenance, insurance and taxes		(709	)		(1,037	)
Net minimum lease receipts		12,083			7,357
Estimated residual values		2,049			5,899
Unearned finance charges		(7,621	)		(3,282	)
	$	6,511		$	9,974

Future minimum receipts on the direct finance lease contracts are as follows:

(In thousands)
Year ending August 31,
2007	$	2,032
2008		1,432
2009		1,329
2010		1,313
2011		1,313
Thereafter		5,373
	$	12,792

Note 8 - Equipment on Operating Leases

Equipment on operating leases is reported net of accumulated depreciation of $75.3 million and $79.6 million as of August 31, 2006 and 2005. In addition, certain railcar equipment leased-in by the Company (see Note 24) is subleased to customers under non-cancelable operating leases. Aggregate

The Greenbrier Companies 2006 Annual Report                                         35

minimum future amounts receivable under all non-cancelable operating and subleases are as follows:

(In thousands)
Year ending August 31,
2007	$	29,508
2008		26,253
2009		17,281
2010		14,307
2011		10,588
Thereafter		28,349
	$	126,286

Certain equipment is also operated under daily, monthly or car hire arrangements. Associated revenues amounted to $28.6 million, $28.0 million and $30.2 million for the years ended August 31, 2006, 2005 and 2004.

Note 9 - Property, Plant and Equipment

(In thousands)	2006			2005
Land and improvements	$	10,386		$	9,824
Machinery and equipment		120,918			105,910
Buildings and improvements		61,524			55,973
Other		14,642			16,430
		207,470			188,137
Accumulated depreciation		(127,436	)		(114,934	)
	$	80,034		$	73,203

Note 10 - Investment in Unconsolidated Subsidiaries

In June 2003, the Company acquired a minority ownership interest in a joint venture which produces castings for freight cars. This joint venture is accounted for under the equity method and the investment is included in other assets on the Consolidated Balance Sheets.

Summarized financial data for the castings joint venture is as follows:

(In thousands)	2006		2005
Current assets	$	14,198	$	17,135
Total assets	$	30,418	$	33,632
Current liabilities	$	13,983	$	14,931
Equity	$	7,719	$	6,862

(In thousands)	2006		2005		2004
Revenue	$	123,086	$	109,801	$	55,722
Net earnings (loss)	$	857	$	1,942	$	(4,154	)

In December 2004, Greenbrier acquired Bombardier’s interest in our Mexican railcar manufacturing joint venture previously accounted for under the equity method. Greenbrier’s share of the operating results through November 2004 are included as equity in loss of unconsolidated subsidiaries in the Consolidated Statements of Operations. Financial results of the Mexican operations are consolidated for financial reporting purposes beginning December 1, 2004.

Summarized financial data for the joint venture is as follows:

	Three Months Ended			Year Ended
(In thousands)	November 30, 2004			August 31, 2004
Revenue	$	30,067		$	75,565
Net loss	$	(1,576	)	$	(2,956	)

Greenbrier has purchased railcars from the joint venture for subsequent sale or for its lease fleet for which the Company’s portion of margin is eliminated upon consolidation. In addition, the joint venture paid a management fee to each owner, of which 50% of the fee earned by Greenbrier was eliminated upon consolidation.

Note 11 - Revolving Notes

All amounts originating in foreign currency have been translated at the August 31, 2006 exchange rate for the following discussion. Credit facilities aggregated $179.9 million as of August 31, 2006. Available borrowings are based on defined levels of inventory, receivables, leased equipment and property, plant and equipment, as well as total debt to consolidated capitalization, tangible net worth and interest coverage ratios which at August 31, 2006 levels would provide for maximum borrowing of $148.4 million of which $22.4 million is outstanding. A $125.0 million revolving line of credit is available through June 2010 to provide working capital and interim financing of equipment for the United States and Mexican operations. A $27.2 million line of credit is available through June 2010 for working capital for Canadian manufacturing operations. Lines of credit totaling $27.7 million are available principally through June 2008 for working capital for the European manufacturing operation. Advances bear interest at variable rates that depend on the type of borrowing and the defined ratio of debt to total

36                                        The Greenbrier Companies 2006 Annual Report

capitalization. At August 31, 2006, there were no borrowings outstanding under the North American credit facilities. The European manufacturing credit lines had $22.4 million outstanding at interest rates of 5.1% and 5.2%.

Note 12 - Accounts Payable and Accrued Liabilities

(In thousands)	2006		2005
Trade payables and accrued liabilities	$	141,380	$	129,499
Accrued maintenance		22,985		25,464
Accrued payroll and related liabilities		24,525		17,292
Accrued warranty		14,201		15,037
Other		1,702		7,966
	$	204,793	$	195,258

Note 13 - Maintenance and Warranty Accruals

(In thousands)	2006			2005			2004
Accrued maintenance
Balance at beginning of period	$	25,464		$	21,264		$	18,155
Charged to cost of revenue		16,210			20,152			19,968
Payments		(18,689	)		(15,952	)		(16,859	)
Balance at end of period	$	22,985		$	25,464		$	21,264
Accrued warranty
Balance at beginning of period	$	15,037		$	12,691		$	9,511
Charged to cost of revenue		3,111			4,664			4,895
Payments		(4,492	)		(3,297	)		(2,186	)
Currency translation effect		545			811			471
Acquisition		–			168			–
Balance at end of period	$	14,201		$	15,037		$	12,691

Note 14 - Notes Payable

(In thousands)	2006		2005
Senior unsecured notes	$	235,000	$	175,000
Convertible notes		100,000		–
Term loans		27,314		39,479
Other notes payable		–		156
	$	362,314	$	214,635

On November 21, 2005, the Company issued, at par, through a private placement, $60.0 million aggregate principal amount of 8³/8% senior unsecured notes due 2015. In January 2006, Greenbrier filed a registration statement with respect to an offer to exchange these senior unsecured notes for a new issue of identical notes registered with the Securities and Exchange Commission. In March 2006, the exchange for the registered notes was completed. The transaction is an additional offering under the indenture entered into in connection with the Company’s sale of $175.0 million of senior unsecured notes in May 2005. The $235.0 million combined senior unsecured notes (the Notes) have identical terms. Payment on the Notes is guaranteed by substantially all of the Company’s domestic subsidiaries. Interest is paid in arrears on May 15th and November 15th of each year.

The Greenbrier Companies 2006 Annual Report                                         37

On May 22, 2006, the Company issued, at par, through a private placement, $100.0 million aggregate principal amount of 2.375% convertible senior notes due 2026. Interest will be paid semi-annually in arrears commencing November 15, 2006. Greenbrier also will pay contingent interest on the notes in certain circumstances commencing with the six month period beginning May 15, 2013. In July 2006, Greenbrier filed a registration statement with respect to an offer to exchange these convertible senior notes for a new issue of identical notes registered with the Securities and Exchange Commission. In August 2006, the exchange for the registered notes was completed. Payment on the convertible notes is guaranteed by substantially all of the Company’s domestic subsidiaries.

The convertible senior notes will be convertible upon the occurrence of specified events into cash and shares, if any, of Greenbrier’s common stock at an initial conversion rate of 20.8125 shares per $1,000 principal amount of the notes (which is equal to an initial conversion price of $48.05 per share). The initial conversion rate is subject to adjustment upon the occurrence of certain events, as defined. On or after May 15, 2013, Greenbrier may redeem all or a portion of the notes at a redemption price equal to 100% of the principal amount of the notes plus accrued and unpaid interest.

On May 15, 2013, May 15, 2016 and May 15, 2021 and in the event of certain fundamental changes, holders may require the Company to repurchase all or a portion of their notes at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest.

Term loans are due in varying installments through August 2017 and are generally collateralized by certain property, plant and equipment. As of August 31, 2006, the effective interest rates on the term loans ranged from 4.4% to 8.4%.

The revolving and operating lines of credit, along with notes payable, contain covenants with respect to the Company and various subsidiaries, the most restrictive of which, among other things, limit the ability to: incur additional indebtedness or guarantees; pay dividends; enter into sale leaseback transactions; create liens; sell assets; engage in transactions with affiliates; enter into mergers, consolidations or sales of substantially all the Company’s assets; and enter into new lines of business. The covenants also require certain minimum levels of tangible net worth, maximum ratios of debt to equity or total capitalization and minimum levels of interest coverage.

Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain term loans. At August 31, 2006, such agreements had a notional amount of $13.4 million and mature between June 2007 and March 2011.

Principal payments on the notes payable are as follows:

(In thousands)
Year ending August 31,
2007	$	4,517
2008		3,978
2009		4,170
2010		5,373
2011		3,299
Thereafter		340,977
	$	362,314

Note 15 - Subordinated Debt

Subordinated notes, amounting to $2.1 million and $8.6 million at August 31, 2006 and 2005, were issued to the seller of railcars purchased from 1990 to 1997 as part of an agreement described in Note 25. The notes bear interest at 9.0%, with the principal due ten years from the date of issuance of the notes, and are subordinated to all other liabilities of a subsidiary. The agreement includes an option that, under certain conditions, provides for the seller to repurchase the railcars for the original acquisition cost to the Company at the date the underlying subordinated notes are due. The Company has received notice from the seller that the purchase options will be exercised, and amounts due under the subordinated notes will be retired from the repurchase proceeds during the next year.

Note 16 - Derivative Instruments

Foreign operations give rise to market risks from changes in foreign currency exchange rates. Foreign currency forward exchange contracts with established financial institutions are utilized to hedge a portion of that risk. Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain debt. The Company’s foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, and therefore the unrealized gains and losses are recorded in accumulated other comprehensive loss.

38                                        The Greenbrier Companies 2006 Annual Report

At August 31, 2006 exchange rates, forward exchange contracts for the sale of United States dollars aggregated $28.0 million, sale of Pound Sterling aggregated $5.2 million and purchase of Euro aggregated $1.0 million. Adjusting these contracts to the fair value of these cash flow hedges at August 31, 2006 resulted in an unrealized pre-tax gain of $0.6 million that was recorded in the line item accumulated other comprehensive loss. As these contracts mature at various dates through December 2006, any such gain or loss remaining will be recognized in manufacturing revenue along with the related transactions. In the event that the underlying sales transaction does not occur or does not occur in the period designated at the inception of the hedge, the amount classified in accumulated other comprehensive income (loss) would be reclassified to the current year’s results of operations.

At August 31, 2006 exchange rates, interest rate swap agreements had a notional amount of $13.4 million and mature between June 2007 and March 2011. The fair value of these cash flow hedges at August 31, 2006 resulted in an unrealized pre-tax loss of $0.6 million. The loss is included in accumulated other comprehensive loss and the fair value of the contracts is included in accounts payable and accrued liabilities on the Consolidated Balance Sheet. As interest expense on the underlying debt is recognized, amounts corresponding to the interest rate swaps are reclassified from accumulated other comprehensive income (loss) and charged or credited to interest expense. At August 31, 2006 interest rates, approximately $0.1 million would be reclassified to interest expense in the next 12 months.

Note 17 - Stockholders’ Equity

On May 11, 2005, the Company issued 5,175,000 shares of its common stock at a price of $26.50 per share, less underwriting commissions, discounts and expenses. Proceeds were used to purchase 3,504,167 shares from the estate of Alan James, former member of the board of directors, and 1,837,500 shares from William Furman, President and Chief Executive Officer.

A stock incentive plan was adopted July 1, 1994 (the 1994 Plan) that provides for granting compensatory and non-compensatory options to employees and others. No further grants will be awarded under this plan.

On April 6, 1999, the Company adopted the Stock Incentive Plan — 2000 (the 2000 Plan), under which 1,000,000 shares of common stock were made available for issuance with respect to options granted to employees, non-employee directors and consultants of the Company. The 2000 Plan authorized the grant of incentive stock options, non-statutory stock options, and restricted stock awards, or any combination of the foregoing. Under the 2000 Plan, the exercise price for incentive stock options could not be less than the market value of the Company’s common stock at the time the option is granted. Grants for 2,500 shares remain available under this plan. In 2005, vesting was accelerated on all outstanding options on this plan in an effort to reduce administrative expenses associated with the implementation of FASB 123R as the remaining unvested portion of options was immaterial and no further options were expected to be issued. If the vesting of the options had not been accelerated, the impact to the Company’s Statement of Operations would be an additional expense of $0.1 million in 2006 with an after-tax impact of $0.004 per share. The effect would be minimal for periods after 2006.

In January 2005, the stockholders approved the 2005 Stock Incentive Plan. The plan provides for the grant of incentive stock options, nonstatutory stock options, restricted shares, stock units and stock appreciation rights. The maximum aggregate number of the Company’s common shares available for issuance under the plan is 1,300,000. During 2006 and 2005, the Company awarded restricted stock grants totaling 70,820 and 353,864 shares under the 2005 Stock Incentive Plan.

The following table summarizes stock option transactions for shares under option and the related weighted average option price:

				Weighted
				Average
				Option
	Shares			Price
Balance at September 1, 2003		1,480,450		$	8.66
Exercised		(592,200	)		10.58
Expired		(4,000	)		13.63
Balance at August 31, 2004		884,250			7.35
Exercised		(408,930	)		7.48
Expired		(2,500	)		8.75
Balance at August 31, 2005		472,820			7.24
Exercised		(403,424	)		7.29
Balance at August 31, 2006		69,396		$	6.96

The Greenbrier Companies 2006 Annual Report                                         39

At August 31, 2006 options outstanding have exercise prices ranging from $4.36 to $9.19 per share, have a remaining average contractual life of 2.82 years and options to purchase 69,396 shares were exercisable. On August 31, 2006 and 2005, 877,816 and 948,636 shares were available for grant. No shares were available for grant as of August 31, 2004.

Note 18 - Earnings Per Share

The shares used in the computation of the Company’s basic and diluted earnings per common share are reconciled as follows:

(In thousands)	2006		2005		2004
Weighted average basic common shares outstanding		15,751		15,000		14,569
Dilutive effect of employee stock options		186		560		630
Weighted average diluted common shares outstanding		15,937		15,560		15,199

Weighted average diluted common shares outstanding includes the incremental shares that would be issued upon the assumed exercise of stock options. No options were anti-dilutive the years ended August 31, 2006, 2005 and 2004.

Note 19 - Related Party Transactions

James-Furman & Company Partnership. Alan James, former member of the Board of Directors, and William Furman, President and Chief Executive Officer of the Company were partners in a general partnership, James Furman & Company (the Partnership), that, among other things, engaged in the ownership, leasing and marketing of railcars and programs for refurbishing and marketing of used railcars. As a result of Mr. James’ death, the Partnership was dissolved as of January 28, 2005. In 1989, the Company entered into presently existing agreements with the Partnership pursuant to which the Company manages and maintains railcars owned by the Partnership in exchange for a fixed monthly fee that is no less favorable to the Company than the fee the Company could obtain for similar services rendered to unrelated parties. The maintenance and management fees paid to the Company under such agreements for the years ended August 31, 2006, 2005 and 2004 aggregated $0.1 million per year. In addition, the Partnership paid the Company fees of $0.1 million in each of the years ended August 31, 2006, 2005 and 2004 for administrative and other services. The management and maintenance agreements presently in effect between the Company and the Partnership provide that in remarketing railcars owned by the Partnership and the Company, as well as by unaffiliated lessors, the Company will, subject to the business requirements of prospective lessees and railroad regulatory requirements, grant priority to that equipment which has been off-lease and available for the longest period of time. Such agreements also provide that the Partnership will grant to the Company a right of first refusal with respect to any opportunity originated by the Partnership in which the Company may be interested involving the manufacture, purchase, sale, lease, management, refurbishing or repair of railcars. The right of first refusal provides that prior to undertaking any such transaction the Partnership must offer the opportunity to the Company and must provide the disinterested, independent members of the Board of Directors a period of not less than 30 days in which to determine whether the Company desires to pursue the opportunity. The right of first refusal in favor of the Company continues for a period of 12 months after the date that both of Messrs. James and Furman cease to be officers or directors of the Company. The disposition of the partnership assets is still in process. Upon completion of the asset disposition, all agreements between the Company and the Partnership will be discontinued.

Indebtedness of Management - Since the beginning of the Company’s last fiscal year, only one director or executive officer of the Company has been indebted to the Company for an amount in excess of $60 thousand. The President of the Company’s manufacturing operations has a promissory note payable upon demand with a balance of $0.1 million as of August 31, 2006. The largest amount outstanding during the year ended August 31, 2006 under this note was $0.2 million. The note, secured by a mortgage on the officer’s residence, does not bear interest and has not been amended since its issuance in 1994.

Policy - Greenbrier’s policy is that all proposed transactions by the Company with directors, officers, five percent stockholders and their affiliates be entered into only if such transactions are on terms no less favorable to Greenbrier than could be obtained from unaffiliated parties, are reasonably expected to benefit the Company and are approved by a majority

40                                        The Greenbrier Companies 2006 Annual Report

of the disinterested, independent members of the Company’s Board of Directors.

Purchases from unconsolidated subsidiaries - The Company purchased railcars totaling $1.0 million for the three months ended November 30, 2004 and $31.8 million for the year ended August 31, 2004 from a 50%-owned joint venture for subsequent sale or for its own lease fleet. As a result of the acquisition of the Company’s joint venture partner’s interest the financial results of the entity were consolidated beginning on December 1, 2004.

Note 20 - Employee Benefit Plans

Defined contribution plans are available to substantially all United States employees. Contributions are based on a percentage of employee contributions and amounted to $1.3 million, $1.2 million and $1.2 million for the years ended August 31, 2006, 2005 and 2004.

Defined benefit pension plans are provided for Canadian employees covered by collective bargaining agreements. The plans provide pension benefits based on years of credited service. Contributions to the plan are actuarially determined and are intended to fund the net periodic pension cost. Expenses resulting from contributions to the plans were $2.5 million, $2.1 million and $1.9 million for the years ended August 31, 2006, 2005 and 2004.

Nonqualified deferred benefit plans exist for certain employees. Expenses resulting from contributions to the plans were $1.8 million, $1.6 million and $1.6 million for the years ended August 31, 2006, 2005 and 2004.

Note 21 - Income Taxes

Components of income tax expense (benefit) of continuing operations are as follows:

(In thousands)		2006			2005			2004
Current:
	Federal	$	10,619		$	15,587		$	(35	)
	State		1,175			1,213			215
	Foreign		3,904			328			(347	)
			15,698			17,128			(167	)
Deferred:
	Federal		9,291			(1,344	)		7,437
	State		2,193			2,084			1,481
	Foreign		(5,484	)		2,043			368
			6,000			2,783			9,286
		$	21,698		$	19,911		$	9,119

Income tax expense (benefit) is computed at rates different than statutory rates. The reconciliation between effective and statutory tax rates on continuing operations is as follows:

	2006			2005			2004
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		3.6			4.3			3.5
Impact of foreign operations		(8.0	)		(1.0	)		(10.0	)
Income tax settlement		4.1			–			–
Other		0.8			1.5			0.7
		35.5	%		39.8	%		29.2	%

The Greenbrier Companies 2006 Annual Report                                         41

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows:

(In thousands)		2006			2005
Deferred tax assets:
	Deferred participation	$	(814	)	$	(3,931	)
	Maintenance and warranty accruals		(8,689	)		(9,542	)
	Accrued payroll and related liabilities		(4,020	)		(5,568	)
	Deferred revenue		(7,250	)		(5,754	)
	Inventories and other		(2,946	)		(3,871	)
	Investment and asset tax credit		(3,002	)		(1,061	)
			(26,721	)		(29,727	)
Deferred tax liabilities:
	Accelerated depreciation		60,743			57,439
	SFAS 133 and translation adjustment		1,745			1,902
	Other		1,705			2,015
Net deferred tax liability		$	37,472		$	31,629

United States income taxes have not been provided for approximately $17.8 million of cumulative undistributed earnings of several non-United States subsidiaries as Greenbrier plans to reinvest these earnings indefinitely in operations outside the United States.

At August 31, 2005, no income tax benefit was recognized for certain net deferred tax assets due to the uncertainty of their realization in future years. However, due to the earnings in 2006 and the level of probable earnings in 2007, the realization of certain deferred tax assets is more likely than not and as such $3.7 million was recognized.

42                                        The Greenbrier Companies 2006 Annual Report

Note 22 - Segment Information

Greenbrier operates in two reportable segments: manufacturing and leasing & services. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Performance is evaluated based on margin. Intersegment sales and transfers are accounted for as if the sales or transfers were to third parties.

The information in the following tables is derived directly from the segments’ internal financial reports used for corporate management purposes. Unallocated assets primarily consist of cash and short-term investments.

(In thousands)		2006			2005			2004
Revenue:
	Manufacturing	$	927,011		$	983,818		$	644,927
	Leasing & services		121,184			101,426			88,793
	Intersegment eliminations		(94,372	)		(61,022	)		(4,269	) (1)
		$	953,823		$	1,024,222		$	729,451
Margin:
	Manufacturing	$	96,868		$	83,211		$	58,208
	Leasing & services		60,511			41,962			33,976
		$	157,379		$	125,173		$	92,184
Assets:
	Manufacturing	$	342,094		$	298,730		$	254,044
	Leasing & services		390,270			299,180			241,514
	Unallocated		144,950			73,297			13,195
		$	877,314		$	671,207		$	508,753
Depreciation and amortization:
	Manufacturing	$	12,618		$	12,205		$	9,399
	Leasing & services		12,635			10,734			11,441
		$	25,253		$	22,939		$	20,840
Capital expenditures:
	Manufacturing	$	18,027		$	16,318		$	7,161
	Leasing & services		122,542			52,805			35,798
		$	140,569		$	69,123		$	42,959

The following table summarizes selected geographic information.

(In thousands)		2006		2005		2004
Revenue:
	United States	$	846,560	$	875,261	$	558,152
	Foreign		107,263		148,961		171,299
		$	953,823	$	1,024,222	$	729,451
Identifiable assets:
	United States	$	679,742	$	516,690	$	403,914
	Canada		50,192		48,529		39,943
	Mexico		80,447		48,291		366
	Europe		66,933		57,697		64,530
		$	877,314	$	671,207	$	508,753

⁽¹⁾  Includes $33.6 million in revenue associated with railcars produced in a prior period for which revenue recognition had been deferred pending removal of contractual contingencies that were removed in 2004.

The Greenbrier Companies 2006 Annual Report                                         43

Note 23 - Customer Concentration

In 2006, revenue from two customers was 29% and 17% of total revenue. Revenue from one customer was 44% of total revenue for the year ended August 31, 2005 and revenue from two customers was 39% and 12% of total revenues for the year ended August 31, 2004. No other customers accounted for more than 10% of total revenues in 2006, 2005 or 2004. Two customers had balances that individually equaled or exceeded 10% of accounts receivable and in total represented 32% of the consolidated balance at August 31, 2006.

Note 24 - Lease Commitments

Lease expense for railcar equipment leased-in under non-cancelable leases was $6.7 million, $6.7 million and $6.6 million for the years ended August 31, 2006, 2005 and 2004. Aggregate minimum future amounts payable under these non-cancelable railcar equipment leases are as follows:

(In thousands)
Year ending August 31,
2007	$	3,943
2008		2,656
2009		1,351
2010		264
2011		228
Thereafter		660
	$	9,102

Operating leases for domestic railcar repair facilities, office space and certain manufacturing and office equipment expire at various dates through April 2015. Rental expense for facilities, office space and equipment was $6.8 million, $4.0 million and $3.6 million for the years ended August 31, 2006, 2005 and 2004. Aggregate minimum future amounts payable under these non-cancelable operating leases are as follows:

(In thousands)
Year ending August 31,
2007	$	5,718
2008		3,658
2009		2,537
2010		1,189
2011		671
Thereafter		970
	$	14,743

Note 25 - Commitments and Contingencies

In 1990, an agreement was entered into for the purchase and refurbishment of over 10,000 used railcars between 1990 and 1997. The agreement provides that, under certain conditions, the seller will receive a percentage of defined earnings of a subsidiary, and further defines the period when such payments are to be made. Such amounts are referred to as participation, are accrued when earned and charged to leasing & services cost of revenue. Unpaid amounts are included in participation in the Consolidated Balance Sheets. Participation expense was $1.7 million, $1.6 million and $1.7 million in 2006, 2005 and 2004. Payment of participation was $12.1 million in 2006 and is estimated to be $9.3 million in 2007, $3.6 million in 2008, $0.3 million in 2009, $0.1 million in 2010 and $0.2 million thereafter.

Environmental studies have been conducted of the Company’s owned and leased properties that indicate additional investigation and some remediation on certain properties may be necessary. The Company’s Portland, Oregon manufacturing facility is located adjacent to the Willamette River. The United States Environmental Protection Agency (EPA) has classified portions of the river bed, including the portion fronting Greenbrier’s facility, as a federal “National Priority List” or “Superfund” site due to sediment contamination (the Portland Harbor Site). Greenbrier and more than 60 other parties have received a “General Notice” of potential liability from the EPA relating to the Portland Harbor Site. The letter advised the Company that they may be liable for the costs of investigation and remediation (which liability may be joint and several with other potentially responsible parties) as well as for natural resource damages resulting from releases of hazardous substances to the site. At this time, ten private and public entities, including the Company,

44                                        The Greenbrier Companies 2006 Annual Report

have signed an Administrative Order on Consent to perform a remedial investigation/feasibility study of the Portland Harbor Site under EPA oversight, and four additional entities have not signed such consent, but are nevertheless contributing money to the effort. The study is expected to be completed in 2009. In May 2006, the EPA notified several additional entities, including other federal agencies that it is prepared to issue unilateral orders compelling additional participation in the remedial investigation. In addition, the Company has entered into a Voluntary Clean-Up Agreement with the Oregon Department of Environmental Quality in which the Company agreed to conduct an investigation of whether, and to what extent, past or present operations at the Portland property may have released hazardous substances to the environment. The Company is also conducting groundwater remediation relating to a historical spill on the property which antedates our ownership.

Because these environmental investigations are still underway, the Company is unable to determine the amount of ultimate liability relating to these matters. Based on the results of the pending investigations and future assessments of natural resource damages, Greenbrier may be required to incur costs associated with additional phases of investigation or remedial action, and may be liable for damages to natural resources. In addition, the Company may be required to perform periodic maintenance dredging in order to continue to launch vessels from its launch ways in Portland, Oregon, on the Willamette River, and the river’s classification as a Superfund site could result in some limitations on future dredging and launch activities. Any of these matters could adversely affect the Company’s business and results of operations, or the value of its Portland property.

From time to time, Greenbrier is involved as a defendant in litigation in the ordinary course of business, the outcome of which cannot be predicted with certainty. The most significant litigation is as follows:

On April 20, 2004, BC Rail Partnership initiated litigation against the Company in the Supreme Court of Nova Scotia, alleging breach of contract and negligent manufacture and design of railcars which were involved in a 1999 derailment. No trial date has been set.

On November 3, 2004, and November 4, 2004, in the District Court of Tarrant County, Texas, and in the District Court of Lancaster County, Nebraska, respectively, litigation was initiated against the Company by Burlington Northern Santa Fe Railway (BNSF). BNSF alleges the failure of a supplier-provided component part on a railcar manufactured by Greenbrier in 1988, resulted in a derailment and a chemical spill. On June 24, 2006, the District Court of Tarrant County, Texas, entered an order granting the Company’s motion for summary judgment as to all claims. On August 7, 2006, BNSF gave notice of appeal.

Greenbrier and a customer, SEB Finans AB (SEB), have raised performance concerns related to a component that the Company installed on 372 railcar units with an aggregate sales value of approximately $20.0 million produced under a contract with SEB. On December 9, 2005, SEB filed a Statement of Claim in an arbitration proceeding in Stockholm, Sweden, against Greenbrier alleging that the cars are defective and cannot be used for their intended purpose. SEB seeks damages in an undisclosed amount and in addition late delivery penalties in the amount of 1.1 million Euros. In a Statement of Defense and Counterclaim filed with the Arbitral Tribunal on February 1, 2006, Greenbrier denied that there were defects in the railcar units delivered for which Greenbrier is liable and filed Counterclaims against SEB in total amounting to approximately $11.0 million plus interest representing payments in default under the contract. Greenbrier believes that applicable law provides an opportunity to remedy the performance issues and that an engineering solution is likely. The component supplier has filed for the United Kingdom equivalent of bankruptcy protection. Accordingly, Greenbrier’s recourse against the supplier may be of limited or no value. Arbitration hearings tentatively scheduled for early November have been rescheduled to May 2007 by mutual agreement. The parties continue to discuss alternative resolutions of the dispute.

Management intends to vigorously defend its position in each of the open foregoing cases and believes that any ultimate liability resulting from the above litigation will not materially affect the Company’s Consolidated Financial Statements.

The Company is involved as a defendant in other litigation initiated in the ordinary course of business. While the ultimate outcome of such legal proceedings cannot be determined at this time, management believes that the resolution of these actions will not have a material adverse effect on the Company’s Consolidated Financial Statements.

The Greenbrier Companies 2006 Annual Report                                         45

On April 20, 2005, the Company entered into an employment agreement with Mr. Furman, President and Chief Executive Officer. The employment agreement provides that Greenbrier pay Mr. Furman a base salary of $550,000 per year (subject to increase by the compensation committee of the board of directors), an annual performance based cash bonus up to 150% of his base salary, and an annual retirement benefit of $407,000 commencing in November 2004 and continuing until Mr. Furman reaches age 70. Either party may terminate the employment agreement at any time upon written notice. The employment agreement contains a two year noncompete clause limiting Mr. Furman’s activities with competing businesses upon termination. In the event of his termination following a change in control, Mr. Furman will be entitled to a lump sum severance amount equal to three times his base salary and average bonus, accrued salary and vacation, and continuation for three years of specified employee benefits.

The Company has entered into contingent rental assistance agreements, aggregating $11.8 million, on certain railcars subject to leases that have been sold to third parties. These agreements guarantee the purchasers a minimum lease rental, subject to a maximum defined rental assistance amount, over remaining periods that range from one to six years. A liability is established and revenue is reduced in the period during which a determination can be made that it is probable that a rental shortfall will occur and the amount can be estimated. For the years ended August 31, 2006, 2005 and 2004 no accruals were made to cover estimated obligations as the existing liability was adequate. There is no liability accrued at August 31, 2006. All of these agreements were entered into prior to December 31, 2002 and have not been modified since. The accounting for any future rental assistance agreements will comply with the guidance required by FASB Interpretation (FIN) 45 which pertains to contracts entered into or modified subsequent to December 31, 2002.

A portion of leasing & services revenue is derived from “car hire” which is a fee that a railroad pays for the use of railcars owned by other railroads or third parties. Car hire earned by a railcar is usually made up of hourly and mileage components. Until 1992, the Interstate Commerce Commission directly regulated car hire rates by prescribing a formula for calculating these rates. Government regulation of car hire rates continues but the system of prescribed rates has been superseded by a system known as deprescription. A ten-year period used to phase in this new system ended on January 1, 2003. Deprescription is a system whereby railcar owners and users have the right to negotiate car hire rates. If the railcar owner and railcar user cannot come to an agreement on a car hire rate then either party has the right to call for arbitration. In arbitration either the owner’s or user’s rate is selected and that rate becomes effective for a one-year period. There is some risk that car hire rates could be negotiated or arbitrated to lower levels in the future. This could reduce future car hire revenue for the Company which amounted to $25.3 million, $25.3 million and $27.2 million in 2006, 2005 and 2004.

In accordance with customary business practices in Europe, the Company has $14.6 million in bank and third party performance, advance payment and warranty guarantee facilities, all of which have been utilized as of August 31, 2006. To date no amounts have been drawn under these performance, advance payment and warranty guarantee facilities.

At August 31, 2006, an unconsolidated subsidiary had $8.3 million of third party debt, for which the Company has guaranteed 33% or approximately $2.8 million. In the event that there is a change in control or insolvency by any of the three 33% investors that have guaranteed the debt, the remaining investors’ share of the guarantee will increase proportionately.

The Company has outstanding letters of credit aggregating $2.1 million associated with material purchases and payroll.

Greenbrier has jointly committed with Babcock & Brown Rail Management, LLC to purchase new rail-cars from unaffiliated manufacturers to be leased to third party customers. Greenbrier’s remaining portion of this commitment is approximately $30.7 million. All purchases are expected to be completed by the end of December 2006.

46                                        The Greenbrier Companies 2006 Annual Report

Note 26 - Fair Value of Financial Instruments

The estimated fair values of financial instruments and the methods and assumptions used to estimate such fair values are as follows:

	2006
	Carrying		Estimated
(In thousands)	Amount		Fair Value
Notes payable and subordinated debt	$	364,406	$	355,685
Deferred participation	$	2,078	$	1,711

	2005
	Carrying		Estimated
(In thousands)	Amount		Fair Value
Notes payable and subordinated debt	$	223,252	$	218,541
Deferred participation	$	9,826	$	8,780

The carrying amount of cash and cash equivalents, accounts and notes receivable, revolving notes, accounts payable and accrued liabilities, foreign currency forward contracts and interest rate swaps is a reasonable estimate of fair value of these financial instruments. Estimated rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of notes payable and subordinated debt. The fair value of deferred participation is estimated by discounting the estimated future cash payments using the Company’s estimated incremental borrowing rate.

Note 27 - Guarantor/ Non Guarantor

The Notes (see Note 14) issued on May 11, 2005 and November 21, 2005 are fully and unconditionally and jointly and severally guaranteed by certain of Greenbrier’s wholly owned subsidiaries: Autostack Company LLC, Greenbrier-Concarril, LLC, Greenbrier Leasing Company LLC, Greenbrier Leasing Partner, LLC, Greenbrier Management Services, LLC, Greenbrier Leasing L.P., Greenbrier Railcar LLC, Gunderson LLC, Gunderson Marine LLC, Gunderson Rail Services LLC and Gunderson Specialty Products, LLC. No other subsidiaries guarantee the Notes.

The following represents the supplemental consolidated condensed financial information of Greenbrier and its guarantor and non guarantor subsidiaries, as of August 31, 2006 and 2005 and for the years ended August 31, 2006, 2005 and 2004. The information is presented on the basis of Greenbrier accounting for its ownership of its wholly owned subsidiaries using the equity method of accounting. Intercompany transactions of goods and services between the guarantor and non guarantor subsidiaries are presented as the sales or transfers were to third parties.

The Greenbrier Companies 2006 Annual Report                                         47

The Greenbrier Companies, Inc.

       Condensed Consolidated Balance Sheet

       August 31, 2006

						Combined
				Combined		Non-
				Guarantor		Guarantor
(In thousands)		Parent		Subsidiaries		Subsidiaries			Eliminations			Consolidated
Assets
	Cash and cash equivalents	$	133,695	$	35	$	9,164		$	–		$	142,894
	Restricted cash		–		–		2,056			–			2,056
	Accounts and notes receivable		65,188		29,525		20,812			40			115,565
	Inventories		–		62,468		100,683			–			163,151
	Railcars held for sale		–		24,862		10,354			–			35,216
	Investment in direct finance leases		–		6,511		–			–			6,511
	Equipment on operating leases		–		303,664		–			(2,655	)		301,009
	Property, plant and equipment		–		44,013		36,021			–			80,034
	Other		375,944		49,259		2,044			(396,369	)		30,878
		$	574,827	$	520,337	$	181,134		$	(398,984	)	$	877,314
Liabilities and Stockholders’ Equity
	Revolving notes	$	–	$	–	$	22,429		$	–		$	22,429
	Accounts payable and accrued liabilities		11,146		111,764		81,842			41			204,793
	Participation		–		11,453		–			–			11,453
	Deferred income tax		2,704		41,091		(5,876	)		(447	)		37,472
	Deferred revenue		1,241		11,030		5,210			–			17,481
	Notes payable		341,929		6,716		13,669			–			362,314
	Subordinated debt		–		2,091		–			–			2,091
Stockholders’ Equity			217,807		336,192		63,860			(398,578	)		219,281
		$	574,827	$	520,337	$	181,134		$	(398,984	)	$	877,314

48                                        The Greenbrier Companies 2006 Annual Report

The Greenbrier Companies, Inc.

       Condensed Consolidated Statement of Operations

       For the year ended August 31, 2006

								Combined
					Combined			Non-
					Guarantor			Guarantor
(In thousands)		Parent			Subsidiaries			Subsidiaries		Eliminations			Consolidated
Revenue
	Manufacturing	$	11,250		$	587,740		$	491,920	$	(239,621	)	$	851,289
	Leasing & services		4,839			99,745			–		(2,050	)		102,534
			16,089			687,485			491,920		(241,671	)		953,823
Cost of revenue
	Manufacturing		10,191			515,738			467,445		(238,953	)		754,421
	Leasing & services		–			42,094			–		(71	)		42,023
			10,191			557,832			467,445		(239,024	)		796,444
Margin			5,898			129,653			24,475		(2,647	)		157,379
Other costs
	Selling and administrative expense		17,258			42,116			11,545		(1	)		70,918
	Interest and foreign exchange		23,432			3,266			1,244		(2,546	)		25,396
			40,690			45,382			12,789		(2,547	)		96,314
Earnings (loss) before income tax and equity in unconsolidated subsidiaries			(34,792	)		84,271			11,686		(100	)		61,065
	Income tax (expense) benefit		11,169			(34,276	)		1,361		48			(21,698	)
			(23,623	)		49,995			13,047		(52	)		39,367
Equity in earnings (loss) of unconsolidated subsidiaries			63,159			8,189			–		(71,179	)		169
Earnings (loss) from continuing operations			39,536			58,184			13,047		(71,231	)		39,536
Earnings from discontinued operations (net of tax)			62			–			–		–			62
Net earnings		$	39,598		$	58,184		$	13,047	$	(71,231	)	$	39,598

The Greenbrier Companies 2006 Annual Report                                         49

The Greenbrier Companies, Inc.

       Condensed Consolidated Statement of Cash Flows

       For the year ended August 31, 2006

									Combined
						Combined			Non-
						Guarantor			Guarantor
(In thousands)			Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net earnings			$	39,598		$	58,184		$	13,047		$	(71,231	)	$	39,598
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
	Earnings from discontinued operations			(62	)		–			–			–			(62	)
	Deferred income taxes			1,752			9,531			(5,342	)		(48	)		5,893
	Depreciation and amortization			56			19,510			5,759			(72	)		25,253
	Gain on sales of equipment			–			(10,942	)		–			(6	)		(10,948	)
	Other			–			99			180			(1	)		278
	Decrease (increase) in assets:
		Accounts and notes receivable		(37,904	)		52,998			350			(6,496	)		8,948
		Inventories		–			(8,879	)		(28,638	)		–			(37,517	)
		Railcars held for sale		–			(5,356	)		6,113			(601	)		156
		Other		(94,487	)		19,784			1,465			75,815			2,577
	Increase (decrease) in liabilities:
		Accounts payable and accrued liabilities		1,664			(11,591	)		15,456			(42	)		5,487
		Participation		–			(10,447	)		–			–			(10,447	)
		Deferred revenue		(155	)		5,644			4,837			–			10,326
Net cash provided by (used in) operating activities				(89,538	)		118,535			13,227			(2,682	)		39,542
Cash flows from investing activities:
	Principal payments received under direct finance leases			–			2,048			–			–			2,048
	Proceeds from sales of equipment			–			28,863			–			–			28,863
	Investment in and advances to unconsolidated subsidiaries			–			550			–			–			550
	Decrease in restricted cash			–			–			(1,958	)		–			(1,958	)
	Capital expenditures			–			(132,934	)		(8,412	)		777			(140,569	)
Net cash used in investing activities				–			(101,473	)		(10,370	)		777			(111,066	)
Cash flows from financing activities:
	Changes in revolving notes			–			–			8,965			–			8,965
	Proceeds from notes payable			154,567			–			–			–			154,567
	Repayments of notes payable			(1,143	)		(11,055	)		(7,493	)		6,500			(13,191	)
	Repayments of subordinated debt			–			(6,526	)		–			–			(6,526	)
	Dividends			(5,042	)		–			–			–			(5,042	)
	Stock options exercised and restricted stock awards			5,757			–			–			–			5,757
	Excess tax benefit of stock options exercised			2,600			–			–			–			2,600
	Purchase of subsidiary’s shares subject to mandatory redemption			–			–			–			(4,636	)		(4,636	)
Net cash provided by (used in) financing activities				156,739			(17,581	)		1,472			1,864			142,494
Effect of exchange rate changes				(266	)		81			(1,095	)		–			(1,280	)
Increase (decrease) in cash and cash equivalents				66,935			(438	)		3,234			(41	)		69,690
Cash and cash equivalents:
Beginning of period				66,760			473			5,930			41			73,204
End of period			$	133,695		$	35		$	9,164		$	–		$	142,894

50                                        The Greenbrier Companies 2006 Annual Report

The Greenbrier Companies, Inc.

       Condensed Consolidated Balance Sheet

       August 31, 2005

						Combined
				Combined		Non-
				Guarantor		Guarantor
(In thousands)		Parent		Subsidiaries(1)		Subsidiaries(1)			Eliminations			Consolidated
Assets
	Cash and cash equivalents	$	66,760	$	473	$	5,930		$	41		$	73,204
	Restricted cash		–		–		93			–			93
	Accounts and notes receivable		27,325		83,074		19,014			(6,456	)		122,957
	Inventories		–		53,589		68,109			–			121,698
	Railcars held for sale		–		43,561		16,467			(607	)		59,421
	Investment in direct finance leases		–		9,974		–			–			9,974
	Equipment on operating leases		–		185,104		–			(1,949	)		183,155
	Property, plant and equipment		8		41,165		32,030			–			73,203
	Other		276,072		41,707		2,707			(292,984	)		27,502
		$	370,165	$	458,647	$	144,350		$	(301,955	)	$	671,207
Liabilities and Stockholders’ Equity
	Revolving notes	$	–	$	–	$	12,453		$	–		$	12,453
	Accounts payable and accrued liabilities		9,586		122,871		62,717			84			195,258
	Participation		–		21,900		–			–			21,900
	Deferred income tax		952		31,560		(484	)		(399	)		31,629
	Deferred revenue		1,396		5,387		127			–			6,910
	Notes payable		183,072		17,772		20,291			(6,500	)		214,635
	Subordinated debt		–		8,617		–			–			8,617
	Subsidiary shares subject to mandatory redemption		–		–		–			3,746			3,746
Stockholders’ Equity			175,159		250,540		49,246			(298,886	)		176,059
		$	370,165	$	458,647	$	144,350		$	(301,955	)	$	671,207

⁽¹⁾  A wholly owned Mexican subsidiary is shown as non-guarantor subsidiary in the current year’s presentation. In the prior year’s presentation such financial information was consolidated as part of its U.S. parent which is a guarantor subsidiary. Amounts for 2005, therefore have been reclassified to conform to the current year’s presentation. The net equity investment in the Mexican subsidiary is now shown an investment in the Mexican subsidiary in other assets category instead of the individual asset and liability categories.

The Greenbrier Companies 2006 Annual Report                                         51

The Greenbrier Companies, Inc.

       Condensed Consolidated Statement of Operations

       August 31, 2005

								Combined
					Combined			Non-
					Guarantor			Guarantor
(In thousands)		Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenue
	Manufacturing	$	66,940		$	549,058		$	490,473		$	(165,310	)	$	941,161
	Leasing & services		1,369			84,061			–			(2,369	)		83,061
			68,309			633,119			490,473			(167,679	)		1,024,222
Cost of revenue
	Manufacturing		62,535			493,423			466,140			(164,148	)		857,950
	Leasing & services		–			41,168			–			(69	)		41,099
			62,535			534,591			466,140			(164,217	)		899,049
Margin			5,774			98,528			24,333			(3,462	)		125,173
Other costs
	Selling and administrative expense		14,260			32,069			10,786			310			57,425
	Interest and foreign exchange		7,405			6,459			4,198			(3,227	)		14,835
	Special charges		–			2,913			–			–			2,913
			21,665			41,441			14,984			(2,917	)		75,173
Earnings (loss) before income tax and equity in unconsolidated subsidiaries			(15,891	)		57,087			9,349			(545	)		50,000
Income tax (expense) benefit			6,452			(23,996	)		(2,445	)		78			(19,911	)
			(9,439	)		33,091			6,904			(467	)		30,089
Equity in earnings (loss) of unconsolidated subsidiaries			39,261			2,479			–			(42,007	)		(267	)
Net earnings		$	29,822		$	35,570		$	6,904		$	(42,474	)	$	29,822

52                                        The Greenbrier Companies 2006 Annual Report

The Greenbrier Companies, Inc.

       Condensed Consolidated Statement of Cash Flows

       For the year ended August 31, 2005

									Combined
						Combined			Non-
						Guarantor			Guarantor
(In thousands)			Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net earnings			$	29,822		$	35,570		$	6,904		$	(42,474	)	$	29,822
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
	Deferred income taxes			(2,845	)		(553	)		9,284			(79	)		5,807
	Tax benefit of stock options exercised			2,393			–			–			–			2,393
	Depreciation and amortization			208			17,316			5,483			(68	)		22,939
	Gain on sales of equipment			–			(6,439	)		–			(358	)		(6,797	)
	Other			–			250			401			–			651
	Decrease (increase) in assets:
		Accounts and notes receivable		(95,492	)		81,788			(18,886	)		262			(32,328	)
		Inventories		–			(6,657	)		21,689			371			15,403
		Railcars held for sale		–			(27,522	)		(11,574	)		601			(38,495	)
		Other		(40,639	)		(6,399	)		(136	)		42,007			(5,167	)
	Increase (decrease) in liabilities:
		Accounts payable and accrued liabilities		4,459			3,345			(7,580	)		(221	)		3
		Participation		–			(15,207	)		–			–			(15,207	)
		Deferred revenue		1,397			2,837			51			–			4,285
Net cash provided by (used in) operating activities				(100,697	)		78,329			5,636			41			(16,691	)
Cash flows from investing activities:
	Principal payments received under direct finance leases			–			5,733			–			–			5,733
	Proceeds from sales of equipment			–			32,528			–			–			32,528
	Investment in and advances to unconsolidated subsidiaries			–			92			–			–			92
	Acquisition of joint venture interest			–			5,813			2,622			–			8,435
	Decrease in restricted cash			–			–			1,007			–			1,007
	Capital expenditures			–			(63,183	)		(5,940	)		–			(69,123	)
	Net cash provided by (used in) investing activities			–			(19,017	)		(2,311	)		–			(21,328	)
Cash flows from financing activities:
	Changes in revolving notes			–			–			2,514			–			2,514
	Proceeds from notes payable			169,752			–			–			–			169,752
	Repayments of notes payable			(1,052	)		(65,752	)		(887	)		–			(67,691	)
	Repayments of subordinated debt			–			(6,325	)		–			–			(6,325	)
	Dividends			(3,889	)		–			–			–			(3,889	)
	Net proceeds from equity offering			127,462			–			–			–			127,462
	Repurchase and retirement of stock			(127,538	)		–			–			–			(127,538	)
	Stock options exercised and restricted stock awards			3,286			–			–			–			3,286
Net cash provided by (used in) financing activities				168,021			(72,077	)		1,627			–			97,571
Effect of exchange rate changes				(564	)		2,784			(678	)		–			1,542
Increase (decrease) in cash and cash equivalents				66,760			(9,981	)		4,274			41			61,094
Cash and cash equivalents:
Beginning of period				–			10,454			1,656			–			12,110
End of period			$	66,760		$	473		$	5,930		$	41		$	73,204

The Greenbrier Companies 2006 Annual Report                                         53

The Greenbrier Companies, Inc.

       Condensed Consolidated Statement of Operations

       For the year ended August 31, 2004

								Combined
					Combined			Non-
					Guarantor			Guarantor
(In thousands)		Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenue
	Manufacturing	$	28,551		$	306,070		$	306,984		$	11,629		$	653,234
	Leasing & services		881			75,405			–			(69	)		76,217
			29,432			381,475			306,984			11,560			729,451
Cost of revenue
	Manufacturing		25,042			270,455			287,717			11,812			595,026
	Leasing & services		–			42,304			–			(63	)		42,241
			25,042			312,759			287,717			11,749			637,267
Margin			4,390			68,716			19,267			(189	)		92,184
Other costs
	Selling and administrative expense		12,608			24,748			10,932			–			48,288
	Interest and foreign exchange		2,386			6,170			2,975			(63	)		11,468
	Special charges		–			–			1,234			–			1,234
			14,994			30,918			15,141			(63	)		60,990
Earnings (loss) before income tax and equity in unconsolidated subsidiaries			(10,604	)		37,798			4,126			(126	)		31,194
Income tax (expense) benefit			6,468			(15,906	)		(26	)		345			(9,119	)
			(4,136	)		21,892			4,100			219			22,075
Equity in earnings (loss) of unconsolidated subsidiaries			24,914			(822	)		–			(26,128	)		(2,036	)
Earnings from continuing operations			20,778			21,070			4,100			(25,909	)		20,039
Earnings from discontinued operations (net of tax)			–			–			739			–			739
Net earnings		$	20,778		$	21,070		$	4,839		$	(25,909	)	$	20,778

54                                        The Greenbrier Companies 2006 Annual Report

The Greenbrier Companies, Inc.

       Condensed Consolidated Statement of Cash Flows

       For the year ended August 31, 2004

									Combined
						Combined			Non-
						Guarantor			Guarantor
(In thousands)			Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net earnings			$	20,778		$	21,070		$	4,839		$	(25,909	)	$	20,778
Adjustments to reconcile net earnings to net cash provided by (used in ) operating activities:
	Earnings from discontinued operations			–			–			(739	)		–			(739	)
	Deferred income taxes			1,220			8,200			571			(345	)		9,646
	Depreciation and amortization			208			17,824			2,871			(63	)		20,840
	Gain on sales of equipment			–			(512	)		–			(117	)		(629	)
	Special charges			–			–			1,234			–			1,234
	Other			–			896			435			1			1,332
	Decrease (increase) in assets:
		Accounts and notes receivable		6,441			(32,065	)		(12,304	)		142			(37,786	)
		Inventories		–			(21,108	)		(1,647	)		400			(22,355	)
		Railcars held for sale		–			(14,523	)		(4,127	)		32,747			14,097
		Other		(36,750	)		692			11,593			27,405			2,940
	Increase (decrease) in liabilities:
		Accounts payable and accrued liabilities		3,814			18,461			8,699			(18	)		30,956
		Participation		–			(18,794	)		–			–			(18,794	)
		Deferred revenue		–			(3,367	)		(522	)		(33,606	)		(37,495	)
Net cash provided by (used in) operating activities				(4,289	)		(23,226	)		10,903			637			(15,975	)
Cash flows from investing activities:
	Principal payments received under direct finance leases			–			9,461			–			–			9,461
	Proceeds from sales of equipment			–			16,217			–			–			16,217
	Investment in and advances to unconsolidated subsidiaries			–			(2,240	)		–			–			(2,240	)
	Decrease in restricted cash			–			1,233			3,524			–			4,757
	Capital expenditures			–			(40,221	)		(3,378	)		640			(42,959	)
	Net cash (used in) provided by investing activities			–			(15,550	)		146			640			(14,764	)
Cash flows from financing activities:
	Changes in revolving notes			–			–			(14,030	)		–			(14,030	)
	Repayments of notes payable			(969	)		(19,751	)		(819	)		–			(21,539	)
	Repayments of subordinated debt			–			(5,979	)		–			–			(5,979	)
	Dividends			(889	)		–			–			–			(889	)
	Proceeds from exercise of stock options			6,093			–			–			–			6,093
	Purchase of subsidiary’s shares subject to mandatory redemption			–			–			–			(1,277	)		(1,277	)
	Net cash provided by (used in) financing activities			4,235			(25,730	)		(14,849	)		(1,277	)		(37,621	)
Effect of exchange rate changes				54			571			2,547			–			3,172
Decrease in cash and cash equivalents				–			(63,935	)		(1,253	)		–			(65,188	)
Cash and cash equivalents:
Beginning of period				–			74,389			2,909			–			77,298
End of period			$	–		$	10,454		$	1,656		$	–		$	12,110

The Greenbrier Companies 2006 Annual Report                                         55

Note 28 - Subsequent Event (Unaudited)

On September 11, 2006, the Company purchased substantially all of the operating assets of Rail Car America (RCA), its American Hydraulics division and the assets of its wholly owned subsidiary, Brandon Corp. RCA is a leading provider of intermodal and conventional railcar repair services in North America, operating from four repair facilities throughout the United States. RCA also reconditions and repairs end-of-railcar cushioning units through its American Hydraulics division and operates a switching railroad in Nebraska through Brandon Corp. The purchase price of the acquisition was approximately $34.0 million in cash. RCA currently generates nearly $40.0 million in annual revenue with a workforce approaching 400 employees.

In October 2006, the Company formed a joint venture with Grupo Industrial Monclova (GIMSA) to build new railroad freight cars for the North American marketplace at GIMSA’s existing manufacturing facility, located in Monclova, Mexico. The initial investment will be less than $10.0 million for one production line and each party will maintain a 50% interest in the joint venture. Production is expected to commence in the second calendar quarter of 2007.

In October 2006, the Company entered into a definitive agreement to acquire the stock of Meridian Rail Holdings, Corp. for $227.5 million in cash, plus or minus working capital adjustments. Meridian is a leading supplier of wheel maintenance services to the North American freight car industry. Operating out of six facilities, Meridian supplies replacement wheel sets and axles to approximately 170 freight car maintenance locations where worn or damaged wheels, axles, or bearings are replaced. Meridian also operates a coupler reconditioning facility and performs railcar repair at one of its wheel services facilities. The acquisition is expected to close in November 2006, subject to customary closing conditions.

Greenbrier has entered into a commitment to increase our revolving line of credit in the U.S. and Canada to an aggregate of $275.0 million. The amended five year facility will replace our existing facility aggregating $150.0 million and will be used to support the Meridian acquisition, provide working capital and interim financing of equipment for United States and Mexican operations. It is expected to close on or before the closing of the Meridian acquisition.

56                                        The Greenbrier Companies 2006 Annual Report

Quarterly Results of Operations (Unaudited)

Operating results by quarter for 2006 are as follows:

(In thousands, except per share amounts)		First			Second			Third			Fourth			Total
2006
Revenue
	Manufacturing	$	164,596		$	208,922		$	236,052		$	241,719		$	851,289
	Leasing & services		21,766			27,292			30,036			23,440			102,534
			186,362			236,214			266,088			265,159			953,823
Cost of revenue
	Manufacturing		143,030			185,360			211,444			214,587			754,421
	Leasing & services		10,439			10,671			10,172			10,741			42,023
			153,469			196,031			221,616			225,328			796,444
Margin			32,893			40,183			44,472			39,831			157,379
Other costs
	Selling and administrative expense		15,541			17,092			17,896			20,389			70,918
	Interest and foreign exchange		4,573			7,180			6,149			7,494			25,396
			20,114			24,272			24,045			27,883			96,314
Earnings before income tax and equity in unconsolidated subsidiaries			12,779			15,911			20,427			11,948			61,065
Income tax benefit (expense)			(4,934	)		(7,466	)		(9,866	)		568			(21,698	)
Equity in (loss) earnings of unconsolidated subsidiaries			172			118			119			(240	)		169
	Earnings from continuing operations		8,017			8,563			10,680			12,276			39,536
	Earning from discontinuing operations (net of tax)		–			–			–			62			62
Net earnings		$	8,017		$	8,563		$	10,680		$	12,338		$	39,598
Basic earnings per common share:
Continuing operations		$	.52		$	.55		$	.67		$	.77		$	2.51
Discontinued operations			–			–			–			–			–
		$	.52		$	.55		$	.67		$	.77		$	2.51
Diluted earnings per common share:
Continuing operations		$	.51		$	.54		$	.67		$	.76		$	2.48
Discontinued operations			–			–			–			–			–
		$	.51		$	.54		$	.67		$	.76		$	2.48

The Greenbrier Companies 2006 Annual Report                                         57

Quarterly Results of Operations (Unaudited)

Operating results by quarter for 2005 are as follows:

(In thousands, except per share amounts)		First			Second			Third			Fourth			Total
2005
Revenue
	Manufacturing	$	200,397		$	233,808		$	266,090		$	240,866		$	941,161
	Leasing & services		17,651			21,105			19,944			24,361			83,061
			218,048			254,913			286,034			265,227			1,024,222
Cost of revenue
	Manufacturing		182,862			217,796			241,491			215,801			857,950
	Leasing & services		10,380			10,570			9,561			10,588			41,099
			193,242			228,366			251,052			226,389			899,049
Margin			24,806			26,547			34,982			38,838			125,173
Other costs
	Selling and administrative expense		12,072			14,044			15,276			16,033			57,425
	Interest and foreign exchange		3,059			4,295			2,285			5,196			14,835
	Special charges		–			–			2,913			–			2,913
			15,131			18,339			20,474			21,229			75,173
Earnings before income tax and equity in unconsolidated subsidiaries			9,675			8,208			14,508			17,609			50,000
Income tax expense			(3,554	)		(3,397	)		(5,881	)		(7,079	)		(19,911	)
Equity in (loss) earnings of unconsolidated subsidiaries			(731	)		(9	)		417			56			(267	)
Net earnings		$	5,390		$	4,802		$	9,044		$	10,586		$	29,822
Basic earnings per common share:		$	.36		$	.32		$	.60		$	.71		$	1.99
Diluted earnings per common share:		$	.35		$	.31		$	.58		$	.68		$	1.92

58                                        The Greenbrier Companies 2006 Annual Report

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

The Greenbrier Companies, Inc.

We have audited the accompanying consolidated balance sheets of The Greenbrier Companies, Inc. and subsidiaries (the “Company”) as of August 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended August 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with 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, such consolidated financial statements present fairly, in all material respects, the financial position of The Greenbrier Companies, Inc. and subsidiaries as of August 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of August 31, 2006, based on the criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 1, 2006, expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting.

Deloitte & Touche LLP

Portland, Oregon

November 1, 2006

Item 9.
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None.

The Greenbrier Companies 2006 Annual Report                                         59

Item 9a.
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our President and Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the Exchange Act). Based on that evaluation, our President and Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes In Internal Controls

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Management of the Greenbrier Companies, Inc. together with its consolidated subsidiaries (the Company), is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

As of the end of the Company’s 2006 fiscal year, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company’s internal control over financial reporting as of August 31, 2006 is effective.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of August 31, 2006 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein.

Inherent Limitations on Effectiveness of Controls

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

60                                        The Greenbrier Companies 2006 Annual Report

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

The Greenbrier Companies, Inc.

We have audited management’s assessment, included in the accompanying “Management’s Report on Internal Control over Financial Reporting,” that The Greenbrier Companies, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of August 31, 2006, based on the criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of August 31, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2006, based on the criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended August 31, 2006, of the Company and our report dated November 1, 2006, expressed an unqualified opinion on those financial statements.

Portland, Oregon

November 1, 2006

The Greenbrier Companies 2006 Annual Report                                         61

PART III

ITEM 10.
DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT

There is hereby incorporated by reference the information under the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” and “Executive Officers” in the Company’s definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of Registrant’s year ended August 31, 2006.

ITEM 11.
EXECUTIVE COMPENSATION

There is hereby incorporated by reference the information under the caption “Executive Compensation” in Registrant’s definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of Registrant’s year ended August 31, 2006.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

There is hereby incorporated by reference the information under the captions “Voting” and “Stockholdings of Certain Beneficial Owners and Management” in Registrant’s definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of Registrant’s year ended August 31, 2006.

ITEM 13.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There is hereby incorporated by reference the information under the caption “Certain Relationships and Related Party Transactions” in Registrant’s definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of Registrant’s year ended August 31, 2006.

ITEM 14.         PRINCIPAL ACCOUNTANTS FEES AND SERVICES

There is hereby incorporated by reference the information under the caption “Ratification of the Appointment of Auditors” in Registrant’s definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of the Registrant’s year ended August 31, 2006.

62                                        The Greenbrier Companies 2006 Annual Report

PART IV

Item 15.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES

       (a)            (1) Financial Statements

                See Consolidated Financial Statements in Item 8

       (b)            (2) Financial Statements Schedule*

*  All other schedules have been omitted because they are inapplicable, not required or because the information is given in the Consolidated Financial Statements or notes thereto. This supplemental schedule should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this report.

(a)       (3) The following exhibits are filed herewith and this list is intended to constitute the exhibit index:

3	.1	Registrant’s Articles of Incorporation is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 10-Q filed April 5, 2006.
3	.2	Articles of Merger amending the Registrant’s Articles of Incorporation, is incorporated herein by reference to Exhibit 3.2 to the Registrant’s Form 10-Q filed April 5, 2006.
3	.3	Registrant’s Bylaws, as amended January 11, 2006, are incorporated herein by reference to Exhibit 3.3 to the Registrant’s Form 10-Q filed April 5, 2006.
4	.1	Indenture between the Registrant, Autostack Corporation, Greenbrier-Concarril, LLC, Greenbrier Leasing Corporation, Greenbrier Leasing Limited Partner, LLC, Greenbrier Management Services, LLC, Greenbrier Leasing, L.P., Greenbrier Railcar, Inc., Gunderson, Inc., Gunderson Marine, Inc., Gunderson Rail Services, Inc., Gunderson Specialty Products, LLC and U.S. Bank National Association as Trustee dated May 11, 2005, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed May 13, 2005.
4	.2	Indenture between the Registrant, the Guarantors named therein and U.S. Bank National Association as Trustee dated May 22, 2006, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed May 25, 2006.
4	.3	Rights Agreement, dated as of July 13, 2004, between the Registrant and EquiServe Trust Registrant, N.A., as Rights Agent, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form 8-A filed September 16, 2004.
4	.4	Amendment No. 1 to the Rights Agreement, dated as of July 13, 2004, is incorporated herein by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed November 15, 2004.
4	.5	Amendment No. 2 to the Rights Agreement, dated as of July 13, 2004, incorporated herein by reference to Exhibit 4.3 to the Registrant’s Form 8-K filed February 9, 2005.
10	.1	Registration Rights Agreement among the Registrant and Banc of America Securities LLC and Bear, Stearns & Co. Inc., dated May 11, 2005, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed May 13, 2005.
10	.2	Termination Agreement entered into November 1, 2005 between the Registrant and William A. Furman and each of George L. Chelius and Eric Epperson as Executor of the Will and Estate of Alan James and as Trustee, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed November 10, 2005.
10	.3	Purchase Agreement among the Registrant and Banc of America Securities LLC and Bear, Stearns & Co. Inc., as initial purchasers, dated November 16, 2005, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed December 1, 2005.
10	.4	Registration Rights Agreement among the Registrant and Banc of America LLC and Bear, Stearns & Co. Inc., dated November 21, 2005, is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed December 1, 2005.

The Greenbrier Companies 2006 Annual Report                                         63

EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued)

10	.5*	Employment Agreement dated April 7, 2006 between Mr. Mark Rittenbaum and Registrant, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8 K filed April 13, 2006.
10	.5*	Employment Agreement between the Registrant and Mr. William A. Furman dated April 20, 2005, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed April 20, 2005.
10	.6*	Amendment to Employment Agreement between Mr. William A. Furman and Registrant dated May 11, 2006, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed May 12, 2006.
10	.7*	Employment Agreement dated May 11, 2006 between Robin Bisson and Registrant, is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed May 12, 2006.
10	.8	Purchase Agreement among the Registrant and Bear, Stearns & Co. Inc. and Banc of America Securities LLC, as initial purchasers, and the guaranteeing subsidiaries named therein, dated May 17, 2006, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed May 18, 2006.
10	.9	Registration Rights Agreement among the Registrant, the Guarantors named therein, Bear, Stearns & Co. Inc. and Banc of America Securities LLC, dated May 22, 2006, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed May 25, 2006.
10	.10*	Greenbrier Leasing Corporation’s Manager Owned Target Benefit Plan dated as of January 1, 1996 is incorporated herein by reference to Exhibit 10.35 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended May 31, 1997.
10	.11*	James-Furman Supplemental 1994 Stock Option Plan is incorporated herein by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K for the year ended August 31, 1994.
10	.12	Form of Agreement concerning Indemnification and Related Matters (Directors) between Registrant and its directors.
10	.13	Railcar Management Agreement between Greenbrier Leasing Corporation and James-Furman & Registrant, dated as of December 31, 1989 is incorporated herein by reference to Exhibit 10.9 to the Registrant’s Registration Statement No. 33-78852, dated July 11, 1994.
10	.14	Form of Amendment No. 1 to Railcar Management Agreement between Greenbrier Leasing Corporation and James-Furman & Registrant dated as of July 1, 1994 is incorporated herein by reference to Exhibit 10.11 to the Registrant’s Registration Statement No. 33-78852, dated July 11, 1994.
10	.15	Railcar Maintenance Agreement between Greenbrier Leasing Corporation and James-Furman & Registrant, dated as of December 31, 1989 is incorporated herein by reference to Exhibit 10.10 to the Registrant’s Registration Statement No. 33-78852, dated July 11, 1994.
10	.16	Form of Amendment No. 1 to Railcar Maintenance Agreement between Greenbrier Leasing Corporation and James-Furman & Registrant, dated as of July 1, 1994 is incorporated herein by reference to Exhibit 10.12 to the Registrant’s Registration Statement No. 33-78852, dated July 11, 1994.
10	.17	Lease of Land and Improvements dated as of July 23, 1992 between the Atchison, Topeka and Santa Fe Railway Registrant and Gunderson Southwest, Inc. is incorporated herein by reference to Exhibit 10.4 to the Registrant’s Registration Statement No. 33-78852, dated July 11, 1994.
10	.18	Re-marketing Agreement dated as of November 19, 1987 among Southern Pacific Transportation Registrant, St. Louis Southwestern Railway Registrant, Greenbrier Leasing Corporation and Greenbrier Railcar, Inc. is incorporated herein by reference to Exhibit 10.5 to the Registrant’s Registration Statement No. 33-78852, dated July 11, 1994.

64                                        The Greenbrier Companies 2006 Annual Report

EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued)

10	.19	Amendment to Re-marketing Agreement among Southern Pacific Transportation Registrant, St. Louis Southwestern Railway Registrant, Greenbrier Leasing Corporation and Greenbrier Railcar, Inc. dated as of November 15, 1988 is incorporated herein by reference to Exhibit 10.6 to the Registrant’s Registration Statement No. 33-78852, dated July 11, 1994.
10	.20	Amendment No. 2 to Re-marketing Agreement among Southern Pacific Transportation Registrant, St. Louis Southwestern Railway Registrant, Greenbrier Leasing Corporation and Greenbrier Railcar, Inc. dated as of November 15, 1988 is incorporated herein by reference to Exhibit 10.7 to the Registrant’s Registration Statement No. 33-78852, dated July 11, 1994.
10	.21	Amendment No. 3 to Re-marketing Agreement dated November 19, 1987 among Southern Pacific Transportation Registrant, St. Louis Southwestern Railway Registrant, Greenbrier Leasing Corporation and Greenbrier Railcar, Inc. dated as of March 5, 1991 is incorporated herein by reference to Exhibit 10.8 to the Registrant’s Registration Statement No. 33-78852, dated July 11, 1994.
10	.22	First amendment dated September 26, 1994 to the Lease of Land and Improvements dated as of July 23, 1992 between The Atchison, Topeka and Santa Fe Railway Registrant and Gunderson Southwest, Inc. is incorporated herein by reference to Exhibit 10.24 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended November 30, 1994.
10	.23*	Stock Incentive Plan—2000, dated as of April 6, 1999 is incorporated herein by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended August 31, 1999.
10	.24*	Amendment No. 1 to the Stock Incentive Plan—2000, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended February 28, 2001.
10	.25*	Amendment No. 2 to the Stock Incentive Plan—2000, is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended February 28, 2001.
10	.26*	Amendment No 3 to the Stock Incentive Plan—2000, is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended February 28, 2001.
10	.27	The Greenbrier Companies Code of Business Conduct and Ethics is incorporated herein by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K for the year ended August 31, 2003.
10	.28*	Employment Agreement dated February 15, 2004 between James T. Sharp and Registrant, is incorporated herein by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended August 31, 2004.
10	.29*	Form of Employee Restricted Share Agreement related to the 2005 Stock Incentive Plan, is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed August 5, 2005.
10	.30*	Form of Change of Control Agreement, is incorporated herein by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed August 5, 2005.
10	.31*	2004 Employee Stock Purchase Plan is incorporated herein by reference to Appendix B to the Registrant’s Proxy Statement on Schedule 14A filed November 25, 2003.
10	.32*	2005 Stock Incentive Plan is incorporated herein by reference to Appendix C to the Registrant’s Proxy Statement on Schedule 14A filed November 24, 2004.
10	.33*	Amendment No. 1 to the 2005 Stock Incentive Plan dated June 30, 2005 is incorporated herein by reference to Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K for the year ended August 31, 2005.
10	.34	Stock purchase agreement among Gunderson Rail Services LLC and Meridian Rail Holdings Corp. dated October 15, 2006.
12	.0	Calculation of ratio of earnings to fixed changes.
21	.1	List of the subsidiaries of the Registrant.
23	.	Consent of Deloitte & Touche LLP, independent auditors.

The Greenbrier Companies 2006 Annual Report                                         65

EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued)

31	.1(a)	Certification pursuant to Rule 13(a)-14(a)
31	.2(b)	Certification pursuant to Rule 13(a)-14(a)
32	.1(c)	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32	.2(d)	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*  Management contract or compensatory plan or arrangement.

CERTIFICATIONS

The Company filed the required 303A.12(a) New York Stock Exchange Certification of its Chief Financial Officer with the New York Stock Exchange with no qualifications following the 2005 Annual Meeting of Shareholders and the Company filed as an exhibit to its Annual Report on Form 10-K for the year ended August 31, 2005, as filed with the Securities and Exchange Commission, a Certification of the Chief Executive Officer and a Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

66                                        The Greenbrier Companies 2006 Annual Report

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE GREENBRIER COMPANIES, INC.

Dated: October 31, 2006

By:  /s/ William A. Furman

William A. Furman

President and Chief Executive Officer

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	Date
/s/ Benjamin R. Whiteley Benjamin R. Whiteley, Chairman of the Board	October 31, 2006
/s/ William A. Furman William A. Furman, President and Chief Executive Officer, Director	October 31, 2006
/s/ Victor G. Atiyeh Victor G. Atiyeh, Director	October 31, 2006
/s/ Duane McDougall Duane McDougall, Director	October 31, 2006
/s/ Daniel O’Neal A. Daniel O’Neal, Director	October 31, 2006
/s/ Charles J. Swindells Charles J. Swindells, Director	October 31, 2006
/s/ C. Bruce Ward C. Bruce Ward, Director	October 31, 2006
/s/ Donald A. Washburn Donald A. Washburn, Director	October 31, 2006
/s/ Joseph K. Wilsted Joseph K. Wilsted, Sr. Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	October 31, 2006

The Greenbrier Companies 2006 Annual Report                                         67

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GREENBRIER-CONCARRIL, LLC

Dated: October 31, 2006	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on
October 31, 2006:

Signature	Title
/s/ William A. Furman	Chairman of the Board of Directors
William A. Furman	(Principal Executive Officer)
/s/ Joseph K. Wilsted	Vice President
Joseph K. Wilsted	(Principal Financial and Accounting Officer)

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GREENBRIER LEASING LIMITED PARTNER, LLC

Dated: October 31, 2006	By: Greenbrier Leasing Company LLC
	Sole Member and Manager
	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on
October 31, 2006:

Signature	Title
/s/ William A. Furman	Principal Executive Officer
William A. Furman
/s/ Joseph K. Wilsted	Principal Financial and Accounting Officer
Joseph K. Wilsted

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GREENBRIER LEASING COMPANY, LLC

Dated: October 31, 2006	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, October 31, 2006:

Signature	Title
/s/ William A. Furman	Chief Executive Officer and Manager
William A. Furman	(Principal Executive Officer)
/s/ Joseph K. Wilsted	Vice President
Joseph K. Wilsted	(Principal Financial and Accounting Officer)

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GREENBRIER LEASING, L.P.

Dated: October 31, 2006	By: Greenbrier Management Services LLC
	General Partner
	By: Greenbrier Leasing Company LLC
	Sole Member and Manager
	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on
October 31, 2006:

Signature	Title
/s/ William A. Furman	Principal Executive Officer
William A. Furman
/s/ Joseph K. Wilsted	Principal Financial and Accounting Officer
Joseph K. Wilsted

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GREENBRIER MANAGEMENT SERVICES LLC

Dated: October 31, 2006	By: Greenbrier Leasing Company LLC
	Sole Member and Manager
	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on
October 31, 2006:

Signature	Title
/s/ William A. Furman	Principal Executive Officer
William A. Furman
/s/ Joseph K. Wilsted	Principal Financial and Accounting Officer
Joseph K. Wilsted

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GREENBRIER RAILCAR LLC

Dated: October 31, 2006	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on
October 31, 2006:

Signature	Title
/s/ William A. Furman	Manager
William A. Furman	(Principal Executive Officer)
/s/ Joseph K. Wilsted	Vice President
Joseph K. Wilsted	(Principal Financial and Accounting Officer)

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GUNDERSON LLC

Dated: October 31, 2006	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on
October 31, 2006:

Signature	Title
/s/ William A. Furman	Manager
William A. Furman	(Principal Executive Officer)
/s/ Joseph K. Wilsted	Vice President
Joseph K. Wilsted	(Principal Financial and Accounting Officer)

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GUNDERSON MARINE LLC

Dated: October 31, 2006	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on
October 31, 2006:

Signature	Title
/s/ William A. Furman	Manager
William A. Furman	(Principal Executive Officer)
/s/ Joseph K. Wilsted	Vice President
Joseph K. Wilsted	(Principal Financial and Accounting Officer)

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GUNDERSON RAIL SERVICES LLC

Dated: October 31, 2006	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on
October 31, 2006:

Signature	Title
/s/ William A. Furman	Manager
William A. Furman	(Principal Executive Officer)
/s/ Joseph K. Wilsted	Vice President
Joseph K. Wilsted	(Principal Financial and Accounting Officer)

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GUNDERSON SPECIALTY PRODUCTS LLC

Dated: October 31, 2006	By: Gunderson LLC, Sole Member and Sole Manager
	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on
October 31, 2006:

Signature	Title
/s/ William A. Furman	Principal Executive Officer
William A. Furman
/s/ Joseph K. Wilsted	Principal Financial and Accounting Officer
Joseph K. Wilsted

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AUTOSTACK COMPANY LLC

Dated: October 31, 2006	By:	/s/ Joseph K. Wilsted
		Joseph K. Wilsted
		Vice President

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on
October 31, 2006:

Signature	Title
/s/ William A. Furman	Chief Executive Officer and Manager
William A. Furman	(Principal Executive Officer)
/s/ Joseph K. Wilsted	Vice President
Joseph K. Wilsted	(Principal Financial and Accounting Officer)

EX-10.12

                                                                   EXHIBIT 10.12

                         THE GREENBRIER COMPANIES, INC.

            AGREEMENT CONCERNING INDEMNIFICATION AND RELATED MATTERS
                                   (DIRECTORS)

     This Agreement is made as of February 28, 2006, by and between THE
GREENBRIER COMPANIES, INC., an Oregon corporation (the "Corporation"), and
___________ (the "Director"), a director of the Corporation.

     WHEREAS, it is essential to the Corporation to retain and attract as
directors of the Corporation the most capable persons available and persons who
have significant experience in business, corporate and financial matters; and

     WHEREAS, the Corporation has identified the Director as a person possessing
the background and abilities desired by the Corporation and desires the Director
to serve as a director of the Corporation; and

     WHEREAS, the substantial increase in corporate litigation may, from time to
time, subject directors to burdensome litigation, the risks of which frequently
far outweigh the advantages of serving in such capacity; and

     WHEREAS, in recent times the cost of liability insurance has increased and
the availability of such insurance is, from time to time, severely limited; and

     WHEREAS, the Corporation and the Director recognize that serving as a
director of a corporation at times calls for subjective evaluations and
judgments upon which reasonable persons may differ and that, in that context, it
is anticipated and expected that directors of corporations will and do from time
to time commit actual or alleged errors or omissions in the good faith exercise
of their corporate duties and responsibilities; and

     WHEREAS, it is the express policy of the Corporation to indemnify its
directors to the fullest extent permitted by law; and

     WHEREAS, the Articles of Incorporation of the Corporation permit, and the
Bylaws of the Corporation require, indemnification of the directors of the
Corporation to the fullest extent permitted by law, including but not limited to
the Oregon Business Corporation Act (the "OBCA"), and the OBCA expressly
provides that the indemnification provisions set forth therein are not
exclusive, and thereby contemplates that contracts may be entered into between
the Corporation and its directors with respect to indemnification; and

     WHEREAS, the Corporation and the Director desire to articulate clearly in
contractual form their respective rights and obligations with regard to the
Director's service on behalf of the Corporation as a director and with regard to
claims for loss, liability, expense or damage which, directly or indirectly, may
arise out of or relate to such service; and



     WHEREAS, the Corporation and the Director are parties to an indemnification
agreement, dated as of _________ (the "Delaware Indemnification Agreement"),
that is governed by Delaware law and was entered into when the Corporation was
incorporated in Delaware; and

     WHEREAS, as the Corporation has reincorporated in Oregon as of this date
(the "Reincorporation"); and

     WHEREAS, in recognition of the differences between Oregon and Delaware law
governing the indemnification of directors, the Corporation and the Director
desire to enter into a new indemnification agreement that replaces their prior
agreement as of the effective time of the Reincorporation;

     NOW THEREFORE, the Corporation and the Director agree as follows:

1.   Agreement to Serve.

     The Director shall serve as a director of the Corporation for so long as
the Director is duly elected or until the Director tenders a resignation in
writing. This Agreement creates no obligation on either party to continue the
service of the Director for a particular term or any term.

2.   Definitions.

     As used in this Agreement:

     (a)  The term "Proceeding" shall include any threatened, pending or
          completed action, suit or proceeding, whether brought in the right of
          the Corporation or otherwise, and whether of a civil, criminal,
          administrative or investigative nature, whether formal or informal, in
          which the Director may be or may have been involved as a party,
          witness or otherwise, by reason of the fact that the Director is or
          was a director of the Corporation, or is or was serving at the request
          of the Corporation as a director, officer, partner, trustee, manager,
          employee or agent of another corporation, limited liability company,
          partnership, joint venture, trust or other enterprise, whether or not
          serving in such capacity at the time any liability or expense is
          incurred for which exculpation, indemnification or reimbursement can
          be provided under this Agreement.

     (b)  The term "Expenses" includes, without limitation thereto, expenses of
          investigations, judicial or administrative proceedings or appeals,
          attorney, accountant and other professional fees and disbursements and
          any expenses of establishing a right to indemnification under Section
          12 of this Agreement, but shall not include amounts paid in settlement
          by the Director or the amount of judgments or fines against the
          Director.


                                        2



     (c)  References to "other enterprise" include, without limitation, employee
          benefit plans; references to "fines" include, without limitation, any
          excise taxes assessed on a person with respect to any employee benefit
          plan; references to "serving at the request of the Corporation"
          include, without limitation, any service as a director, officer,
          partner, trustee, manager, employee or agent which imposes duties on,
          or involves services by, such director, officer, partner, trustee,
          manager, employee or agent with respect to an employee benefit plan,
          its participants, or its beneficiaries; and a person who acted in good
          faith and in a manner such person reasonably believed to be in the
          interest of the participants and beneficiaries of an employee benefit
          plan shall be deemed to have acted in a manner "not opposed to the
          best interests of the Corporation" as referred to in this Agreement.

     (d)  References to "the Corporation" shall include, in addition to the
          resulting entity, any constituent corporation or other entity
          (including any constituent of a constituent) absorbed in a
          consolidation or merger which, if its separate existence had
          continued, would have had power and authority to indemnify its
          directors, officers, partners, trustees, managers, employees or
          agents, so that any person who is or was a director, officer, partner,
          trustee, manager, employee or agent of such constituent entity, or is
          or was serving at the request of such constituent entity as a
          director, officer, partner, trustee, manager, employee or agent of
          another corporation, limited liability company, partnership, joint
          venture, trust or other enterprise, shall stand in the same position
          under this Agreement with respect to the resulting or surviving entity
          as such person would have with respect to such constituent entity if
          its separate existence had continued.

     (e)  For purposes of this Agreement, the meaning of the phrase "to the
          fullest extent permitted by law" shall include, but not be limited to:

          (i)  to the fullest extent authorized or permitted by any amendments
               to or replacements of the OBCA adopted after the date of this
               Agreement that increase the extent to which a corporation may
               indemnify or exculpate its directors; and

          (ii) to the fullest extent permitted by the provision of the OBCA that
               authorizes or contemplates additional indemnification by
               agreement, or the corresponding provision of any amendment to or
               replacement of the OBCA.

3.   Limitation of Liability

     To the fullest extent permitted by law, the Director shall have no monetary
liability of any kind or nature whatsoever in respect of the Director's errors
or omissions (or alleged errors or omissions) in serving the Corporation or any
of its subsidiaries, their respective shareholders or any other enterprise at
the request of the Corporation, so long as such errors or omissions (or alleged
errors or omissions), if any, are not shown by clear and convincing evidence to
have involved:


                                        3



          (i)  any breach of the Director's duty of loyalty to such entities,
               shareholders or enterprises;

          (ii) any act or omission not in good faith or which involved
               intentional misconduct or a knowing violation of law;

          (iii) any transaction from which the Director derived an improper
               personal benefit;

          (iv) any unlawful distribution (including, without limitation,
               dividends, stock repurchases and stock redemptions), as defined
               in the OBCA or, as applicable, in the limited liability company
               act of the state where the Company's subsidiary is organized; or

          (v)  profits made from the purchase and sale by the Director of
               securities of the Corporation within the meaning of Section 16(b)
               of the Securities Exchange Act of 1934, as amended, or similar
               provision of any state statutory law or common law.

     (b)  Without limiting the generality of subparagraph (a) above and to the
          fullest extent permitted by law, the Director shall have no personal
          liability to the Corporation or any of its subsidiaries, their
          respective shareholders or any other person claiming derivatively
          through the Corporation, regardless of the theory or principle under
          which such liability may be asserted, for:

          (i)  punitive, exemplary or consequential damages;

          (ii) treble or other damages computed based upon any multiple of
               damages actually and directly proved to have been sustained;

          (iii) fees of attorneys, accountants, expert witnesses or professional
               consultants; or

          (iv) civil fines or penalties of any kind or nature whatsoever.

4.   Indemnity in Third Party Proceedings.

     The Corporation shall indemnify the Director in accordance with the
provisions of this Section 4 if the Director was or is a party to, or is
threatened to be made a party to, any Proceeding (other than a Proceeding by or
in the right of the Corporation to procure a judgment in its favor), against all
Expenses, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by the Director in connection with such Proceeding if the
Director acted in good faith and in a manner the Director reasonably believed
was in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, the Director, in addition, had no
reasonable cause to believe that the Director's conduct was unlawful.


                                        4



However, the Director shall not be entitled to indemnification under this
Section 4 in connection with any Proceeding charging improper personal benefit
to the Director in which the Director is adjudged liable on the basis that
personal benefit was improperly received by the Director unless and only to the
extent that the court conducting such Proceeding, or any other court of
competent jurisdiction, determines upon application that, despite the
adjudication of liability, the Director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances.

5.   Indemnity in Proceedings by or in the Right of the Corporation.

     The Corporation shall indemnify the Director in accordance with the
provisions of this Section 5 if the Director was or is a party to, or is
threatened to be made a party to, any Proceeding by or in the right of the
Corporation to procure a judgment in its favor, against all Expenses actually
and reasonably incurred by the Director in connection with the defense or
settlement of such Proceeding if the Director acted in good faith and in a
manner the Director reasonably believed was in or not opposed to the best
interests of the Corporation. However, the Director shall not be entitled to
indemnification under this Section 5 in connection with any Proceeding in which
the Director has been adjudged liable to the Corporation unless and only to the
extent that the court conducting such Proceeding, or any other court of
competent jurisdiction, determines upon application that, despite the
adjudication of liability, the Director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances.

6.   Indemnification of Expenses of Successful Party.

     Notwithstanding any other provisions of this Agreement other than Section
8, to the extent that the Director has been successful, on the merits or
otherwise, in defense of any Proceeding or in defense of any claim, issue or
matter therein, including the dismissal of an action without prejudice, the
Corporation shall indemnify the Director against all Expenses actually and
reasonably incurred in connection therewith.

7.   Additional Indemnification.

     Notwithstanding any limitation in Sections 4, 5 or 6, the Corporation shall
indemnify the Director to the fullest extent permitted by law with respect to
any Proceeding (including a Proceeding by or in the right of the Corporation to
procure a judgment in its favor), against all Expenses, judgments, fines and
amounts paid in settlement, actually and reasonably incurred by the Director in
connection with such Proceeding.

8.   Exclusions.

     Notwithstanding any provision in this Agreement, the Corporation shall not
be obligated under this Agreement to make any indemnification in connection with
any claim made against the Director:


                                        5



     (a)  for which payment is required to be made to or on behalf of the
          Director under any insurance policy, except with respect to any excess
          amount to which the Director is entitled under this Agreement beyond
          the amount of payment under such insurance policy;

     (b)  if a court having jurisdiction in the matter finally determines that
          such indemnification is not lawful under any applicable statute or
          public policy;

     (c)  in connection with any Proceeding (or part of any Proceeding)
          initiated by the Director, or any Proceeding by the Director against
          the Corporation or its directors, officers, employees or other persons
          entitled to be indemnified by the Corporation, unless:

          (i)  the Corporation is expressly required by law to make the
               indemnification;

          (ii) the Proceeding was authorized by the Board of Directors of the
               Corporation; or

          (iii) the Director initiated the Proceeding pursuant to Section 12 of
               this Agreement and the Director is successful in whole or in part
               in such Proceeding; or

     (d)  for an accounting of profits made from the purchase and sale by the
          Director of securities of the Corporation within the meaning of
          Section 16(b) of the Securities Exchange Act of 1934, as amended, or
          similar provision of any state statutory law or common law.

9.   Advances of Expenses.

     The Corporation shall pay the Expenses incurred by the Director in any
Proceeding (other than a Proceeding brought for an accounting of profits made
from the purchase and sale by the Director of securities of the Corporation
within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provision of any state statutory law or common law) in
advance of the final disposition of the Proceeding at the written request of the
Director, if the Director:

     (a)  furnishes the Corporation a written affirmation of the Director's good
          faith belief that the Director is entitled to be indemnified under
          this Agreement; and

     (b)  furnishes the Corporation a written undertaking to repay the advance
          to the extent that it is ultimately determined that the Director is
          not entitled to be indemnified by the Corporation. Such undertaking
          shall be an unlimited general obligation of the Director but need not
          be secured.

     Advances pursuant to this Section 9 shall be made no later than 10 days
after receipt by the Corporation of the affirmation and undertaking described in
Sections 9(a) and 9(b) above,


                                        6



and shall be made without regard to the Director's ability to repay the amount
advanced and without regard to the Director's ultimate entitlement to
indemnification under this Agreement. The Corporation may establish a trust,
escrow account or other secured funding source for the payment of advances made
and to be made pursuant to this Section 9 or of other liability incurred by the
Director in connection with any Proceeding.

10.  Nonexclusivity and Continuity of Rights.

     The indemnification, advancement of Expenses, and exculpation from
liability provided by this Agreement shall not be deemed exclusive of any other
rights to which the Director may be entitled under any other agreement, any
articles of incorporation, bylaws, or vote of shareholders or directors, the
OBCA, or otherwise, both as to action in the Director's official capacity and as
to action in another capacity while holding such office or occupying such
position. The indemnification under this Agreement shall continue as to the
Director even though the Director may have ceased to be a director of the
Corporation or a director, officer, partner, trustee, manager, employee or agent
of an enterprise related to the Corporation and shall inure to the benefit of
the heirs, executors, administrators and personal representatives of the
Director.

11.  Procedure Upon Application for Indemnification.

     Any indemnification under Sections 4, 5, 6 or 7 shall be made no later than
45 days after receipt of the written request of the Director, unless a
determination that the Director is not entitled to indemnification under this
Agreement is made within such 45 day period:

     (a)  by the Board of Directors by a majority vote of a quorum consisting of
          directors who are not parties to the applicable Proceeding;

     (b)  if a quorum cannot be obtained under paragraph (a) of this Section 11,
          then by a majority vote of a committee of the Board of Directors that
          is (i) duly designated by the Board of Directors, with the
          participation of directors who are parties to the applicable
          Proceeding and (ii) consists solely of two or more directors not
          parties to the applicable Proceeding;

     (c)  by independent legal counsel in a written opinion, which counsel shall
          be appointed (i) by a majority vote of the Board of Directors or its
          committee in the manner prescribed by paragraph (a) or paragraph (b)
          of this Section 11, or (ii) if a quorum of the Board of Directors
          cannot be obtained under paragraph (a) of this Section 11 or a
          committee cannot be designated under paragraph (b) of this Section 11,
          then by a majority vote of the full Board of Directors, including
          directors who are parties to the applicable Proceeding; or

     (d)  by the shareholders of the Corporation.


                                        7



12.  Enforcement.

     The Director may enforce any right to indemnification, advances or
exculpation provided by this Agreement in any court of competent jurisdiction
if:

     (a)  the Corporation denies the claim for indemnification, advances or
          exculpation, in whole or in part; or

     (b)  the Corporation does not dispose of such claim within the time period
          required by this Agreement.

     It shall be a defense to any such enforcement action (other than an action
brought to enforce a claim for advancement of Expenses pursuant to, and in
compliance with, Section 9 of this Agreement) that the Director is not entitled
to indemnification or exculpation under this Agreement. However, except as
provided in Section 13 of this Agreement, the Corporation shall not assert any
defense to an action brought to enforce a claim for advancement of Expenses
pursuant to Section 9 of this Agreement if the Director has tendered to the
Corporation the affirmation and undertaking required thereunder. The burden of
proving by clear and convincing evidence that indemnification or exculpation is
not appropriate shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, a committee thereof, or
independent legal counsel) to have made a determination prior to the
commencement of such action that indemnification or exculpation is proper in the
circumstances because the Director has met the applicable standard of conduct
nor an actual determination by the Corporation (including its Board of
Directors, a committee thereof, or independent legal counsel) that
indemnification or exculpation is improper because the Director has not met such
applicable standard of conduct, shall be asserted as a defense to the action or
create a presumption that the Director is not entitled to indemnification or
exculpation under this Agreement or otherwise. The Director's expenses incurred
in connection with successfully establishing the Director's right to
indemnification, advances or exculpation, in whole or in part, in any Proceeding
shall also be paid or reimbursed by the Corporation.

     The termination of any Proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that:

          (i)  the Director is not entitled to indemnification under Sections 4,
               5 or 7 of this Agreement because the Director did not act in good
               faith and in a manner which the Director reasonably believed to
               be in or not opposed to the best interests of the Corporation,
               and, with respect to any criminal action or proceeding, had
               reasonable cause to believe that the Director's conduct was
               unlawful; or

          (ii) the Director is not entitled to exculpation under Section 3 of
               this Agreement.


                                        8



13.  Notification and Defense of Claim.

     As a condition precedent to indemnification under this Agreement, not later
than 30 days after receipt by the Director of notice of the commencement of any
Proceeding the Director shall, if a claim in respect of the Proceeding is to be
made against the Corporation under this Agreement, notify the Corporation in
writing of the commencement of the Proceeding. The failure to properly notify
the Corporation shall not relieve the Corporation from any liability which it
may have to the Director otherwise than under this Agreement. With respect to
any Proceeding as to which the Director so notifies the Corporation of the
commencement:

     (a)  The Corporation shall be entitled to participate in the Proceeding at
          its own expense.

     (b)  Except as otherwise provided in this Section 13, the Corporation may,
          at its option and jointly with any other indemnifying party similarly
          notified and electing to assume such defense, assume the defense of
          the Proceeding, with legal counsel reasonably satisfactory to the
          Director. The Director shall have the right to use separate legal
          counsel in the Proceeding, but the Corporation shall not be liable to
          the Director under this Agreement, including Section 9 above, for the
          fees and expenses of separate legal counsel incurred after notice from
          the Corporation of its assumption of the defense, unless (i) the
          Director reasonably concludes that there may be a conflict of interest
          between the Corporation and the Director in the conduct of the defense
          of the Proceeding, or (ii) the Corporation does not use legal counsel
          to assume the defense of such Proceeding. The Corporation shall not be
          entitled to assume the defense of any Proceeding brought by or on
          behalf of the Corporation or as to which the Director has made the
          conclusion provided for in (i) above.

     (c)  If two or more persons who may be entitled to indemnification from the
          Corporation, including the Director, are parties to any Proceeding,
          the Corporation may require the Director to use the same legal counsel
          as the other parties. The Director shall have the right to use
          separate legal counsel in the Proceeding, but the Corporation shall
          not be liable to the Director under this Agreement, including Section
          9 above, for the fees and expenses of separate legal counsel incurred
          after notice from the Corporation of the requirement to use the same
          legal counsel as the other parties, unless the Director reasonably
          concludes that there may be a conflict of interest between the
          Director and any of the other parties required by the Corporation to
          be represented by the same legal counsel.

     (d)  The Corporation shall not be liable to indemnify the Director under
          this Agreement for any amounts paid in settlement of any Proceeding
          effected without its written consent, which shall not be unreasonably
          withheld. The Director shall permit the Corporation to settle any
          Proceeding that the Corporation assumes the defense of, except that
          the Corporation shall not settle any action or claim in any manner
          that would impose any penalty or limitation on the Director without
          the Director's written consent.


                                        9



14.  Partial Indemnification.

     If the Director is entitled under any provision of this Agreement to
indemnification by the Corporation for some or a portion of the Expenses,
judgments, fines or amounts paid in settlement, actually and reasonably incurred
by the Director in connection with such Proceeding, but not, however, for the
total amount thereof, the Corporation shall nevertheless indemnify the Director
for the portion of such Expenses, judgments, fines or amounts paid in settlement
to which the Director is entitled.

15.  Interpretation and Scope of Agreement.

     Nothing in this Agreement shall be interpreted to constitute a contract of
service for any particular period or pursuant to any particular terms or
conditions. The Corporation retains the right, in its discretion, to terminate
the service relationship of the Director, with or without cause, or to alter the
terms and conditions of the Director's service all without prejudice to any
rights of the Director which may have accrued or vested prior to such action by
the Corporation.

16.  Severability.

     If this Agreement or any portion thereof shall be invalidated on any ground
by any court of competent jurisdiction, the remainder of this Agreement shall
continue to be valid and the Corporation shall nevertheless indemnify the
Director as to Expenses, judgments, fines and amounts paid in settlement with
respect to any Proceeding to the fullest extent permitted by any applicable
portion of this Agreement that shall not have been invalidated.

17.  Subrogation.

     In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
Director. The Director shall execute all documents required and shall do all
acts that may be necessary to secure such rights and to enable the Corporation
effectively to bring suit to enforce such rights.

18.  Notices.

     All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given upon
delivery by hand to the party to whom the notice or other communication shall
have been directed, or on the third business day after the date on which it is
mailed by United States mail with first-class postage prepaid, addressed as
follows:


                                       10



     (a)  If to the Director, to the address indicated on the signature page of
          this Agreement.

     (b)  If to the Corporation, to

          The Greenbrier Companies, Inc.
          One Centerpointe Drive, Suite 200
          Lake Oswego, Oregon 97035
          Attention: President

          With a copy to:

          General Counsel
          The Greenbrier Companies, Inc.
          One Centerpointe Drive, Suite 200
          Lake Oswego, Oregon 97035

or to any other address as either party may designate to the other in writing.

19.  Counterparts.

     This Agreement may be executed in any number of counterparts, each of which
shall constitute the original.

20.  Applicable Law.

     This Agreement shall be governed by and construed in accordance with the
internal laws of the state of Oregon without regard to the principles of
conflict of laws.

21.  Successors and Assigns.

     This Agreement shall be binding upon the Corporation and its successors and
assigns.

22.  Attorney Fees.

     If any suit or action (including, without limitation, any bankruptcy
proceeding) is instituted to enforce or interpret any provision of this
Agreement, the prevailing party shall be entitled to recover from the party not
prevailing, in addition to other relief that may be provided by law, an amount
determined reasonable as attorney fees at trial and on any appeal of such suit
or action.


                                       11



23.  Jurisdiction and Venue.

     Each party hereto expressly and irrevocably consents and submits to the
jurisdiction and venue of any state or federal court sitting in Multnomah
County, Oregon, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in such court and to the appellate courts in connection
with any appeal. The parties expressly waive all defenses of lack of personal
jurisdiction, improper venue and forum non-conveniens with respect to such
federal and state courts sitting within Multnomah County, Oregon. The parties
expressly consent to (i) service of process being effected upon them by
certified mail sent to the addresses set forth in this Agreement and (ii) any
final judgment rendered against a party in any action or proceeding being
enforceable in other jurisdictions in any manner provided by law.

24.  Delaware Indemnification Agreement.

This Agreement supersedes and replaces the Delaware Indemnification Agreement as
of the effective time of the Reincorporation. However, the Delaware
Indemnification Agreement shall continue to govern any claim for or right to
indemnification arising prior to the effective time of the Reincorporation.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.

CORPORATION:
THE GREENBRIER COMPANIES, INC.          DIRECTOR:


By:
    ---------------------------------   ----------------------------------------
Title:                                  [Director]
       ------------------------------   [Address]

                                        ----------------------------------------

                                        ----------------------------------------


                                       12

EX-10.34

                                                                   EXHIBIT 10.34

                            STOCK PURCHASE AGREEMENT

                                      among

                          GUNDERSON RAIL SERVICES LLC,

                            the Sellers party hereto,

                                       and

                          MERIDIAN RAIL HOLDINGS CORP.

                                October 15, 2006



                            STOCK PURCHASE AGREEMENT

          THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of October
15, 2006, by and among Gunderson Rail Services LLC, an Oregon limited liability
company ("Buyer"), Meridian Rail Holdings Corp., a Delaware corporation (the
"Company"), the Persons listed on the signature pages hereto under the heading
"Sellers" (collectively referred to herein as the "Sellers" and individually as
a "Seller") and Olympus Growth Fund IV, L.P. as the "Seller Representative".
Capitalized terms used and not otherwise defined herein have the meanings set
forth in Article XII.

          WHEREAS, the Sellers collectively own (i) all of the issued and
outstanding capital stock of the Company as of the date hereof, which consists
of 33,392.43 shares of the Company's Common Stock, par value $0.01 per share
("Common") and 48,880 shares of the Company's Series A Preferred Stock, par
value $0.01 per share ("Preferred" and together with the Common, the "Shares")
and (ii) warrants currently exercisable to purchase 542.97 shares of Common and
794.80 shares of Preferred (the "Warrants"), which are collectively the only
outstanding equity securities of Company.

          WHEREAS, upon the terms and subject to the conditions set forth
herein, Buyer desires to acquire from the Sellers, and the Sellers desire to
sell to Buyer, all of the Shares which are issued and outstanding and owned by
the Sellers as of the Closing Date.

          WHEREAS, simultaneously with the Closing (as defined below), Buyer
will contribute a sufficient amount of cash to cancel the Warrants in exchange
for the cash payment provided for and on the terms and conditions herein.

          NOW, THEREFORE, in consideration of the premises, representations and
warranties and mutual covenants contained herein and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

                                   ARTICLE I

                                PURCHASE AND SALE

     1.01 Delivery of Estimates; Calculation of Estimated Common Purchase Price.

          (a) At least two business days before the Closing Date, the Company
shall deliver to Buyer a certificate (the "Closing Payment Certificate"), which
Closing Payment Certificate shall be subject to the review and approval of the
Seller Representative, setting forth (i) its good faith estimate of the Cash On
Hand (such estimate is referred to as the "Estimated Cash on Hand"), (ii) its
good faith estimate of the Net Working Capital Amount (such estimate is referred
to as the "Estimated Net Working Capital Amount"), (iii) its good faith estimate
of the Pre-Closing Tax Amount (such estimate is referred to as the "Estimated
Pre-Closing Tax Amount"), (iv) the Aggregate Preferred Purchase Price and the
portion of the Aggregate Preferred Purchase Price to be delivered to each holder
of Preferred, (v) its good faith estimate of the Estimated Common Purchase Price
(as defined below), (vi) the Indebtedness Payoff Amount, (vii) the individual
Common Warrant Cancellation Payments (as defined below) to be delivered to each
holder of Warrants to purchase Common and the individual Preferred Warrant
Cancellation Payments (as defined below) to be delivered to each holder of
Warrants to purchase Preferred, as more fully set forth on Section 1.05 of the
Disclosure Schedules (such estimates are collectively referred to as the
"Estimated Warrant Cancellation Payments") and (viii) the aggregate amount of
Sellers' Expenses


                                       1



(such estimate is referred to as the "Estimated Sellers' Expenses"). Section
1.01(a) of the Disclosure Schedules sets forth a calculation of the amounts
described in this Section 1.01(a) and the payments to be made pursuant to
Section 1.03(b) based on information available as of the date of this Agreement
and certain assumptions as to items that cannot be determined until the Closing
Date.

          (b) For purposes hereof, the "Estimated Common Purchase Price" means
an amount equal to (A) $227,500,000, plus (B) the Estimated Cash on Hand, minus
(C) the Indebtedness Payoff Amount, plus (D) the amount, if any, by which the
Estimated Net Working Capital Amount exceeds the Target Net Working Capital
Amount (such amount, if any, the "Closing Date Working Capital Increase
Amount"), minus (E) the amount, if any, by which the Target Net Working Capital
Amount exceeds the Estimated Net Working Capital Amount, minus (F) the Estimated
Pre-Closing Tax Amount, minus (G) the Aggregate Preferred Purchase Price, minus
(H) without duplication, the aggregate amount, if any, of Estimated Sellers'
Expenses (as detailed in the Closing Payment Certificate), minus (I) the
aggregate amount of the Estimated Warrant Cancellation Payments. The Estimated
Common Purchase Price shall be adjusted after Closing as set forth in Section
1.04 below.

     1.02 Purchase and Sale of Shares.

          (a) Purchase and Sale of Preferred. As of the Closing, upon the terms
and subject to the conditions set forth in this Agreement, each Seller shall
sell, assign, transfer and convey to Buyer, and Buyer shall purchase and acquire
from each Seller, all of the shares of Preferred held by such Seller as such
ownership is set forth on Section 1.02 of the Disclosure Schedules. The purchase
price to be paid by Buyer to each Seller for the shares of Preferred held by
such Seller shall consist of a payment at the Closing, by wire transfer of
immediately available funds to the account designated by such Seller at least
two business days before the Closing, of an amount of cash equal to the sum of
the Preferred Per Share Prices for all shares of Preferred held by such Seller
as of immediately prior to the Closing.

          (b) Purchase and Sale of Common. As of the Closing, upon the terms and
subject to the conditions set forth in this Agreement, each Seller shall sell,
assign, transfer and convey to Buyer, and Buyer shall purchase and acquire from
each such Seller, all of the shares of Common held by such Seller as such
ownership is set forth on Section 1.02 of the Disclosure Schedules. The purchase
price to be paid by Buyer at the Closing to each Seller for the shares of Common
held by such Seller shall consist of a payment at the Closing, by wire transfer
of immediately available funds to the account designated by such Seller at least
two business days before the Closing, of an amount of cash equal to the product
of (x) the Estimated Common Purchase Price, multiplied by (y) the number of
shares of Common held by such Seller as of immediately prior to the Closing
divided by (z) the number of shares of Common issued and outstanding immediately
prior to the Closing. Such payment shall be subject to the Purchase Price
True-Up Holdback as described below.

     1.03 The Closing; Payment for Shares, Indebtedness and Sellers' Expenses.

          (a) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Kirkland & Ellis LLP located
at 200 East Randolph Drive, Chicago, Illinois at 12:00 noon on November 7, 2006
(via facsimile, telephone, mail and other mutually acceptable means of
communication and delivery) or if any of the conditions to the Closing set forth
in Article II (other than those to be satisfied at the Closing) have not been
satisfied or waived by the party entitled to the benefit thereof then on the
second business day following satisfaction or waiver of all of the closing
conditions set forth in Article II (other than those to be satisfied at the
Closing) or on such other date as is mutually agreeable to Buyer and the Seller
Representative. The date on which the Closing shall occur is


                                       2



referred to herein as the "Closing Date." Except as otherwise provided in this
Agreement, all proceedings to be taken and all documents to be executed at the
Closing shall be deemed to have been taken, delivered and executed
simultaneously, and no proceeding shall be deemed taken nor documents deemed
executed or delivered until all have been taken, delivered and executed.

          (b) Upon the terms and subject to the conditions set forth in this
Agreement, the parties hereto shall consummate the following transactions as of
the Closing:

               (i) Buyer shall disburse (or cause such disbursement to be made)
     the amount (without duplication) of the Aggregate Preferred Purchase Price,
     the Estimated Warrant Cancellation Payments, the Estimated Sellers'
     Expenses and the Estimated Common Purchase Price as set forth on the
     Closing Payment Certificate and in accordance with the flow of funds
     memorandum attached to the Closing Payment Certificate and as follows:

               (A) Buyer shall deliver to each of the Sellers who are selling
          Preferred, the Preferred Per Share Price in exchange for each share of
          Preferred held by such Seller immediately prior to the Closing;

               (B) Buyer shall deliver (on behalf of the Company in accordance
          with Section 1.05) to each of the Sellers who are canceling Warrants
          to purchase Preferred, its share of the Preferred Warrant Cancellation
          Payments in exchange for canceling the Warrants to purchase Preferred
          held by such Seller immediately prior to Closing;

               (C) Buyer shall disburse an amount equal to (i) $1,000,000 plus
          (ii) the Closing Date Working Capital Increase Amount (if any)
          (collectively, the "Purchase Price True-Up Holdback") and the Escrow
          Amount to U.S. Bank National Association, as the escrow agent (the
          "Escrow Agent") by wire transfer of immediately available funds,
          pursuant to instructions delivered to Buyer by the Escrow Agent to be
          held pursuant to the Holdback Agreement;

               (D) Buyer shall disburse an amount equal to the Seller
          Representative Reserve to the Seller Representative by wire transfer
          of immediately available funds, pursuant to instructions delivered to
          Buyer by the Seller Representative to be held in accordance with
          Section 10.05;

               (E) after payment of the amounts set forth above, Buyer shall
          deliver to each of the Sellers who are selling Common the
          consideration specified in Section 1.02(b) in exchange for all shares
          of Common held by such Seller immediately prior to Closing, minus such
          Seller's Holdback Share of the sum of the Purchase Price True-Up
          Holdback, and such Seller's Percentage Share of the Escrow Amount and
          the Seller Representative Reserve;

               (F) after payment of the amounts set forth above, Buyer shall
          deliver (on behalf of the Company in accordance with Section 1.05) to
          each of the Sellers who are canceling Warrants to purchase Common, its
          share of the Common Warrant Cancellation Payments in exchange for
          canceling the Warrants to purchase Common held by such Seller
          immediately prior to Closing, minus such Seller's Holdback Share of
          the sum of the Purchase Price True-Up Holdback, and such Seller's
          Percentage Share of the Escrow Amount and the Seller Representative
          Reserve;


                                       3



               (G) Except as provided below in subsection (H) with respect to
          bonuses to employees of the Company, Buyer shall pay, or cause to be
          paid, on behalf of the Sellers and the Company, (i) the Estimated
          Sellers' Expenses by wire transfer of immediately available funds to
          accounts specified by the Seller Representative prior to the Closing
          in the Closing Payment Certificate, and (ii) the Indebtedness Payoff
          Amount in accordance with the terms of payoff letters with respect
          thereto;

               (H) Buyer shall contribute to the Company that portion of
          Sellers' Expenses which represents the bonuses to be paid to certain
          employees at the Closing and that portion of Sellers' Expenses which
          represents the employer portion of any and all applicable federal,
          state and local employer payroll-related Taxes, employer matching
          contributions on 401(k) deferrals, FICA, Medicare and other employer
          liabilities, obligations or payments with respect to such bonuses and
          the Company shall withhold any applicable withholding Tax, which
          amounts are required to be deducted and withheld pursuant to
          applicable Tax law, before the Company remits the remaining amount of
          such bonuses to the employees. The Company shall remit such
          withholding Taxes to the appropriate Taxing authority;

               (ii) Each Seller shall deliver to Buyer the certificates
     representing the Shares held by such Seller, duly endorsed for transfer or
     accompanied by appropriate transfer documents, and each holder of a Warrant
     shall deliver to Buyer the Warrant Cancellation Agreement referenced in
     Section 1.05 with respect to each Warrant held by such holder; and

               (iii) Buyer, the Company and the Sellers shall make such other
     deliveries as are required by and in accordance with Article II hereof.

     1.04 Final Calculations.

          (a) Determination. As promptly as possible, but in any event within 75
days after the Closing Date, Buyer will deliver to the Seller Representative a
consolidated balance sheet of the Company as of 11:59 p.m. (New York City time)
on the day immediately preceding the Closing Date and a reasonably detailed
statement (the "Closing Statement") setting forth Buyer's calculations of (i)
Cash on Hand, (ii) the Net Working Capital Amount, (iii) the Pre-Closing Tax
Amount, (iv) the Sellers' Expenses, (v) a recalculation of the Common Purchase
Price and (vi) a recalculation of the Common Warrant Cancellation Payments.
After delivery of the Closing Statement, the Seller Representative and its
accountants shall be permitted reasonable access to review the Company's and its
Subsidiaries' books and records and work papers related to the preparation of
the Closing Statement. The Seller Representative and its accountants may make
inquiries of Buyer, the Company and their respective accountants and officers
regarding questions concerning or disagreements with the Closing Statement
arising in the course of their review thereof, and Buyer shall use its, and
shall cause the Company and its Subsidiaries to use their, reasonable best
efforts to cause any such accountants and officers to cooperate with and respond
to such inquiries. If the Seller Representative has any objections to the
Closing Statement, the Seller Representative shall deliver to Buyer a written
statement setting forth its objections thereto (an "Objections Statement"). If
an Objections Statement is not delivered to Buyer within 60 days after delivery
of the Closing Statement, the Closing Statement shall be final, binding and
non-appealable by the parties hereto. The Seller Representative and Buyer shall
negotiate in good faith to resolve any objections set forth in the Objections
Statement (and all such discussions related thereto shall, unless otherwise
agreed by Buyer and the Seller Representative, be governed by Rule 408 of the
Federal Rules of Evidence (and any applicable similar state rule)), but if they
do not reach a final resolution within 15 days after the


                                       4



delivery of the Objections Statement, the Seller Representative and Buyer shall
submit such dispute for resolution to and by KPMG LLP (the "Independent
Auditor"). Each of Buyer and the Seller Representative agrees to execute, if
requested by the Independent Auditor, an engagement letter containing reasonable
and customary terms, including an indemnification against claims asserted by the
respective parties. The Seller Representative and Buyer shall use their
commercially reasonable efforts to cause the Independent Auditor to resolve all
such disagreements as soon as practicable. The resolution of the dispute by the
Independent Auditor shall be final, binding and non-appealable on the parties
hereto. The Independent Auditor shall act as an arbitrator to determine, based
upon the provisions of this Section 1.04(a), only the disputed items and the
determination of each amount of the disputed items shall be made in accordance
with the procedures set forth in Section 1.04(a) and, in any event, shall be no
less than the lesser of the amount claimed by either Buyer or the Seller
Representative, and shall be no greater than the greater of the amount claimed
by either Buyer or the Seller Representative. The Closing Statement shall be
modified if necessary to reflect such determination. The fees and expenses of
the Independent Auditor shall be allocated to be paid by Buyer, on the one hand,
and the Sellers (from the Purchase Price True-Up Holdback, to the extent the
Deficiency (if any) plus any such fees and expenses payable by the Sellers to
the Independent Auditor hereunder are less than or equal to the amount of funds
in the Purchase Price True-Up Holdback), on the other hand, based upon the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party, as determined by the
Independent Auditor. The obligation of any Seller to pay such fees and expenses
to the Independent Auditor shall be several and limited to such Seller's
Holdback Share.

          (b) Final Adjustment Amount. Without duplication, all amounts owed
based on the calculations in the Closing Statement shall be aggregated, and the
net amount (if any) owed by Buyer to the Sellers, on the one hand, or the
Sellers to Buyer, on the other hand, is referred to as the "Final Adjustment
Amount." The Final Adjustment Amount shall be calculated as an adjustment to
each of the Estimated Common Purchase Price and the Common Warrant Cancellation
Payments and the Common Purchase Price, as so adjusted, is referred to herein as
the "Final Common Purchase Price."

          (c) Adjustments.

               (i) Positive Adjustment. If the Final Common Purchase Price is
     equal to or greater than the Estimated Common Purchase Price estimated at
     Closing (such amount that is greater than the Estimated Common Purchase
     Price shall be referred to as the "Excess"), Buyer shall pay to the Seller
     Representative the Excess, if any, which shall be paid by the Seller
     Representative to each Seller based on such Seller's Holdback Share, and
     the Seller Representative, on behalf of the Sellers, and Buyer shall direct
     the Escrow Agent to pay to such Sellers their Holdback Share of all funds
     deposited and remaining in the Purchase Price True-Up Holdback.

               (ii) Negative Adjustment. If the Final Common Purchase Price is
     less than the Estimated Common Purchase Price estimated at Closing (such
     amount that is less than the Estimated Common Purchase Price shall be
     referred to as the "Deficiency") and the Deficiency is less than or equal
     to the amount of funds deposited in the Purchase Price True-Up Holdback,
     the Seller Representative, on behalf of the Sellers, and Buyer shall direct
     the Escrow Agent to pay to Buyer the amount of the Deficiency from the
     funds deposited and remaining in the Purchase Price True-Up Holdback and
     direct that the balance of the Purchase Price True-Up Holdback (if any) be
     paid to the Sellers in accordance with their Holdback Share.


                                       5



               (iii) Other Adjustment. If the Deficiency is greater than the
     amount of funds deposited in the Purchase Price True-Up Holdback (such
     difference, the "Shortfall"), the Seller Representative, on behalf of the
     Sellers, and Buyer shall direct the Escrow Agent to pay to Buyer all funds
     deposited and remaining in the Purchase Price True-Up Holdback, and (x) at
     the sole election of Buyer, Buyer shall be entitled to take all or any
     portion of the Shortfall from the Escrow Amount and (y) the Sellers shall
     pay the Shortfall to Buyer, or such portion of the Shortfall not received
     by Buyer from the Escrow Amount to Buyer, with each Seller's obligation
     being several and limited to such Seller's Holdback Share of the Shortfall.

               (iv) Payment of the Adjustments. Payment of these adjustment
     amounts shall be paid by delivery of immediately available funds to the
     account designated by the recipient party(ies) (or if such payor is a
     Seller, such Seller may, with the consent of Buyer, pay by certified check
     or money order) within three business days of the date of final
     determination. All such adjustments shall be deemed adjustments to the
     Final Common Purchase Price for all Tax purposes.

          (d) Enforcement. If any Seller does not pay the amounts required to be
paid to Buyer under Section 1.04(c)(iii) within the time frame specified under
Section 1.04(c)(iv) once such amounts are finally determined hereunder,
notwithstanding anything to the contrary in this Agreement, Buyer shall be
entitled to recover from such Seller all costs, fees and expenses, including
attorneys' fees, incurred in connection with any action brought by Buyer to
enforce payment of such amounts, and in any petition for appeal or appeals
therefrom or in bankruptcy, in addition to any other relief to which Buyer may
be entitled. If Buyer does not pay the amounts required to be paid to the
Sellers under Section 1.04(c)(iii) within the time frame specified under Section
1.04(c)(iv) once such amounts are finally determined hereunder, notwithstanding
anything to the contrary in this Agreement, the Seller Representative shall be
entitled to recover from Buyer all costs, fees and expenses, including
attorneys' fees, incurred in connection with any action brought by the Seller
Representative on behalf of the Sellers to enforce payment of such amounts, and
in any petition for appeal or appeals therefrom or in bankruptcy, in addition to
any other relief to which the Sellers may be entitled.

     1.05 Warrants. Immediately prior to the Closing (and subject to the terms
and conditions hereof), the Company shall cause each holder of Warrants set
forth on Section 1.05 of the Disclosure Schedules attached hereto to cancel and
deliver to the Company for cancellation all Warrants held by such Person in
exchange for the Warrant Cancellation Payments to be made by the Company on the
Closing Date, in each case pursuant to an executed warrant cancellation
agreement substantially in the form of Exhibit A attached hereto (the "Warrant
Cancellation Agreements"). Buyer shall cause the Company to make such Warrant
Cancellation Payments concurrently with the consummation of the Closing. For
purposes hereof, the "Common Warrant Cancellation Payments" means an amount
equal to (i) the aggregate number of shares of Common subject to the Warrant,
times the aggregate amount the holders of the Warrant would have been entitled
to receive under Section 1.02(b) assuming the Warrant had been exercised as of
the Closing, minus (ii) the aggregate amount of the applicable exercise prices
per share of Common subject to such Warrant. For purposes hereof, the "Preferred
Warrant Cancellation Payments" means an amount equal to (i) the aggregate number
of shares of Preferred subject to the Warrant, times the aggregate amount the
holders of the Warrant would have been entitled to receive under Section 1.02(a)
assuming the Warrant had been exercised as of the Closing, minus (ii) the
aggregate amount of the applicable exercise prices per share of Preferred
subject to such Warrant. The Common Warrant Cancellation Payments and the
Preferred Warrant Cancellation Payments are referred to collectively herein as
the "Warrant Cancellation Payments." The Common Warrant Cancellation Payments
shall be subject to the Purchase Price True-Up Holdback as described herein.


                                       6



     1.06 Termination of Agreements. Reference is hereby made to that certain
Stockholders Agreement of the Company, dated on or about November 23, 2004 (as
amended, modified or supplemented from time to time, the "Company Stockholders
Agreement"). Each of the Sellers, to the extent such Seller is a party to any of
the agreements and documents referenced in this Section 1.06, acknowledges and
agrees for the benefit of the other parties thereto and hereto that, upon
consummation of the Closing, all of such agreements and documents and all rights
and obligations of the parties under (i) the Company Stockholders Agreement and
(ii) all agreements and documents identified in the Disclosure Schedules as
terminating in connection with the Closing, shall each terminate without
obligation or liability to any party thereunder or hereunder. The Company hereby
acknowledges and agrees for the benefit of the other parties hereto that
effective upon the Closing the 2005 Management Bonus Plan will terminate and all
bonuses earned and accrued under those plans, including those listed on item 13
of Section 4.13(a) of the Disclosure Schedules, shall be paid out of Cash by the
Company at Closing. The parties hereto further acknowledge and agree that such
payment by the Company is payment in full, and as of the Closing the 2005
Management Bonus Plan shall be of no further force or effect, and neither the
Company nor the Sellers shall have any further obligations thereunder or any
continuing liability to any party thereto.

                                   ARTICLE II

                              CONDITIONS TO CLOSING

     2.01 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction (or Buyer's written waiver) of the following conditions as of the
Closing Date:

          (a) The representations and warranties set forth in Articles III and
IV shall be true and correct at and as of the Closing Date as though then made
(without giving effect to any materiality or Material Adverse Effect qualifiers
contained in such representations and warranties and in the case of
representations and warranties that address matters as of particular dates which
shall be true and correct at and as of such particular dates), except where the
failure of such representations and warranties to be so true and correct would
not, individually or in the aggregate, have a Material Adverse Effect;

          (b) The Company and the Sellers shall have performed in all respects
the covenants and agreements under Section 6.01(b)(xii) and 6.01(c) and in all
material respects all of the other covenants and agreements required to be
performed by them under this Agreement at or prior to the Closing;

          (c) The applicable waiting periods, if any, under the HSR Act shall
have expired or been terminated;

          (d) Since the date of this Agreement, there shall have been no
Material Adverse Effect;

          (e) Since the date of this Agreement, there has been no new litigation
commenced or, to the Company's knowledge, threatened, against the Company or its
Subsidiaries other than which would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect;


                                       7



          (f) No statute, rule, regulation, judgment, decree, ruling, injunction
or order shall have been enacted or entered and no action, suit or proceeding
shall have been instituted which restrains, enjoins, prohibits, invalidates or
otherwise prevents the consummation of the transactions contemplated hereby;

          (g) All consents, approvals, filings, notices and waivers which are
set forth on Section 2.01(g) of the Disclosure Schedules shall have been
obtained;

          (h) At or prior to the Closing, each Seller shall deliver to Buyer a
certificate in the form of U.S. Treasury Regulations Section
1.1445-2(b)(2)(iv)(A) or (B), as the case may be, or, at the option of the
Sellers, an affidavit, under penalties of perjury, stating that the Company is
not and has not been a United States real property holding corporation, dated as
of the Closing Date and in form and substance required under Treasury Regulation
Section 1.897-2(h) so that Buyer is exempt from withholding any portion of the
Purchase Price thereunder;

          (i) The Wheelset Supply and Services Agreement dated November 9, 1999
shall be in full force and effect to the same extent such agreement was in
effect prior to the Closing (subject to among other things, for the avoidance of
doubt, the disclosures set forth in Section 2.01(i) of the Disclosure
Schedules);

          (j) The existing Employment Agreements with each of Rick Turner and
Frank Cristelli, as amended and restated by the Employment Agreement Amendments,
executed prior to the date hereof and the Employment Agreement with William
Holcomb executed prior to the date hereof, shall have been duly authorized and
be in full force and effect against each of Rick Turner, Frank Cristelli and
William Holcomb;

          (k) Buyer shall have received evidence reasonably satisfactory to it
that the following agreements of the Company have been terminated in connection
with the Closing: (i) the Advisory Services Agreement dated as of November 23,
2004 between the Company and Olympus Advisory Partners, Inc. and (ii) the
Company Stockholders Agreement dated as of November 23, 2004 among the Company
and the stockholders party thereto;

          (l) Buyer shall have received, dated as of the Closing Date and
addressed to Buyer, substantially in the form of Exhibit B attached hereto an
opinion of Kirkland & Ellis LLP, legal counsel to Olympus Growth Fund IV, L.P.
("Olympus") and the Company; and

          (m) The Company or the Seller Representative (on behalf of the
Sellers), as the case may be, shall have delivered to Buyer each of the
following:

               (i) a certificate of the Company in a form reasonably
     satisfactory to Buyer, dated as of the Closing Date, stating that the
     preconditions specified in Sections 2.01(a) and (b), as they relate to the
     Company have been satisfied;

               (ii) a certificate of Olympus in a form reasonably satisfactory
     to Buyer, dated as of the Closing Date, stating that the preconditions
     specified in Sections 2.01(a) and (b), as they relate to Olympus have been
     satisfied;

               (iii) a certificate of each Seller other than Olympus in a form
     reasonably satisfactory to Buyer, dated as of the Closing Date, stating
     that the preconditions specified in Sections 2.01(a) and (b), as they
     relate to such Seller have been satisfied, or, at the option of the


                                       8



     Company, a certificate of the Company in a form reasonably satisfactory to
     Buyer, dated as of the Closing Date, stating that, to the Company's
     knowledge, the preconditions specified in Sections 2.01(a) and (b), as they
     relate to such Seller have been satisfied;

               (iv) copies of customary payoff letters from all holders of
     Indebtedness for borrowed money to be paid at Closing as part of the
     Indebtedness Payoff Amount in a form reasonably satisfactory to Buyer
     (which payoff letters shall be attached to the Closing Payment
     Certificate), and provide to Buyer recordable lien releases simultaneously
     with the Closing;

               (v) fully executed Warrant Cancellation Agreements which shall be
     in full force and effect;

               (vi) the Holdback Agreement fully executed by Sellers and the
     Escrow Agent which shall be in full force and effect;

               (vii) resignations effective as of the Closing Date from such
     officers and directors of the Company and its Subsidiaries as Buyer shall
     have requested in writing and delivered to the Company and the Seller
     Representative not less than five days prior to the Closing Date;

               (viii) a copy of the certificate of incorporation of the Company
     (certified by the Secretary of State of Delaware) and a certificate of good
     standing from the State of Delaware for the Company dated within fifteen
     days of the Closing Date; and

               (ix) certified copies of the resolutions duly adopted by the
     Company's board of directors authorizing the execution, delivery and
     performance of this Agreement and the other agreements contemplated hereby,
     and the consummation of the transactions contemplated hereby and thereby,
     including termination of the agreements and documents identified in Section
     1.06 above.

          (n) The Sellers and the Company shall have delivered to Buyer such
other documents as Buyer may reasonably request for the purpose of facilitating
the consummation or performance of any of the transactions contemplated by this
Agreement, including, without limitation, the Shares and appropriate stock
powers.

If the Closing occurs, all closing conditions set forth in this Section 2.01
which have not been fully satisfied as of the Closing shall be deemed to have
been fully waived by Buyer.

     2.02 Conditions to the Sellers' and the Company's Obligations. The
obligations of the Sellers and the Company to consummate the transactions
contemplated by this Agreement are subject to the satisfaction (or the written
waiver by the Seller Representative on behalf of the Sellers and the Company) of
the following conditions as of the Closing Date:

          (a) The representations and warranties set forth in Article V shall be
true and correct at and as of the Closing as though then made (without giving
effect to any materiality or material adverse effect qualifiers contained in
such representations and warranties and in the case of those representations and
warranties that address matters as of particular dates which shall be true and
correct at and as of such particular dates), except where the failure of such
representations and warranties to be so true and correct would not, in the
aggregate, have a material and adverse effect on Buyer's ability to consummate
the transactions contemplated by this Agreement;


                                       9



          (b) Buyer shall have performed in all material respects all the
covenants and agreements required to be performed by it under this Agreement at
or prior to the Closing;

          (c) The applicable waiting periods, if any, under the HSR Act shall
have expired or been terminated;

          (d) No statute, rule, regulation, judgment, decree, ruling, injunction
or order shall have been enacted or entered and no action, suit or proceeding
shall have been instituted which restrains, enjoins, prohibits, invalidates or
otherwise prevents the consummation of the transactions contemplated hereby;

          (e) All consents and approvals which are set forth on Section 2.02(e)
of the Disclosure Schedules attached hereto shall have been obtained;

          (f) The Seller Representative shall have received, dated as of the
Closing Date and substantially in the form of Exhibit C attached hereto an
opinion of Tonkon Torp LLP, legal counsel to Buyer and Guarantor;

          (g) Buyer shall have delivered to the Seller Representative certified
copies of the resolutions duly adopted by Buyer's and the Guarantor's board of
directors (or its equivalent governing body) authorizing the execution, delivery
and performance of this Agreement and the other agreements contemplated hereby,
and the consummation of all transactions contemplated hereby and thereby; and

          (h) Buyer shall have delivered to the Seller Representative a
certificate in the form reasonably satisfactory to the Seller Representative,
dated as of the Closing Date, stating that the preconditions specified in
Sections 2.02(a) and (b) have been satisfied.

If the Closing occurs, all closing conditions set forth in this Section 2.02
which have not been fully satisfied as of the Closing shall be deemed to have
been fully waived by the Sellers and the Company.

                                  ARTICLE III

                               REPRESENTATIONS AND
                            WARRANTIES OF EACH SELLER

          Except as disclosed in the disclosure schedules attached hereto (the
"Disclosure Schedules"), each Seller, solely for himself, herself or itself (on
a several and not joint basis), represents and warrants to Buyer as of the date
hereof and as of the Closing Date, as follows:

     3.01 Organization and Standing. Each Seller that is an entity represents
and warrants that it is duly organized, formed or incorporated and is validly
existing and in good standing under the laws of the state of its incorporation
or organization.

     3.02 Authority. Such Seller has all requisite legal capacity, power and
authority (including, if applicable, full organizational power and authority) to
execute and deliver this Agreement and to perform such Seller's obligations
hereunder.

     3.03 Execution and Delivery; Valid and Binding Agreement. This Agreement
and the other Transaction Documents to which such Seller is a party has been
duly authorized, executed and delivered by such Seller. Assuming this Agreement
and the other Transaction Documents are the valid and binding


                                       10



agreement of each of the other parties thereto, this Agreement and the
Transaction Documents to which such Seller is a party constitute a valid and
binding agreement of such Seller, enforceable against such Seller in accordance
with its terms, except as enforceability may be limited by bankruptcy laws,
other similar laws affecting creditors' rights and general principles of equity
affecting the availability of specific performance and other equitable remedies.

     3.04 No Breach. Except for the applicable requirements of the HSR Act and
compliance with applicable federal and state securities laws, such Seller is not
subject to or obligated under any applicable law, or rule or regulation of any
governmental authority, or any material agreement or instrument, or any license,
franchise or permit, or its certificate of incorporation, its bylaws or similar
organizational documents if such Seller is a corporation or other entity, or
subject to any order, writ, injunction, judgment or decree, which would be
breached or violated in any material respect by such Seller's execution,
delivery or performance of this Agreement, the Transaction Documents or the
consummation of the transactions contemplated hereby.

     3.05 Governmental Authorization. Except for the applicable requirements of
the HSR Act and compliance with applicable federal and state securities laws,
such Seller is not required to submit or obtain any notice, consent, approval,
authorization, report or other filing with any governmental or regulatory
authority in connection with the execution, delivery or performance by such
Seller of this Agreement, the Transaction Documents or the consummation of the
transactions contemplated hereby or thereby.

     3.06 Ownership of Capital Stock. As of the date hereof, each Seller is the
record owner of, beneficially owns and has good title to the Shares and Warrants
set forth opposite such Seller's name on Section 4.04(a) of the Disclosure
Schedules, which Shares and Warrants constitute all of the Shares and Warrants
owned beneficially or held of record by such Seller. At Closing, and upon
termination of those agreements listed on Section 4.04 of the Disclosure
Schedules, such Seller shall transfer to, and Buyer will acquire, good title to
such Seller's Shares, free and clear of any liens or other restrictions on
transfer, other than applicable federal and state securities law restrictions
and those liens and restrictions listed on Section 3.06 of the Disclosure
Schedules which are being released at the Closing.

     3.07 Litigation. There are no actions, suits or proceedings pending or, to
Seller's knowledge, threatened against or affecting such Seller at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau or agency, domestic or foreign, which
would adversely affect such Seller's performance under this Agreement, the
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby.

     3.08 Brokers Fees. Such Seller has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          Except as disclosed in the Disclosure Schedules (including, without
limitation, any schedule update), the Company represents and warrants to Buyer
as of the date hereof and as of the Closing Date, as follows:

     4.01 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and the Company has all


                                       11



requisite corporate power to own and operate its properties and to carry on its
businesses as now conducted. The Company is duly qualified to do business and is
in good standing in every jurisdiction in which its ownership of property or the
conduct of businesses as now conducted requires it to qualify, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has made available to
Buyer true and complete copies of the organizational documents of the Company as
currently in effect.

     4.02 Subsidiaries. Except as set forth on Section 4.02 of the Disclosure
Schedules, neither the Company nor any of its Subsidiaries owns any stock,
partnership interest, joint venture interest or other equity ownership interest
in any other Person. Each Subsidiary of the Company is wholly owned by the
Company or another Subsidiary of the Company as indicated on Section 4.02 of the
Disclosure Schedules. Each Subsidiary of the Company identified on Section 4.02
of the Disclosure Schedules (i) is validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) has all requisite
corporate power and authority to carry on its businesses as now conducted and
(iii) is duly qualified to do business and is in good standing in every
jurisdiction in which its ownership of property or the conduct of its business
as now conducted requires it to qualify, except, in each case, where the failure
to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has made available to
Buyer true and complete copies of the organizational documents of each of its
Subsidiaries as currently in effect.

     4.03 Authorization; Valid and Binding Agreement; No Breach.

          (a) This Agreement and the other Transaction Documents have been duly
authorized, executed and delivered by the Company. Assuming that this Agreement
and the other Transaction Documents are the valid and binding obligation of each
of the other parties thereto, this Agreement and the other Transaction Documents
constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as enforceability may be limited by bankruptcy
laws, other similar laws affecting creditors' rights and general principles of
equity affecting the availability of specific performance and other equitable
remedies.

          (b) Except (i) as set forth on Section 4.03(b) of the Disclosure
Schedules, and (ii) for the applicable requirements of the HSR Act, the
execution, delivery and performance of this Agreement and the Transaction
Documents by the Company and each Subsidiary and the consummation of the
transactions contemplated hereby or thereby do not and will not (A) result in
any breach of or require any authorization, consent or approval by or notice to
any court, other governmental body or Person under the provisions of the
Company's or any of its Subsidiaries' certificate or articles of incorporation
or bylaws or equivalent organizational documents, or (B) result in any material
breach of, constitute a material default under, result in a material violation
of, result in the creation of any material lien, security interest, charge or
encumbrance (other than a Permitted Lien) upon any asset of the Company or any
of its Subsidiaries, or require any authorization, consent or approval by or
notice to any court, other governmental body or Person (1) under any indenture,
mortgage, lease or loan agreement or any Significant Contract to which the
Company or any of its Subsidiaries is bound, (2) under any law, statute or
regulation or (3) under any order, judgment or decree to which the Company or
any of its Subsidiaries is subject.

     4.04 Capital Stock.

          (a) Section 4.04(a) of the Disclosure Schedules sets forth, as of the
date of this Agreement, (i) the authorized and issued and outstanding shares of
each class of capital stock of the Company and its Subsidiaries, the name of
each record holder of such shares of the Company's capital


                                       12



stock, and the number of shares of such class of the Company's or its
Subsidiaries' capital stock held by each such record holder and (ii) all
outstanding Warrants issued by the Company, the name of each record holder of
such Warrants and the class and number of shares of capital stock issuable upon
exercise of each such Warrant.

          (b) All outstanding Shares of the Company and all outstanding shares
of capital stock of each of its Subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable. Except for the Warrants
which will be cancelled in connection with the Closing and except as set forth
on Section 4.04(a) or 4.04(b)(i) of the Disclosure Schedules, there are no
outstanding (i) shares of capital stock of the Company or any of its
Subsidiaries, (ii) securities of the Company, whether debt or equity, or any of
its Subsidiaries convertible into or exchangeable for shares of capital stock of
the Company or any of its Subsidiaries or (iii) options, warrants or other
rights to acquire from the Company or any of its Subsidiaries, or other
obligations of the Company or any of its Subsidiaries to issue, any capital
stock or securities convertible into or exchangeable for capital stock of the
Company or any of its Subsidiaries (the items in clauses 4.04(b)(i), 4.04(b)(ii)
and 4.04(b)(iii) being referred to collectively as the "Company Securities").
There are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire or retire for value any Company
Securities.

     4.05 Financial Statements.

          (a) The Company has furnished Buyer with true and complete copies of
its (i) unaudited consolidated balance sheet as of July 1, 2006 (the "Latest
Balance Sheet"), and the related consolidated statement of income and cash flow
of the Company and its Subsidiaries for the six month period then ended (the
"Unaudited Financial Statements") and (ii) the audited consolidated balance
sheet as of December 31, 2005, and the related consolidated statement of income
and cash flow of the Company and its Subsidiaries for the fiscal year ended
December 31, 2005 (the "Audited Financial Statements" and, together with the
Unaudited Financial Statements, the "Financial Statements"). Except as set forth
on Section 4.05 of the Disclosure Schedules, such Financial Statements have been
based upon the information concerning the Company and its Subsidiaries contained
in the Company's and its Subsidiaries' books and records, and present fairly and
accurately in all material respects the financial condition and results of
operations of the Company and its Subsidiaries (taken as a whole) as of the
times and for the periods referred to therein and have been prepared in
accordance with GAAP consistently applied (which is subject to such exceptions
set forth on Schedule 4.05 of the Disclosure Schedules).

          (b) To the Company's knowledge, neither the Company nor any of its
Subsidiaries is subject to any liability (other than any liability, together
with the liabilities arising from all related items or events, as would not
result in a Loss to the Company and its Subsidiaries in excess of $250,000)
arising out of events, transactions or actions or inactions arising prior to the
date hereof, except (i) liabilities under leases, licenses, contracts and
agreements which are not required to be disclosed on the Disclosure Schedules
arising out of or related to the transactions contemplated hereby, (ii)
liabilities reflected on the Latest Balance Sheet or liabilities which have
arisen after the date of the Latest Balance Sheet in the ordinary course of
business consistent with past practices and (iv) liabilities otherwise disclosed
on the Disclosure Schedules (including, without limitation, liabilities under
leases, licenses, contracts and agreements described in the Disclosure
Schedules). Notwithstanding the foregoing, this representation and warranty will
not apply to (and will exclude) any liability arising out of or related to
facts, events, transactions, actions or inactions, which are covered by,
addressed in or are of the same nature or subject matter as any liability which
is covered by or addressed in another representation or warranty set forth in
this Article IV. (By way of example, as to the foregoing sentence, pending and
threatened litigation is covered in the representations and warranties in
Section 4.11 and therefore all pending and threatened


                                       13



litigation (regardless of whether such litigation is covered by the
representation and warranties in Section 4.11) is covered by Section 4.11 for
the purposes of the foregoing sentence and not this Section.)

     4.06 Absence of Certain Developments. Since the date of the Latest Balance
Sheet, there has not been any Material Adverse Effect. Except as set forth on
Section 4.06 of the Disclosure Schedules or except as contemplated by this
Agreement, since the date of the Latest Balance Sheet, neither the Company nor
any Subsidiary of the Company has:

          (a) mortgaged, pledged or subjected to any material lien, charge or
other encumbrance, any portion of its assets, except Permitted Liens;

          (b) sold, assigned or transferred any material portion of its tangible
assets, except in the ordinary course of business;

          (c) sold, assigned or transferred any Intellectual Property, except in
the ordinary course of business;

          (d) forgiven or cancelled any material Indebtedness or suffered any
material extraordinary losses (whether or not covered by insurance), or
condemnation, taking or other similar proceedings, or waived any claims or
rights of material value (including any Indebtedness owed by any stockholder,
officer, director, employee or affiliate of the Company or any Subsidiary);

          (e) redeemed or repurchased, directly or indirectly, any shares of
capital stock or declared, set aside or paid any dividends or made any other
distributions (whether in cash or in kind) with respect to any shares of its
capital stock;

          (f) issued, sold or transferred any of its capital stock, securities
convertible into its capital stock or warrants, options or other rights to
acquire its capital stock;

          (g) made any capital expenditures or commitments therefore in excess
of $250,000, except in the ordinary course of business;

          (h) changed any of its accounting policies, practices or procedures,
including internal control procedures, except those changes required by GAAP;

          (i) amended or modified its charter or bylaws;

          (j) increased the salary of any senior management-level employee of
the Company or any of its Subsidiaries (i.e., Vice President or above) or
entered into any agreement with such senior management-level employee, except
for increases in salary in the ordinary course of business;

          (k) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment which is reasonably expected to result in
more than $250,000 of liability to the Company, other than in the ordinary
course of business; or

          (l) agreed in writing or, to the Company's knowledge, orally, to take
any of the foregoing actions.


                                       14



     4.07 Title to Properties.

          (a) Except as set forth on Section 4.07(a) of the Disclosure
Schedules, the Company and its Subsidiaries own good title to, or hold pursuant
to valid and enforceable leases, all of the personal property shown to be owned
by them on the Latest Balance Sheet (except for such personal property sold or
disposed of subsequent to the date thereof in the ordinary course of business),
free and clear of all liens, security interests and other encumbrances, except
for Permitted Liens.

          (b) Section 4.07(b)(i) of the Disclosure Schedules sets forth the
addresses of all land, together with all buildings, structures, improvements and
fixtures located thereon, and all easements and other rights and interests
appurtenant thereto, owned by the Company or its Subsidiaries (collectively, the
"Owned Real Property"). With respect to each parcel of Owned Real Property,
except as set forth in Section 4.07(b)(ii) of the Disclosure Schedules: (i) the
Company or one of its Subsidiaries has fee simple title thereto, free and clear
of all liens, security interests and other encumbrances, except Permitted Liens;
(ii) neither the Company nor any of its Subsidiaries has leased to any Person
the right to use or occupy such Owned Real Property or any portion thereof;
(iii) there are no outstanding options, rights of first offer or rights of first
refusal to purchase such Owned Real Property or any portion thereof; (iv) the
Company has received no written notice from any governmental agency of any
violation of any statute, law, ordinance, deed restriction, rule or regulation
with respect to the Owned Real Property; and (v) there is no pending or, to the
Company's knowledge, threatened litigation, condemnation proceeding, or
annexation proceeding affecting any of the Owned Real Property, and there are no
governmental assessments against any of the Owned Real Property other than those
that constitute Permitted Liens.

          (c) The real property demised by the leases described on Section
4.07(c)(i) of the Disclosure Schedules (the "Leased Real Property") constitutes
all of the material real property leased by the Company and its Subsidiaries.
Except as set forth on Section 4.07(c)(ii) of the Disclosure Schedules, the
leases demising the Leased Real Property are in full force and effect, subject
to proper authorization and execution of such lease by the other party and the
limitations of bankruptcy laws, other similar laws affecting creditors' rights
and general principles of equity affecting the availability of specific
performance and other equitable remedies. The Company has made available to
Buyer true and complete copies of the leases demising the Leased Real Property.
Neither the Company nor any of its Subsidiaries is in payment default under any
such leases or any other default under any of such leases that would permit the
landlord to terminate such lease.

     4.08 Tax Matters.

          (a) Each of the Company and its Subsidiaries has filed all federal
Income Tax Returns and all other material Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all material respects.
All Taxes due and owing by the Company or any of its Subsidiaries (whether or
not shown on any Tax Return) have been paid. Except as set forth on Section
4.08(a) of the Disclosure Schedules, neither the Company nor any of its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return. There are no liens for Taxes (other than Taxes not yet
due and payable) upon any of the assets of the Company or any of its
Subsidiaries.

          (b) Except as set forth on Section 4.08(b) of the Disclosure
Schedules, there is no material dispute or claim concerning any Tax liability of
the Company or any of its Subsidiaries either (i) claimed or raised by any Tax
authority in writing or (ii) as to which any of Sellers or any of the directors
and officers of the Company and its Subsidiaries has knowledge based upon
personal contact with any agent of such authority.


                                       15



          (c) Section 4.08(c) of the Disclosure Schedules lists (i) all federal,
state, local, and foreign Income Tax Returns filed with respect to the Company
or any of its Subsidiaries and (ii) all states in which sale or use Tax Returns
were filed with respect to the Company or any of its Subsidiaries, in each case
for taxable periods ended on or after December 31, 2003, and (iii) indicates
those Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Sellers have delivered to Buyer true and
complete copies of all federal Income Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by the Company or any
of its Subsidiaries since November 23, 2004. Neither the Company nor any of its
Subsidiaries has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency.

          (d) Neither the Company nor any of its Subsidiaries is a party to or
bound by any tax allocation or sharing agreement. Neither the Company nor any of
its Subsidiaries (i) has been a member of an Affiliated Group filing a
consolidated federal Income Tax Return (other than a group the common parent of
which was the Company or Meridian Rail Acquisition Corp.) or (ii) has any
liability for the Taxes of any Person (other than the Company or any of its
Subsidiaries) under Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.

          (e) Except as set forth in Section 4.08(e) of the Disclosure
Schedules, neither the Company nor any of its Subsidiaries will be required to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any:

               (i) change in method of accounting for a taxable period ending on
     or prior to the Closing Date;

               (ii) "closing agreement" as described in Internal Revenue Code
     Section 7121 (or any corresponding or similar provision of state, local or
     foreign income Tax law) executed on or prior to the Closing Date;

               (iii) intercompany transactions or any excess loss account
     described in Treasury Regulations under Internal Revenue Code Section 1502
     (or any corresponding or similar provision of state, local or foreign
     income Tax law);

               (iv) installment sale or open transaction disposition made on or
     prior to the Closing Date; or

               (v) prepaid amount received on or prior to the Closing Date.

          (f) Neither the Company nor any of its Subsidiaries has distributed
stock of another Person, or has had its stock distributed by another Person, in
a transaction that was purported or intended to be governed in whole or in part
by Internal Revenue Code Section 355 or Internal Revenue Code Section 361.

          (g) Any claim of breach of representation or warranty regarding Taxes
shall be made only under this Section 4.08 and shall not be made under any other
representation or warranty contained in this Agreement. For the avoidance of
doubt, (i) this Section 4.08(g) shall not apply to the covenants set forth under
Section 11.03 and (ii) representations and warranties regarding ERISA will not
be considered a representation or warranty regarding Taxes for the purposes of
this Section 4.08(g) and such


                                       16



representations and warranties regarding ERISA shall be made only in Section
4.13 below and not this Section 4.08.

     4.09 Contracts and Commitments.

          (a) Except as set forth on Section 4.09(a) of the Disclosure
Schedules, neither the Company nor any of its Subsidiaries is party to any
written: (i) collective bargaining agreement or contract with any labor union;
(ii) pension, profit sharing, retirement, deferred compensation plan or other
material bonus plan, other than as described in Section 4.13(a) of the
Disclosure Schedules relating thereto; (iii) agreement for the employment of any
officer, individual employee or other individual on a full-time or consulting
basis with annual payments in excess of $100,000 which is not terminable on 60
or fewer days notice by the Company or any Subsidiary without liability for any
penalty or severance payment greater than $30,000; (iv) loan agreement or
indenture relating to Indebtedness; (v) stockholders agreement or other
agreement among the Company's stockholders governing voting of the Company's
equity securities; (vi) lease or agreement under which it is lessee of, or holds
or operates any personal property owned by any other party, for which the annual
rental exceeds $250,000 and which is not terminable on 60 or fewer days notice
by the Company or any Subsidiary without liability for any penalty greater than
$30,000; (vii) lease or agreement under which it is lessor of or permits any
third party to hold or operate any personal property, for which the annual
rental exceeds $250,000 and which is not terminable on 60 or fewer days notice
by the Company or any Subsidiary without liability for any penalty greater than
$30,000; (viii) contract or group of related contracts with the same party for
the purchase of products or services by the Company or any of its Subsidiaries
with such products and services having a selling price in excess of $250,000 and
which is not terminable on 60 or fewer days notice by the Company or any
Subsidiary without liability for any penalty greater than $30,000; (ix) contract
or group of related contracts with the same party for the sale of products or
services by the Company or any of its Subsidiaries with such products and
services having a selling price in excess of $250,000 and which is not
terminable on 60 or fewer days notice by the Company or any Subsidiary without
liability for any penalty greater than $30,000; (x) contract or agreement
containing covenants limiting the freedom of the Company or any Subsidiary of
the Company to compete in any line of business or with any Person which is not
terminable on 60 or fewer days notice by the Company or any Subsidiary without
liability for any penalty greater than $30,000; (xi) guarantees, letters of
credit, performance bonds and/or sureties issued by or on behalf of the Company
or any Subsidiary in connection with any customer contracts, proposals or
otherwise; or (xii) contract involving any commitment of suretyship, guaranty or
indemnification by the Company or any Subsidiary with respect to any side frames
or bolsters which could reasonably be expected to require payments by the
Company or any Subsidiary in excess of $100,000.

          (b) The Company has made available to Buyer true and complete copies
of all contracts listed on Section 4.09(a) of the Disclosure Schedules (the
"Significant Contracts"). With respect to the Significant Contracts, except as
set forth on Section 4.09(b) of the Disclosure Schedules, (i) neither the
Company nor any of its Subsidiaries is in default under any such contract, and
(ii) to the Company's knowledge, no other party thereto, is in default under any
such contract, except, in each case, where such default would not, individually
or in the aggregate, have a Material Adverse Effect. Each Significant Contract
is a valid, binding obligation of the Company or its Subsidiaries and
enforceable in accordance with its terms, except as to the effect, if any, of
(a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (b) rules of law governing specific performance,
equitable relief and other equitable remedies. To the knowledge of the Company,
neither the Company nor any Subsidiary has received written notice of alleged
nonperformance, violation of or other noncompliance with respect to its
obligations under any of the Significant Contracts which alleged nonperformance,
violation or other


                                       17



noncompliance is currently unresolved, nor any written notice that is currently
unresolved that any of the Significant Contracts may be totally or partially
terminated or suspended by any other party thereto.

          (c) Section 4.09(c)(i) of the Disclosure Schedules contains a true and
complete list setting forth the ten largest suppliers (the "Major Suppliers")
and the ten largest customers (excluding scrap purchasers and intercompany
purchases) (the "Major Customers") of the Company or any Subsidiary, by dollar
amount for the six-month period covered by the Unaudited Financial Statements.
Since the Latest Balance Sheet, to the knowledge of the Company, no Major
Customer has cancelled or otherwise materially modified its agreement with the
Company or any Subsidiary in a manner adverse to the Company or any Subsidiary.
Except as set forth in Section 4.09(c)(ii) of the Disclosure Schedules, since
the Latest Balance Sheet, to the knowledge of the Company, no Major Supplier has
cancelled or otherwise materially modified its agreement with the Company or any
Subsidiary in a manner adverse to the Company or any Subsidiary.

     4.10 Intellectual Property. Section 4.10(a) of the Disclosure Schedules
contains a list of all of the material registered Intellectual Property owned by
the Company or any of its Subsidiaries and used in the conduct of the businesses
of the Company and its Subsidiaries. Except as set forth on Section 4.10(b) of
the Disclosure Schedules or as would not, individually or in the aggregate, have
a Material Adverse Effect: (i) the Company or one of its Subsidiaries owns and
possesses all right, title and interest in and to, or possesses the valid and
enforceable right to use, the Intellectual Property used in the conduct of the
businesses of the Company and its Subsidiaries; (ii) since November 23, 2004,
and to the knowledge of the Company since January 1, 2003, neither the Company
nor any of its Subsidiaries has received any written notices of infringement or
misappropriation from any third party with respect to the Company or any
Subsidiary's use of any Intellectual Property; (iii) to the Company's knowledge,
no third party is infringing or misappropriating any registered Intellectual
Property owned by the Company or any of its Subsidiaries, and (iv) to the
Company's knowledge, neither the Company nor any of its Subsidiaries is
infringing any registered Intellectual Property owned by a third party.

     4.11 Litigation. Except as set forth on Section 4.11(a) of the Disclosure
Schedules, there are no actions, suits or proceedings pending or, to the
Company's knowledge, threatened against the Company or any of its Subsidiaries,
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau or agency, domestic or
foreign, nor are there any that questions the validity of this Agreement, the
Transaction Documents or any action taken or to be taken by the Company or any
Subsidiary pursuant to this Agreement, the Transaction Documents or in
connection with the transactions contemplated hereby or thereby. Except as set
forth on Section 4.11(b) of the Disclosure Schedules, neither the Company nor
any of its Subsidiaries is subject to any outstanding judgment, order or decree
of any court or governmental body. Except as set forth on Section 4.11(c) of the
Disclosure Schedules, to the Company's knowledge, since November 23, 2004, there
have been no claims made, or any written threat of a claim received, against the
Company or any Subsidiary for liability arising out of the production or sale of
side frames or bolsters.

     4.12 Governmental Consents, etc. Except as set forth on Section 4.12 of the
Disclosure Schedules, and except for the applicable requirements of the HSR Act,
no material permit, consent, approval or authorization of, or declaration to or
filing with, any governmental or regulatory authority is required in connection
with any of the execution, delivery or performance of this Agreement or the
Transaction Documents by the Company or the consummation by the Company of the
transactions contemplated hereby or thereby.


                                       18



     4.13 Employee Benefit Plans.

          (a) Section 4.13(a) of the Disclosure Schedules contains a true and
complete list of (i) all employee benefit plans (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and (ii) all other material bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical and life
insurance, supplemental retirement, severance and other material benefit plans,
programs and arrangements, and all material retention, termination, severance or
other similar contracts or agreements maintained, contributed to or sponsored by
the Company or any Subsidiary for the benefit of any current or former employee,
officer or director of the Company or any Subsidiary (collectively, excluding
any Multiemployer Plan, the "Plans"). The Company and its Subsidiaries have
previously made available to Buyer a true and complete copy of each Plan or
summary Plan (or, in the case of any unwritten Plan, a description), as
currently in effect, and a true and complete copy of each of the following
documents, to the extent applicable, prepared in connection with each such Plan:
(A) a copy of each trust or other funding arrangement, (B) the three most
recently filed Internal Revenue Service Forms 5500, (C) the most recently
received Internal Revenue Service prototype opinion letter, and (D) the most
recently prepared actuarial report. Neither the Company nor any Subsidiary has
communicated to employees any intent to or has expressly or impliedly committed
to modify, change or terminate any Plan, other than with respect to a
modification, change or termination required to bring the Plan into compliance
with applicable law. Each Plan that is intended to be qualified under Section
401(a) and/or 401(k) or 501(c)(9) of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), so qualifies, has received a favorable
prototype opinion letter from the Internal Revenue Service to such effect and
its trust is exempt from taxation under Section 501(a) of the Internal Revenue
Code. To the knowledge of the Company, except as set forth on Section 4.13(a) of
the Disclosure Schedules, no fact or event has occurred since the date of any
prototype opinion letter from the Internal Revenue Service which is reasonably
likely to affect adversely such favorable determination or such qualification or
to result in a filing under Rev. Proc. 2003-44 or any predecessor or successor
thereto that would be reasonably likely to result in material liability to the
Company. The Company and its Subsidiaries have timely paid all contributions,
premiums and expenses payable to or in respect of each Plan and workers'
compensation arrangement under the terms thereof and in accordance with
applicable law, including ERISA and the Internal Revenue Code, and to the extent
any such contributions, premiums or expenses are not yet due, the liability
therefor has been properly and adequately accrued on the Financial Statements in
accordance with GAAP.

          (b) None of the Plans (i) is a Multiemployer Plan, or a pension plan
within the meaning of Section 4001(a)(15) of ERISA, (ii) is subject to Section
302 or Title IV of ERISA or Section 412 of the Internal Revenue Code, or (iii)
except as set forth on Section 4.13(b) of the Disclosure Schedules, provides or
promises to provide retiree medical or life insurance benefits, other than to
the extent required by Section 4980B(f) of the Internal Revenue Code, and
Sections 601 through 609 of ERISA or other similar laws.

          (c) Except as set forth on Section 4.13(c) of the Disclosure
Schedules, with respect to each Plan, neither the Company, any Subsidiary nor
any ERISA Affiliate is currently liable for any material Tax, including, without
limitation, any material Tax under Section 4971, 4972, 4975, 4976, 4979, 4980 or
4980B of the Internal Revenue Code, and, to the knowledge of the Company, no
fact or event exists which could reasonably be expected to give rise to any such
material liability. Neither the Company, any Subsidiary nor any ERISA Affiliate
has incurred any material liability (which will not be satisfied prior to the
Closing) under, arising out of or by operation of Title IV of ERISA, including,
without limitation, any liability in connection with the termination or
reorganization of any employee pension benefit plan subject to Title IV of
ERISA. To the knowledge of the Company, no fact or event


                                       19



exists which could reasonably be expected to give rise to any such material
liability. "ERISA Affiliate" is any trade or business whether or not
incorporated, which together with the Company would be deemed to be a "single
employer" within the meaning of Section 4001(b) of ERISA or Section 414 of the
Internal Revenue Code.

          (d) No Plan subject to a funding requirement has been terminated at a
time when such Plan was not sufficiently funded.

          (e) Except as set forth on Section 4.13(e) of the Disclosure
Schedules, and except as would not, individually or in the aggregate, have a
Material Adverse Effect, each Plan has been operated in compliance with its
terms and applicable laws, including, without limitation, ERISA and the Internal
Revenue Code.

          (f) There are no actions, suits or claims (other than routine claims
for benefits in the ordinary course) pending or, to the knowledge of the
Company, threatened with respect to any Plan. With respect to the Plans, no
Plan, the Company or any Subsidiary is under audit or, to the knowledge of the
Company, investigation by the Internal Revenue Service, the U.S. Department of
Labor, the Pension Benefit Guaranty Corporation or any other federal or state
governmental agency, nor is any such audit or investigation pending or, to the
knowledge of the Company, threatened.

          (g) Except as set forth on Section 4.13(g) of the Disclosure
Schedules, neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, either alone or in
combination with another event (whether contingent or otherwise) will (i)
entitle any current or former employee, consultant or director of the Company or
any Subsidiary to any increased or modified benefit or payment, including any
bonus payments, severance or change in control benefits; (ii) increase the
amount of compensation due to any such employee, consultant or director; (iii)
accelerate the vesting, payment or funding of any compensation, stock-based
benefit, incentive or other benefit; or (iv) result in any "parachute payment"
under Section 280G of the Internal Revenue Code (whether or not such payment is
considered to be reasonable compensation for services rendered).

          (h) The Company and its Subsidiaries has workers compensation
insurance from a bona fide third party insurance carrier in amounts sufficient
to satisfy applicable workers compensation insurance requirements in the
jurisdictions where the Company and its Subsidiaries conduct business.

          (i) Except as set forth on Section 4.13(i) of the Disclosure
Schedules, neither the Company nor any Subsidiary contributes to, nor has any
liability with respect to, any Multiemployer Plan.

     4.14 Insurance. Section 4.14(a) of the Disclosure Schedules lists each
material insurance policy maintained by the Company and its Subsidiaries
identifying the name of the insurance carrier, type of coverage, policy limits
and deductibles for each such policy. All of such insurance policies are in full
force and effect, and to the Company's knowledge, neither the Company nor any
Subsidiary of the Company is in default with respect to its obligations under
any of such insurance policies, except where such default would not,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in Section 4.14(b) of the Disclosure Schedules, none of such insurance
policies will terminate or lapse by reason of any of the transactions
contemplated by this Agreement. All premiums covering all periods up to and
including the Closing have been paid, and to the knowledge of the Company, no
notice of cancellation or termination has been received with respect to any such
policy or binder. Since November 23, 2004, neither the Company nor any
Subsidiary has been refused any insurance with respect to its assets or
operations. True and complete copies of all policies have been made available to
Buyer.


                                       20



     4.15 Compliance with Laws. Except as set forth on Section 4.15 of the
Disclosure Schedules, the Company and its Subsidiaries are in compliance with
all applicable laws and regulations of foreign, federal, state, provincial and
local governments and all agencies thereof which affect the business, operations
or Owned Real Property or Leased Real Property of the Company or its
Subsidiaries and to which the Company or its Subsidiaries may be subject, and no
claim has been filed or commenced against any of them alleging any failure to so
comply, except with respect to compliance with where the failure to comply would
not, individually or in the aggregate, have a Material Adverse Effect; provided,
however, that with respect to compliance with applicable laws regarding bribes,
kickbacks, any other illegal payments to obtain or retain business or to receive
favorable treatment with regard to business, illegal contributions made to any
political party, political candidate or holder of governmental office and
compliance with the United States Corrupt Foreign Practices Act or any other
similar laws, statute, rule or regulation of any country, this representation
shall not be subject to the Material Adverse Effect qualifier.

     4.16 Environmental, Health and Safety Matters. Except as set forth on
Section 4.16 of the Disclosure Schedules:

          (a) The Company and each Subsidiary are, and since November 23, 2004
have been, in material compliance with all applicable Environmental
Requirements.

          (b) Without limiting the generality of the foregoing, the Company and
each Subsidiary have obtained all permits, licenses and other authorizations
required under applicable Environmental Requirements ("Environmental Permits"),
and are in material compliance with such permits, licenses and authorizations. A
list of all material Environmental Permits owned or possessed by the Company or
its Subsidiaries is set forth on Section 4.16 of the Disclosure Schedules.

          (c) Neither the Company nor any of its Subsidiaries has since November
23, 2004, received any written notice from any government entity, that alleges
that any of them is in material violation of Environmental Requirements or OSHA
rules or regulations, or has any material liability arising under applicable
Environmental Requirements or OSHA rules or regulations, including any material
investigatory, remedial or corrective obligation, relating to the Company, any
Subsidiary or their facilities, the subject of which is unresolved.

          (d) To the knowledge of the Company, none of the following exists at
or under the Real Property: (1) underground storage tanks in violation of
Environmental Requirements, (2) friable or potentially friable
asbestos-containing material requiring abatement under Environmental
Requirements, (3) materials or equipment containing polychlorinated biphenyls in
violation of Environmental Requirements, or (4) unpermitted landfills, surface
impoundments, or disposal areas in violation of Environmental Requirements.

          (e) Since November 23, 2004, neither the Company nor any Subsidiary
has treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any hazardous substance in material violation
of any Environmental Requirements.

          (f) Since November 23, 2004, neither the Company nor any Subsidiary
has materially violated any Environmental Requirements at any real property
previously owned or operated by the Company or any Subsidiary.

          (g) The Company and each Subsidiary possess all material manifests,
reports, policies, manuals, safety data sheets, hazard communications program
documents and all other material


                                       21



records they are required to retain pursuant to any Environmental Requirements,
in the manner so required in all material respects.

          (h) Neither the Company nor any of its Subsidiaries is in material
violation of any applicable OSHA rules and regulations.

          (i) This Section 4.16 constitutes the sole and exclusive
representations and warranties of the Company with respect to any environmental,
health and safety matters, including without limitation any arising under
Environmental Requirements and OSHA.

          (j) To the Company's knowledge, the environmental reports (the
"Vanguard Reports") delivered to the Company by Vanguard Environmental, Inc.
("Vanguard") (in 2005 and/or 2006) do not disclose any liability which would be
required to be disclosed on Section 4.16 of the Disclosure Schedules which is
not otherwise disclosed on such Section 4.16 of the Disclosure Schedule (or
otherwise set forth in any other environmental report listed thereon). The scope
of the Vanguard Reports do not contain a Phase II environmental investigation
(or the results of any soil or groundwater sampling done by Vanguard in
connection therewith).

     4.17 Affiliated Transactions. Except as set forth on Section 4.17 of the
Disclosure Schedules and except for payments to be made in connection with the
Closing to the extent reflected in the Closing Statement, no officer, director,
stockholder or Affiliate of any of them or an Affiliate of the Company or any
Subsidiary is a party to any agreement, contract, commitment or transaction with
the Company or any of its Subsidiaries or has any interest in any property used
by the Company or its Subsidiaries.

     4.18 Employees. Except as set forth on Section 4.18(a) of the Disclosure
Schedules, neither the Company nor any Subsidiary of the Company has experienced
any strike or material grievance, claim of unfair labor practices, or other
material collective bargaining dispute since November 23, 2004 that has not been
dismissed or settled. Except as set forth on Section 4.18(b) of the Disclosure
Schedules, to the Company's knowledge, no organizational effort is presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company or any of its Subsidiaries. Except as set forth on
Section 4.18(c) of the Disclosure Schedules, no collective bargaining agreements
are in effect with respect to the Company or any Subsidiary.

     4.19 Brokerage. Except as set forth on Section 4.19 of the Disclosure
Schedule, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Company or any Subsidiary.

     4.20 Governmental Licenses and Permits. Section 4.20 of the Disclosure
Schedules contains a list of all permits (temporary or otherwise), licenses,
authorizations and approval of federal, foreign, state and local governmental
entities and zoning bodies (collectively, the "Licenses") owned or possessed by
the Company or its Subsidiaries all of which are currently valid and in full
force and effect and no other permits, licenses, authorizations and approval of
federal, foreign, state and local governmental entities and zoning bodies are
required in the conduct of their respective businesses and operations or used by
the Company and its Subsidiaries in the conduct of their businesses, in each
case as of the date hereof, except, in each case, where the failure to obtain,
own, possess and/or use such other permits and licenses of governmental entities
would not, individually or in the aggregate, have a Material Adverse Effect. All
such licenses, permits, authorizations and approvals shall as of the Closing
Date be valid and in full force and effect and the consummation of the
transactions contemplated by this Agreement and the Transaction


                                       22



Documents will not cause a material loss or adverse modification of, or require
any transfer, renewal or notice with respect to, any such Licenses.

     4.21 Officers and Directors. Section 4.21 of the Disclosure Schedules lists
all officers and directors of the Company and its Subsidiaries.

     4.22 Tangible Assets. The Company and its Subsidiaries own, or lease
pursuant to valid, binding and enforceable leases, all buildings, vehicles,
machinery, equipment, and other material tangible assets used in or necessary
for the conduct of its business as presently conducted. Taken as a whole, the
material tangible assets are in good operating condition and repair (subject to
normal wear and tear), and are suitable for the purposes for which they are
presently used.

     4.23 Internal Controls. To the knowledge of the Company, the Company and
its Subsidiaries maintain a system of internal accounting controls intended to
provide reasonable assurance that: (i) there are no transactions of a material
nature, individually or in the aggregate, that have not been properly recorded
in the accounting records underlying the financial statements (other than those
disclosed in Section 4.05 of the Disclosure Schedules) and (ii) there are no
reportable conditions, including material weaknesses, in the design or operation
of internal controls that could adversely affect the Company's or any
Subsidiary's ability to initiate, record, process, and report financial data;
provided that the Company and its Subsidiaries make no representation or
warranty that such systems or internal accounting controls meet the standards of
companies subject to the Sarbanes-Oxley Act of 2002, and such controls have not
been audited or certified (whether for the purpose of obtaining an SAS70 report
or otherwise) for purposes of compliance with the Sarbanes-Oxley Act of 2002.

                                   ARTICLE V

                     REPRESENTATIONS AND WARRANTIES OF BUYER

          Except as disclosed in the Disclosure Schedules, Buyer represents and
warrants to the Company and the Sellers as of the date hereof and as of the
Closing Date, as follows:

     5.01 Organization and Authority. Buyer is a limited liability company duly
organized and validly existing under the laws of the State of Oregon, with all
requisite power and authority and full legal capacity to execute and deliver
this Agreement and perform its obligations hereunder.

     5.02 Authorization; Valid and Binding Agreement. This Agreement and the
other Transaction Documents have been duly authorized, executed and delivered by
Buyer. Assuming that this Agreement and the other Transaction Documents are
valid and binding obligations of the other parties thereto, this Agreement and
the other Transaction Documents constitute valid and binding obligations of
Buyer, enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy laws, other similar laws affecting creditors' rights and
general principles of equity affecting the availability of specific performance
and other equitable remedies.

     5.03 No Breach. Buyer is not subject to or obligated under its
organizational documents, any applicable law, or rule or regulation of any
governmental authority, or any material agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction, judgment or
decree, which would be breached or violated in any material respect by Buyer's
execution, delivery or performance of this Agreement, the other Transaction
Documents or the consummation of the transactions contemplated hereby.


                                       23



     5.04 Governmental Consents, etc. Except for the applicable requirements of
the HSR Act, Buyer is not required to submit or obtain any notice, consent,
approval, authorization, report or other filing with any governmental or
regulatory authority in connection with the execution, delivery or performance
by it of this Agreement, the Transaction Documents or the consummation of the
transactions contemplated hereby or thereby. No material consent, approval or
authorization of any governmental or regulatory authority or any other party or
Person is required to be obtained by Buyer in connection with its execution,
delivery and performance of this Agreement, the Transaction Documents or the
consummation of the transactions contemplated hereby or thereby. Buyer is not
subject to any outstanding judgment, order or decree of any court or
governmental body.

     5.05 Litigation. There are no actions, suits or proceedings pending or, to
Buyer's knowledge, threatened against or affecting Buyer at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau or agency, domestic or foreign, which would adversely
affect Buyer's performance under this Agreement or the consummation of the
transactions contemplated hereby.

     5.06 Brokerage. Except as set forth on Section 5.06 of the Disclosure
Schedule, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Buyer.

     5.07 Investment Representation. Buyer is purchasing the Shares for its own
account with the present intention of holding such securities for investment
purposes and not with a view to or for sale in connection with any public
distribution of such securities in violation of any federal or state securities
laws. Buyer is an "accredited investor" as defined in Regulation D promulgated
by the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"). Buyer acknowledges that it is informed as to the
risks of the transactions contemplated hereby and of ownership of the Shares.
Buyer acknowledges that the Shares have not been registered under the Securities
Act or any state or foreign securities laws and that the Shares may not be sold,
transferred, offered for sale, pledged hypothecated or otherwise disposed of
unless such transfer, sale, assignment, pledge, hypothecation or other
disposition is pursuant to the terms of an effective registration statement
under the Securities Act and are registered under any applicable state or
foreign securities laws or pursuant to an exemption from registration under the
Securities Act and any applicable state or foreign securities laws.

     5.08 Financing. Buyer has (and at Closing will have) sufficient
unrestricted cash available, or commitments from reputable financial
institutions (true and complete copies of which are attached hereto as Exhibit
D), to enable Buyer to consummate the transactions contemplated by this
Agreement and to satisfy its obligations hereunder on and after the Closing
Date.

     5.09 Tax Status. The Buyer's acquisition of the Shares will cause the
Company to become a member of the Affiliated Group of which the Buyer or an
Affiliate of the Buyer is a member.


                                       24



                                   ARTICLE VI

                                    COVENANTS

     6.01 Conduct of the Business.

          (a) From the date hereof until the Closing Date, except as otherwise
provided in or contemplated by this Agreement, the Company shall use its
commercially reasonable efforts to carry on its and its Subsidiaries' businesses
in the ordinary course of business (including collecting receivables and paying
payables) in all material respects and substantially in the same manner as
previously conducted unless Buyer shall have consented in writing (which consent
will not be unreasonably withheld or delayed); provided that, the foregoing
notwithstanding and except as provided in Section 6.01(c) below, the Company may
use all available Cash on Hand to repay the Indebtedness Payoff Amount and
Sellers' Expenses prior to the Closing.

          (b) From the date hereof until the Closing Date, except as otherwise
provided for or contemplated by this Agreement, as set forth on Section 6.01(b)
of the Disclosure Schedules, as required by law or regulation or as consented to
in writing by Buyer (which consent will not be unreasonably withheld or
delayed), the Company shall not, and shall not permit any Subsidiary of the
Company to, (i) issue, sell or redeem any shares of its or any Subsidiary's
capital stock (other than the issuances of capital stock by the Company upon the
exercise of Warrants issued and outstanding as of the date hereof), (ii) issue,
sell or redeem any securities convertible into, or options with respect to,
warrants to purchase, or rights to subscribe for, any shares of its or any
Subsidiary's capital stock (other than redemptions paid in cash), (iii) effect
any recapitalization, reclassification, stock dividend, stock split or like
change in its capitalization or pay any dividend with respect to the Company's
capital stock (except for dividends in cash and dividends by the Subsidiaries to
other Subsidiaries or to the Company), (iv) amend its or any of its
Subsidiaries' certificate of incorporation or bylaws (or equivalent
organizational documents), (v) become legally committed to any new capital
expenditures requiring expenditures following the Closing Date in excess of
$250,000 in the aggregate, except for any expenditures pursuant to projects for
which work has already been commenced or committed or is otherwise contemplated
in the capital expenditure budget, (vi) sell, assign or transfer any portion of
its tangible assets except in the ordinary course of business, (vii) except in
the ordinary course of business consistent with past practice or as required by
any collective bargaining agreement or other written agreement in effect as of
the date hereof, grant any salary or wage increase to any officer of the Company
or its Subsidiaries, or modify or amend any Employee Benefit Plan in any manner
that increases the amount of the liability attributable to the Company or any
Subsidiary of the Company in respect of such Employee Benefit Plan, (viii)
except for new hires in the ordinary course of business and current employees in
the ordinary course of business, enter into any written employment agreement
with any of its or any Subsidiary's employees involving compensation in excess
of $50,000, (ix) decrease or eliminate any waiting time under the Old Plans (as
defined below), (x) decrease or eliminate any pre-existing condition exclusions
and actively-at-work requirements under the Old Plans, (xi) amend, terminate or
modify any Significant Contract (other than those set forth in subsection (xii)
below which shall be governed by that clause), except in the ordinary course of
business, excluding any ordinary course of business amendment, termination or
modification that materially and adversely impacts the Company or any
Subsidiary; (xii) amend, terminate or modify any agreement or contract with
Union Pacific, Griffin Wheels, or Kansas City Southern; (xiii) settle or
compromise a claim against any sellers or members under the Prior Acquisition
Agreement, or consent to a settlement claim with a third party regarding a claim
that could be or is subject to indemnity under the Prior Acquisition Agreement,
or amend, terminate or modify the Prior Acquisition Agreement; or (xiv)
authorize or enter into any agreement in furtherance of any of the foregoing.


                                       25



          (c) During the time period commencing immediately after 11:59 p.m.
(New York City time) on the day immediately preceding the Closing Date and
ending as of immediately prior to the Closing, the Company and its Subsidiaries
may only use its Cash on Hand to make the payments in respect of the
Indebtedness Payoff Amount, Sellers' Expenses and current liabilities set forth
in the Closing Statement and shall not make any other distributions or payments.

          (d) From the date hereof until the Closing Date, except as consented
to in writing by the Buyer (which consent will not be unreasonably withheld or
delayed) or transfers to Affiliates, each Seller agrees not to transfer any
shares of the Company's capital stock; provided, however, in the case of a
transfer to an Affiliate, the Seller shall remain primarily liable for its
obligations and duties under this Agreement, including, without limitation, the
indemnification provisions, which provisions shall be governed and interpreted
as if the Seller had not made such transfer, the Percentage Share of such Seller
shall remain as it was on the date hereof and the proceeds received in respect
of Common, Preferred and the Warrants will be deemed to have been received by
such Seller rather than any transferee.

     6.02 Access to Books and Records. From the date hereof until the Closing
Date, the Company shall provide Buyer and its authorized representatives
("Buyer's Representatives") with reasonable access at all reasonable times and
upon reasonable notice to the offices, properties, personnel, books and records
(including without limitation to all known environmental studies or similar
documentation of the Company and its Subsidiaries) of the Company and its
Subsidiaries in order for Buyer to have the opportunity to make such
investigation as it shall reasonably desire to make of the affairs of the
Company and its Subsidiaries. Each of Guarantor and Buyer acknowledges that it
and its representatives and advisors remain bound by the Confidentiality
Agreement, dated February 28, 2006, with the Company (the "Confidentiality
Agreement").

     6.03 Regulatory Filings. The Company shall use commercially reasonable
efforts to make or cause to be made all material filings and submissions under
any laws or regulations applicable to the Company and its Subsidiaries for the
consummation of the transactions contemplated herein. The Company shall
coordinate and cooperate with Buyer in exchanging such information and
assistance as Buyer may reasonably request in connection with all of the
foregoing. The appropriate Sellers have made all filings under the HSR Act and
shall (i) use commercially reasonable efforts to make or cause to be made all
filings and submissions under the HSR Act and any other laws or regulations
applicable to them as may be required for the consummation of the transactions
contemplated herein, (ii) use commercially reasonable efforts to secure the
termination of any waiting periods under the HSR Act and (iii) shall be
responsible for the filing fees under the HSR Act and such other laws or
regulations as are applicable to it. Sellers shall coordinate and cooperate with
the Company and Buyer in exchanging such information and assistance as the
Company and Buyer may reasonably request in connection with all of the
foregoing.

     6.04 Conditions. The Company and its Subsidiaries and the Sellers shall use
commercially reasonable efforts to, and the Sellers shall use their commercially
reasonable efforts to cause the Company and its Subsidiaries to, cause the
conditions set forth in Section 2.01 to be satisfied and to consummate the
transactions contemplated herein; provided that, notwithstanding anything in
this Agreement to the contrary, for the avoidance of doubt, the "commercially
reasonable efforts" of the Sellers (or any Seller), the Company (prior to
Closing) and/or any Subsidiary of the Company (prior to Closing) shall not
require any of them to make a material expenditure to any third party to satisfy
the conditions set forth in Section 2.01.

     6.05 Notification.


                                       26



          (a) From the date hereof until the Closing Date, promptly upon
discovery thereof by the Company or the Seller Representative, and in any event,
prior to the Closing Date, the Company and the Seller Representative shall
disclose to Buyer in writing (i) any variances from the representations and
warranties contained in Article III and Article IV, as applicable, that
individually, or in the aggregate, would reasonably be expected to exceed
$1,000,000 (but that are not required to be disclosed pursuant to clause (ii)
hereof), in the form of updates and/or modifications to the Disclosure Schedules
(such update, a "Significant Update") and (ii) any variances, in the Company's
or the Seller Representative's good faith judgment, that would reasonably be
expected to permit the Buyer to refuse to close the transactions contemplated by
this Agreement pursuant to Section 2.01(a) (such update, an "MAE Update"). The
Company or the Seller Representative, as applicable, shall indicate in its
disclosure which items are Significant Updates and which items are MAE Updates.

          (b) The disclosures set forth in a Significant Update shall amend and
supplement the appropriate schedules delivered on the date hereof and as of the
Closing Date and shall otherwise amend or modify the representations and
warranties contained in Article III and Article IV, provided that, subject to
Section 6.05(d), the delivery of any such Significant Update shall not prevent
Buyer from having any claim for indemnification pursuant to Section 9.02(a)(i)
or 9.02(a)(ii) against the Sellers or the Company for any such variance or
inaccuracy and the Buyer Indemnified Parties shall be entitled to such
indemnity.

          (c) Within ten business days after delivery by the Company or the
Seller Representative of the disclosures pursuant to Section 6.05(a), or if
delivered less than ten business days prior to Closing, at any time up to
Closing, Buyer shall provide the Seller Representative with written notice if,
in the Buyer's good faith judgment, any one or any combination of the
Significant Updates permit the Buyer to refuse to close the transactions
contemplated by this Agreement pursuant to Section 2.01(a) (a "Claimed MAE
Update").

          (d) Notwithstanding any provision in this Agreement to the contrary,
in the event that the Closing occurs, the Buyer shall be deemed to have accepted
the disclosures set forth in any MAE Update and/or Claimed MAE Update, and such
updates shall be deemed to have cured any misrepresentation or breach of
warranty that otherwise might have existed hereunder by reason of such variance
or inaccuracy, and Buyer shall not have any claim (whether for indemnification
or otherwise) against the Sellers or the Company for any such variance or
inaccuracy.

     6.06 Exclusivity. Until the earlier of the Closing Date and the date that
this Agreement is terminated by its terms, Sellers will not, and will cause the
Company and its Subsidiaries not to, through any representative or otherwise,
solicit or entertain offers from, negotiate with or in any manner encourage,
discuss, or accept any proposal of any other Person relating to the acquisition
of (i) the shares of the Company or any Subsidiary or (ii) all or substantially
all of the assets or business, in whole or in part, of the Company and its
Subsidiaries, in each case whether directly or indirectly, through purchase,
acquisition, consolidation, or otherwise (other than sales or purchases of
inventory in the ordinary course), other than with Buyer, its Affiliates and
their representatives. The Company will promptly notify Buyer of any contact
between the Company or its representatives and any other Person regarding any
such offer or proposal or any related inquiry.

     6.07 Tax Matters. Without the prior written consent of Buyer, neither the
Company nor any of its Subsidiaries shall make or change any Tax election,
change an annual accounting period, adopt or change any accounting method, file
any amended Tax Return, enter into any closing agreement, settle any Tax claim
or assessment relating to the Company or any of its Subsidiaries, surrender any
right to claim a refund of Taxes, consent to any extension or waiver of the
limitation period applicable to any Tax claim


                                       27



or assessment relating to the Company or any of its Subsidiaries, or take any
other similar action relating to the filing of any Tax Return or the payment of
any Tax, if such election, adoption, change, amendment, agreement, settlement,
surrender, consent or other action would have the effect of increasing the Tax
liability of the Company or any of its Subsidiaries for any period ending after
the Closing Date or decreasing any Tax attribute of the Company or any of its
Subsidiaries existing on the Closing Date.

     6.08 Non-Solicitation. For a period of eighteen months from and after the
Closing Date, each of the Sellers will not contact, approach or solicit for the
purpose of offering employment to or hiring (whether as an employee, consultant,
advisor, agent, independent contractor or otherwise) or actually hire any of the
Key Employees of the Company or any of its Subsidiaries; provided, however, that
the foregoing provision shall not (i) restrict any such Person from making any
general solicitation for employees or public advertising of employment
opportunities not specifically targeted at any such persons, (ii) preclude any
such Person from soliciting and/or hiring any Key Employee who has voluntarily
terminated his or her employment with the Company and its Subsidiaries at least
six months earlier or (iii) preclude any such Person from soliciting and/or
hiring any Key Employee at any time after such Key Employee's employment with
the Company and/or any of its Subsidiaries is terminated by the Company and/or
any such Subsidiary. For purposes hereof, "Key Employees" shall mean Rick
Turner, Susan Baacke, Frank Cristelli, William Holcomb, Jim Kellogg and the
plant managers listed on Schedule 6.08. With respect to any Seller who is also
an employee of the Company, for the avoidance of doubt, the covenants set forth
in this Section 6.08 are in addition to, rather than in lieu of, any similar
covenant or agreement which is otherwise binding on such Seller.

     6.09 Release of Claims. Each of the Company and Buyer releases and forever
discharges the Sellers and their officers, directors, shareholders and
Affiliates, from any and all actions, causes of action, suits, debts, accounts,
claims, contracts, demands, agreements, controversies, judgments, obligations,
damages and liabilities of any nature whatsoever, in law or in equity, whether
currently known or unknown, suspected or claimed, whether pursuant to contract,
statute or otherwise, in each case, arising out of events prior to the Closing
(other than, in the case of the Company's and Subsidiaries' officers and
directors, for breach of their fiduciary duty to the Company or its
Subsidiaries). Nothing herein shall deprive either the Company, the Sellers or
the Buyer of the right to pursue any remedy or otherwise to assert any claim
arising out of this Agreement, the Transaction Documents, or the transactions
contemplated hereby or thereby.

     6.10 Withholding Obligations. The Company or its Subsidiaries, as
applicable, shall deduct and withhold from any consideration payable pursuant to
this Agreement to any employee receiving bonuses in connection with this
transaction such amounts as they are required to deduct and withhold with
respect to the making of such payments under applicable law. The Company shall
only pay over all amounts that are so withheld to the appropriate government
authority.

                                  ARTICLE VII

                               COVENANTS OF BUYER

     7.01 Access to Books and Records. From and after the Closing, Buyer shall,
and shall cause the Company to, provide the Seller Representative, the Sellers
and their authorized representatives with reasonable access at Seller's expense
(for the purpose of examining and copying) at all reasonable times and upon
reasonable notice to the books and records of the Company and its Subsidiaries
with respect to periods prior to the Closing Date and/or in connection with any
matter relating to or arising out of this Agreement or the transactions
contemplated hereby. Unless otherwise consented to in writing by the


                                       28



Seller Representative, Buyer shall not permit the Company or any of its
Subsidiaries, for a period of seven years following the Closing Date, to
destroy, alter or otherwise dispose of any of its books and records, or any
portions thereof, relating to periods prior to the Closing Date and/or matters
relating to this Agreement and the transactions contemplated hereby without
first giving at least thirty (30) days prior written notice to the Seller
Representative and offering to surrender to the Seller Representative such books
and records or such portions thereof. For purposes of the preceding sentence,
any notice from Buyer delivered in accordance with this Section 13.04 shall be
deemed to be implicit consent if not responded to in writing by the Seller
Representative within sixty (60) days.

     7.02 Director and Officer Liability and Indemnification.

          (a) After the Closing, Buyer shall cause the Company to continue to
indemnify and hold harmless each present and former director and officer of the
Company and its Subsidiaries against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities of
any nature whatsoever, incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to Closing, whether asserted or claimed prior to, at or after the
Closing (a "Proceeding"), to the fullest extent that the Company or any of its
Subsidiaries would have been permitted under applicable law and the certificates
of incorporation and by-laws of the Company and its Subsidiaries in effect on
the date hereof to indemnify such person (including the advancing of expenses as
incurred to the fullest extent permitted under applicable law); provided,
however, the person to whom such expenses are advanced provides an unsecured
undertaking to the Company to repay such advances if it is ultimately determined
that such person is not entitled to indemnification; and provided, further, that
any determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under applicable law
and/or the applicable certificate of incorporation and by-laws of the Company or
its Subsidiary providing such indemnity shall be made by independent counsel
selected by the Company and Buyer and reasonably acceptable to the indemnified
person; and provided, further, that such indemnification and advancement of
expenses shall not apply to any Proceeding (or part of any Proceeding) which is
first initiated by such person (other than in response to a third party claim,
in connection with an appeal or if another party has initiated a Proceeding on
the same matter previously), or any Proceeding by such person against the
Company, any Subsidiary or its directors, officers, employees or other persons
entitled to be indemnified by the Corporation.

          (b) For a period of six years after the Closing, Buyer shall not, and
shall not permit the Company or any of its Subsidiaries to amend, repeal or
modify any provision in the Company's or such Subsidiary's certificate or
articles of incorporation or bylaws (or other organizational documents) relating
to the exculpation or indemnification of any officers and directors (unless
required by law), to the extent that such amendment, repeal or modification
would adversely affect the rights of directors or officers under Section
7.02(a).

          (c) In the event that after the Closing Date, Buyer or the Company, or
their respective successors or assigns, (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
in such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any Person, then, and in each case, Buyer and the
Company shall use their reasonable efforts to make proper provision that the
successors and assigns of Buyer or the Company, as the case may be, honor the
indemnification and other obligations of such Persons under this Section 7.02.


                                       29



     7.03 Release of Claims. Each of the Sellers releases and forever discharges
the Company, its Subsidiaries and their officers, directors, shareholders and
Affiliates, from any and all actions, causes of action, suits, debts, accounts,
claims, contracts, demands, agreements, controversies, judgments, obligations,
damages and liabilities of any nature whatsoever, in law or in equity, whether
currently known or unknown, suspected or claimed, whether pursuant to contract,
statute or otherwise, in each case, arising out of events prior to the Closing,
including, without limitation, any claims with respect to the Shares or
Warrants. Nothing herein shall deprive any Seller of the right to pursue any
remedy or otherwise to assert any claim arising out of this Agreement, the
Transaction Documents, or the transactions contemplated hereby or thereby.

     7.04 Regulatory Filings. Buyer has made all filings under the HSR Act and
shall (i) use commercially reasonable efforts to make or cause to be made all
filings and submissions under the HSR Act and any other laws or regulations
applicable to Buyer as may be required of Buyer for the consummation of the
transactions contemplated herein, (ii) use commercially reasonable efforts to
secure the termination of any waiting periods under the HSR Act and (iii) be
responsible for all filing fees under the HSR Act and such other laws or
regulations as are applicable to Buyer. Buyer shall coordinate and cooperate
with the Company in exchanging such information and assistance as the Company
may reasonably request in connection with all of the foregoing.

     7.05 Conditions. Buyer shall use commercially reasonable efforts to cause
the conditions set forth in Section 2.02 to be satisfied and to consummate the
transactions contemplated herein, provided that, notwithstanding anything in
this Agreement to the contrary, for the avoidance of doubt, the "commercially
reasonable efforts" of Buyer shall not require it to make a material expenditure
to any third party to satisfy the conditions set forth in Section 2.02.

     7.06 Contact with Customers and Suppliers. Prior to the Closing, Buyer and
Buyer's Representatives shall contact and communicate with the employees,
customers and suppliers of the Company and its Subsidiaries in connection with
the transactions contemplated hereby only with the prior written consent of the
Company.

     7.07 Employee Benefits. For a period of 12 months following the Closing
Date, Buyer and its Affiliates shall provide each employee who was an employee
of the Company or any Subsidiary of the Company as of June 30, 2006 with base
compensation and target bonuses that are at least as favorable as that provided
immediately prior to June 30, 2006 and employee benefits that are substantially
similar in the aggregate as that provided by the Company as of June 30, 2006.
The structure of the bonus plan for such employees for the 2007 calendar year
shall be as set forth on Section 7.07 of the Disclosure Schedules.
Notwithstanding the preceding two sentences, to the extent that any such
employees are terminated for a reason other than "cause" during such 12-month
period, Buyer or its Affiliates shall provide such employees with severance pay
in an amount equal to up to eight weeks base compensation as provided in the
Company's severance policy in existence as of the date hereof; provided that in
the case of Rick Turner, Frank Cristelli and William Holcomb, Buyer or its
Affiliates will comply with the terms of such employee's employment agreements
with respect to any severance amounts that may become due and payable under the
terms of such agreement, if any. If Buyer or any of its Affiliates transfers any
employees of the Company or any Subsidiary to a New Plan (as defined below), for
eligibility and vesting purposes under such New Plan, each employee who is as of
the Closing Date an employee of the Company or any of its Subsidiaries shall be
credited with his or her years of service with the Company or such Subsidiary,
as applicable, except to the extent such credit would result in a duplication of
benefits. In such event, and without limiting the generality of the foregoing:
(i) each employee shall be immediately eligible to participate, without any
waiting time, in any and all employee benefit plans sponsored by


                                       30



Buyer and its Affiliates for the benefit of employees (such plans, collectively,
the "New Plans") to the extent coverage under such New Plan replaces coverage
under a comparable employee benefit plan in which such employee participated
immediately before the Closing Date (such Plans, collectively, the "Old Plans"),
unless such waiting time applied under the Old Plans; and (ii) for purposes of
each New Plan providing medical, dental, pharmaceutical or vision benefits to
any employee, Buyer shall cause all pre-existing condition exclusions and
actively-at-work requirements of such New Plan to be waived for such employee
and his or her covered dependents (unless such exclusions or requirements
applied under the Old Plans), and (iii) Buyer shall cause any eligible expenses
incurred by such employee and his or her covered dependents during the portion
of the plan year of the Old Plan ending on the date such employee's
participation in the corresponding New Plan begins to be taken into account
under such New Plan for purposes of satisfying all deductible, coinsurance and
maximum out-of-pocket requirements applicable to such employee and his or her
covered dependents for the applicable plan year, as if such amounts had been
paid in accordance with such New Plan.

     7.08 Letters of Credit. Concurrently with the Closing, Buyer will arrange
to replace all of the Company's letters of credit set forth on Section 7.08 of
the Disclosure Schedules to the extent such letters of credit are terminated at
or prior to the Closing in connection with the transactions contemplated hereby.

                                  ARTICLE VIII

                                   TERMINATION

     8.01 Termination. This Agreement may be terminated at any time prior to the
Closing:

          (a) by the mutual written consent of Buyer and the Seller
Representative;

          (b) by Buyer, (i) if there has been a violation or breach by the
Company or the Sellers of any covenant, representation or warranty contained in
this Agreement (without giving effect to any Significant Update or MAE Update)
which would prevent the satisfaction of any condition to the obligations of
Buyer at the Closing and such violation or breach has not been waived by Buyer
or cured by the Company or the Sellers within ten days after written notice
thereof from Buyer or (ii) if Buyer has been provided with any MAE Update;

          (c) by the Seller Representative, if there has been a violation or
breach by Buyer of any covenant, representation or warranty contained in this
Agreement which would prevent the satisfaction of any condition to the
obligations of the Sellers at the Closing and such violation or breach has not
been waived by the Seller Representative or cured by Buyer within ten days after
written notice thereof by the Seller Representative (provided that the failure
of Buyer to deliver the consideration pursuant to Section 1.03 at the Closing as
required hereunder shall not be subject to cure hereunder unless otherwise
agreed to in writing by the Seller Representative); or

          (d) by either Buyer or the Seller Representative if the Closing has
not occurred on or before November 14, 2006; provided that neither Buyer nor the
Seller Representative shall be entitled to terminate this Agreement pursuant to
this Section 8.01(d) if such Person's (or the Company's or any Seller's in the
case of the Seller Representative) knowing or willful breach of this Agreement
has prevented the consummation of the transactions contemplated hereby.

The party desiring to terminate this Agreement pursuant to clauses (b), (c) or
(d) of this Section 8.01 shall give written notice of such termination to the
other parties hereto.


                                       31



     8.02 Effect of Termination. In the event of termination of this Agreement
by either Buyer or the Seller Representative as provided above, the provisions
of this Agreement shall immediately become void and of no further force and
effect (other than this Section 8.02, Section 7.06 and Article XIII and the
Confidentiality Agreement which shall survive the termination of this
Agreement), and there shall be no liability on the part of any of Buyer, the
Company, or the Sellers to one another, except for willful breaches of this
Agreement prior to the time of such termination.

                                   ARTICLE IX

                                 INDEMNIFICATION

     9.01 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements set forth in this Agreement and in any
certificates delivered at the Closing in connection with this Agreement shall
survive the Closing until November 30, 2007 (the "Survival Period") and shall
thereafter be of no further force or effect. Notwithstanding the foregoing, (a)
the representations and warranties set forth in Sections 3.06, 4.04 and 4.08
(the "Fundamental Representations and Warranties") shall survive until sixty
days after the expiration of the longest applicable statute of limitations, or
if there is no applicable statute of limitations, six years after the Closing
Date and (b) any covenants of any party which by their terms are to be performed
or observed on or following the Closing (including, without limitation, the tax
indemnifications and covenants set forth in Section 11.03) shall survive the
Closing until fully performed or observed in accordance with their terms. Except
as expressly provided in the immediately preceding sentence, no claim for
indemnification hereunder may be made after the expiration of the applicable
survival period, provided, that the final resolutions of any claim for
indemnification pending as of the relevant date specified in this Section 9.01
shall survive until its final resolution; and provided, further that if events
or circumstances which are the basis for a claim for indemnification by a Buyer
Indemnified Party also constitute a basis for a claim for indemnification by the
Company or any Subsidiary against the sellers or members in the Prior
Acquisition Agreement, a Buyer Indemnified Party shall be entitled to preserve
its right to indemnification under this Agreement by submitting to the Seller
Representative a written notice of the basis for the claim at any time prior to
the expiration of any applicable survival period and such claim shall survive
until its final resolutions under this Agreement and the Prior Acquisition
Agreement.

     9.02 Indemnification by the Sellers for the Benefit of Buyer.

          (a) Subject to the provisions of Section 6.05(d) and this Article IX,
from and after the Closing, the Sellers, severally and not jointly, shall
defend, indemnify and hold harmless Buyer, the Company and its Subsidiaries,
each of its respective officers, directors, partners, members, employees,
agents, representatives, successors and permitted assigns, (collectively, the
"Buyer Indemnified Parties") against any actual losses, out-of-pocket costs,
dues, obligations, fees (including court costs and reasonable attorneys' fees
and expenses), expenses, liabilities or other damages (collectively, "Losses"),
which the Buyer Indemnified Parties suffer as a result of, arise out of, or in
connection with any actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees or
rulings relating to (i) any breach by the Company of any representation and
warranty of the Company contained in Article IV, the Disclosure Schedules or any
certificate delivered by or on behalf of the Company hereunder at or prior to
the Closing, (ii) any breach by any Seller of any representation and warranty of
such Seller contained in Article III or the Disclosure Schedules, (iii) any
breach of any covenant or agreement contained in this Agreement to be performed
or complied with by the Company at or prior to the Closing, (iv) any breach of
any covenant or agreement contained in this Agreement to be performed or
complied with by any Seller, or (v)(1) governmental penalties and fines


                                       32



levied against the Company or its Subsidiaries with respect to the matters set
forth in items 4 and 5 of Section 4.11 of the Disclosure Schedules, (2) the
claims listed on items 1 and 2 of Section 4.11 of the Disclosure Schedules and
(3) subject to the cap on liability set forth in the EB Side Letter, item 26 of
Section 4.13(a) of the Disclosure Schedules. Subject to the other terms,
conditions and restrictions contained herein, each Seller shall be responsible
for paying such Seller's Percentage Share of any such Losses suffered by any
Buyer Indemnified Party. Notwithstanding the foregoing, however, the
representations, warranties, covenants and agreements contained in this
Agreement that relate specifically and solely to a particular Seller are the
obligations of that particular Seller only and the other Sellers shall not be
responsible therefore. This means that the particular Seller making any such
representation, warranty, covenant or agreement contained in this Agreement
shall be solely responsible for any Losses the Buyer Indemnified Parties suffer
as a result of any breach of any such representations, warranties, covenants and
agreements by such Seller.

          (b) Notwithstanding any other provision in this Agreement to the
contrary, Sellers shall have no liability under Sections 9.02(a)(i)-(iv) above,
unless (i) the Loss with respect to such matter or series of related matters is
$30,000 or greater (the "Per Item Threshold"), it being understood such Losses
with respect to a matter or series of related matters may not be applied toward
satisfaction of the Deductible unless the Losses with respect to a matter or
series of related matters exceeds the Per Item Threshold (in which event,
subject to all of the other limitations and restrictions contained in this
Agreement, all Losses with respect to such matter or series of related matters
are indemnifiable hereunder and may be applied against the Deductible) and (ii)
the aggregate of all Losses for which the Sellers would be liable, but for this
section, exceeds on a cumulative basis $1,000,000 (the "Deductible"), and then
only to the extent such Losses exceed the Deductible; provided that the Sellers'
aggregate liability under Sections 9.02(a)(i)-(iv) shall in no event exceed an
amount equal to $10,000,000 (the "Cap"); provided further that (x) the Cap shall
not apply to Losses (and such Losses shall be disregarded in determining whether
the Cap has been reached) resulting from breaches of the Fundamental
Representations and Warranties, fraud, the willful breach of Sections 6.01(c),
6.08 and 7.03, indemnification payments made pursuant to Section 11.03 or the
indemnity obligations under Section 9.02(a)(v), and (y) the Deductible shall not
apply to Losses resulting from fraud, the willful breach of Sections 6.01(c),
6.08 and 7.03, to indemnification payments made under Section 11.03 or the
indemnity obligations under Section 9.02(a)(v). Except in the case of fraud, in
no event shall the aggregate liability of any Seller for all Losses claimed
under this Section 9.02 by the Buyer Indemnified Parties against such Seller
exceed such Seller's proceeds received in respect of Common, Preferred and the
Warrants. Notwithstanding any provision of this Agreement to the contrary, any
indemnity to Buyer arising from a breach of Section 1.04(c)(iii) shall not be
subject to the limits set forth in this Article IX.

          (c) Notwithstanding anything to the contrary herein, for purposes of
the indemnities in this Section 9.02, each representation and warranty made by
any Seller or the Company is made without any qualifications or limitations as
to materiality (including, without limitation, any qualifications or limitations
made by reference to a Material Adverse Effect) and, without limiting the
foregoing, the words "material" and words of similar import shall be deemed
deleted from any such representation and warranty for such purpose.

          (d) Notwithstanding any other provision in this Agreement to the
contrary, the Sellers shall not be liable to, or indemnify, the Buyer
Indemnified Parties for any Losses (i) to the extent that such Losses result
from actions taken by Buyer Indemnified Parties or the Company, its Subsidiaries
or any of their respective Affiliates from and after the Closing Date, (ii) that
are punitive, special, consequential, incidental, exemplary or otherwise not
actual damages, in the nature of lost profits, or any diminution in value of
property or equity, except solely to the extent actually owed to unrelated third


                                       33



parties or (iii) related to any matter that was taken into account in and
resolved in writing as part of the resolution of the final determination of Net
Working Capital or the Pre-Closing Tax Amount pursuant to Section 1.04 hereof.
The Buyer Indemnified Parties shall not use "multiple of profits" or "multiple
of cash flow" or any similar valuation methodology in calculating the amount of
any Losses. Except as provided in Section 11.03, this Section 9.02 constitutes
the Buyer Indemnified Parties' sole and exclusive remedy for any and all Losses
or other claims relating to or arising from this Agreement and the transactions
contemplated hereby, provided that, notwithstanding anything to the contrary
contained in this Agreement, none of the foregoing limitations set forth in this
Section 9.02 shall apply or reduce any Buyer Indemnified Parties' right to
recover any Losses that such Buyer Indemnified Party may have at law or equity
based on the Sellers' fraudulent acts.

          (e) The Buyer Indemnified Parties shall take, and shall cause the
Company and its Subsidiaries to use all commercially reasonable efforts to
mitigate all Losses upon and after becoming aware of any event which could
reasonably be expected to give rise to Losses.

          (f) The Buyer Indemnified Parties shall not be entitled to recover any
Losses relating to any matter arising under one provision of this Agreement to
the extent that the Buyer Indemnified Parties had already recovered Losses with
respect to such matter pursuant to other provisions of this Agreement.

          (g) Any indemnity payment under this Agreement shall be treated as an
adjustment to the Final Common Purchase Price for Tax purposes.

     9.03 Indemnification by Buyer for the Benefit of the Sellers. From and
after the Closing Date, Buyer shall indemnify the Sellers and their officers,
directors, partners, members, employees, agents, representatives, successors and
permitted assigns (collectively, the "Seller Indemnified Parties") against any
Losses which the Seller Indemnified Parties suffer as a result of: (a) any
breach of any representation or warranty of Buyer under this Agreement or any
certificate delivered by or on behalf of Buyer hereunder, (b) any
non-fulfillment or breach of any covenant, agreement or other provision set
forth in this Agreement to be performed by Buyer and/or, from and after the
Closing, the Company or any of its Subsidiaries, and (c) any claim or suit
brought against any of the Seller Indemnified Parties at any time on or after
the Closing Date to the extent arising from actions taken by Buyer or a Company
or any of its Subsidiaries on or after the Closing Date other than any claim or
action by Buyer pursuant to Section 9.02 relating to any breach by any of the
Seller Indemnified Parties.

     9.04 Manner of Payment. Any indemnification payment pursuant to this
Article IX shall be effected by wire transfer of immediately available funds
from the applicable indemnifying party to an account designated by each
applicable indemnified party within 7 days after the determination thereof.

     9.05 Defense of Third Party Claims. Any Person making a claim for
indemnification under this Section 9.02 or Section 9.03 (an "Indemnitee") shall
notify the indemnifying party (an "Indemnitor") of the claim in writing promptly
after receiving notice of any action, lawsuit, proceeding, investigation, demand
or other claim against the Indemnitee (if by a third party), describing the
claim (including what provision of this Agreement the claim is being made
under), the amount thereof (if known and quantifiable) and the legal and factual
basis thereof in reasonable detail (such written notice, an "Indemnification
Notice"); provided that the failure to so notify an Indemnitor shall not relieve
the Indemnitor of its obligations hereunder except to the extent that (and only
to the extent that) such failure shall have caused the damages for which the
Indemnitor is obligated to be greater than such damages would have been had the
Indemnitee given the Indemnitor prompt notice hereunder. Any Indemnitor


                                       34



shall be entitled to participate in the defense of such action, lawsuit,
proceeding, investigation or other claim giving rise to an Indemnitee's claim
for indemnification at such Indemnitor's expense, and at its option shall be
entitled to assume the defense thereof by appointing a reputable counsel
reasonably acceptable to the Indemnitee to be the lead counsel in connection
with such defense; provided that the Indemnitee shall be entitled to participate
in the defense of such claim and to employ counsel of its choice for such
purpose; provided however, that the fees and expenses of such separate counsel
shall be borne by the Indemnitee and shall not be recoverable from such
Indemnitor under this Article IX. If the Indemnitor shall control the defense of
any such claim, the Indemnitor shall be entitled to settle such claims; provided
that the Indemnitor shall obtain the prior written consent of the Indemnitee
(which consent shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim if, pursuant to or as a
result of such settlement or cessation, injunctive or other equitable relief
will be imposed against the Indemnitee or if such settlement does not expressly
and unconditionally release the Indemnitee from all liabilities and obligations
with respect to such claim. In all cases, the Indemnitee shall provide its
reasonable cooperation with the Indemnitor in defense of claims or litigation,
including by making employees, information and documentation reasonably
available. If the Indemnitor shall not assume the defense of any such action,
lawsuit, proceeding, investigation or other claim, the Indemnitee may defend
against such matter as it deems appropriate; provided that the Indemnitee may
not settle any such matter without the written consent of the Indemnitor (which
consent shall not be unreasonably withheld) if the Indemnitee is seeking or will
seek indemnification hereunder with respect to such matter.

     9.06 Determination of Loss Amount. The amount of any Loss subject to
indemnification under Section 9.02, Section 9.03 or Section 11.03 shall be
calculated net of (i) any Tax Benefit actually received by the Indemnitee on
account of such Loss, (ii) any reserves for current accounts set forth in the
Closing Statement to the extent such reserves were increased since the Latest
Balance Sheet (to the extent not already covered by Section 9.02(d)(iii)) and
(iii) any Net Insurance Proceeds or other amounts under indemnification
agreements actually received by the Indemnitee on account of such Loss,
including without limitation that certain Stock Purchase Agreement dated
November 1, 2004 by and among the Company, certain of its Subsidiaries and the
sellers party thereto (the "Prior Acquisition Agreement"). If the Indemnitee
receives a Tax Benefit on account of such Loss after an indemnification payment
is made to it, the Indemnitee shall promptly pay to the Person or Persons that
made such indemnification payment the amount of such Tax Benefit at such time or
times as and to the extent that such Tax Benefit is realized by the Indemnitee.
For purposes hereof, "Tax Benefit" shall mean any refund of Taxes actually paid
or actual reduction in the amount of Taxes which otherwise would have been paid.
To the extent that a Tax Benefit could give rise to a refund of Taxes, the
Indemnitee shall take all reasonable steps to claim such a refund. The
Indemnitee shall use commercially reasonable efforts to seek recovery under all
insurance policies and/or indemnification agreements covering any Loss to the
same extent as they would if such Loss were not subject to indemnification
hereunder (which may, to the extent commercially reasonable, include commencing
litigation against the insurer or indemnifying parties under such
indemnification agreement); provided, however, (x) the Indemnitee shall obtain
the prior written consent of the Indemnitor (not to be unreasonably withheld)
before entering into any settlement of a claim under any indemnity agreement or
provision (including, without limitation, under the Prior Acquisition Agreement)
if the amount of such settlement does not fully satisfy all Losses relating to
or arising from such claim, and (y) once indemnity for any Loss is sought by a
Buyer Indemnified Party under any applicable indemnification provision of the
Prior Acquisition Agreement and such Loss remains unsatisfied for a period of
not less than 180 days, the Buyer Indemnified Party shall be entitled to pursue
indemnification under the provisions of this Agreement. The fees and expenses
incurred by the Company or any Subsidiary in using commercially reasonable
efforts to seek recovery under all insurance policies and/or indemnification
agreements covering any Loss, including under the Prior Acquisition Agreement,
shall be included in the definition of Losses under this Agreement. To the
extent indemnity is not available under


                                       35



the Prior Acquisition Agreement for any reason, it shall in no way effect,
limit, reduce, diminish or modify in any way the indemnification obligations and
rights under this Agreement. In the event that an insurance or other recovery is
made by any Indemnitee with respect to any Loss for which any such Person has
been indemnified hereunder, then a refund equal to the aggregate amount of the
recovery shall be made promptly to the Person or Persons that provided such
indemnity payments to such Indemnitee. The Indemnitors shall be subrogated to
all rights of the Indemnitees in respect of any Losses indemnified by the
Indemnitors (including, without limitation, pursuant to all indemnification
rights and obligations arising under other agreements, including the Prior
Acquisition Agreement). For Tax purposes, the parties agree to treat all
payments made under this Article IX as adjustments to the Final Common Purchase
Price. "Net Insurance Proceeds" shall mean the value of the Insurance Proceeds
(defined below) in excess of the present value (discounted at the applicable
rate) of any material increase in the annual premiums on such insurance policy
against which the claim was made for the succeeding three-year period which was
directly related to the Loss. "Insurance Proceeds" include the insurance
recoveries that the Indemnitee in fact receives as a consequence of the
circumstances to which the Losses are related or from which the Losses resulted
or arose, excluding any amounts which are in effect self-insured whether through
retention amounts or otherwise.

     9.07 Dispute Procedures. Each party hereto expressly and irrevocably
consents and submits to the jurisdiction and venue of any state or federal court
sitting in Multnomah County, Oregon, in any action or proceeding arising out of
or relating to this Agreement or the Transaction Documents and agrees that all
claims in respect of the action or proceeding may be heard and determined in
such court and to the appellate courts in connection with any appeal. The
parties expressly waive all defenses of lack of personal jurisdiction, improper
venue and forum non-conveniens with respect to such federal and state courts
sitting within Multnomah County, Oregon. The parties expressly consent to (i)
service of process being effected upon them by certified mail sent to the
addresses set forth in this Agreement and (ii) any final judgment rendered
against a party in any action or proceeding being enforceable in other
jurisdictions in any manner provided by law. The rendering of any decision
pursuant to this Section 9.07 will determine the allocation of the costs and
expenses of such litigation based upon the percentage which the portion of the
contested amount not awarded to each party bears to the amount actually
contested by such party. For example, if Buyer submits a claim for $1,000, and
if the applicable Seller(s) (or the Seller Representative, as the case may be)
contest only $500 of the amount claimed by Buyer, and if the court ultimately
resolves the dispute by awarding Buyer $300 of the $500 contested, then the
costs and expenses of litigation will be allocated 60% (i.e., 300 / 500) to the
Sellers and 40% (i.e., 200 / 500) to Buyer.

     9.08 Escrow. Notwithstanding anything herein to the contrary with respect
to claims for indemnity under Section 9.02, the Buyer Indemnified Parties shall
first exhaust the Escrow Amount held by the Escrow Agent before proceeding to
recover an indemnification claim against the Sellers.

     9.09 Termination of Indemnification. The obligations to indemnify and hold
harmless a party hereto in respect of a breach of representation, warranty,
covenant agreement shall terminate when the applicable representation or
warranty or covenant terminates pursuant to Section 9.01; provided, however,
that such obligations to indemnify and hold harmless shall not terminate with
respect to any item as to which the party to be indemnified shall have, prior to
the expiration of the applicable survival period, previously made a claim by
delivering any required written notice hereunder to the indemnifying party.


                                       36



                                   ARTICLE X

                             SELLER REPRESENTATIVE

     10.01 Designation. The Seller Representative is hereby designated by each
of the Sellers to serve as the representative of the Sellers with respect to the
matters expressly set forth in this Agreement to be performed by the Seller
Representative.

     10.02 Authority. Each of the Sellers, by the execution of this Agreement,
hereby irrevocably appoints the Seller Representative as the agent, proxy and
attorney-in-fact for such Seller for all purposes of this Agreement (including
the full power and authority on such Seller's behalf (i) to consummate the
transactions contemplated herein; (ii) to pay such Seller's expenses incurred in
connection with the negotiation and performance of this Agreement (whether
incurred on or after the date hereof); (iii) to receive and disburse any funds
received hereunder or pursuant to the Holdback Agreement to such Seller and each
other Seller; (iv) to endorse and deliver any certificates or instruments
representing the Shares and execute such further instruments of assignment as
Buyer shall reasonably request; (v) to execute and deliver on behalf of such
Seller any amendment or waiver hereto; (vi) to take all other actions to be
taken by or on behalf of such Seller in connection herewith; (vii) to act for
such Seller with regard to matters pertaining to indemnification referred to in
this Agreement, including the power to compromise any indemnity claim on behalf
of such Seller and to transact matters of litigation, and to act for such Seller
under the Holdback Agreement; and (viii) to do each and every act and exercise
any and all rights which such Seller or the Sellers collectively are permitted
or required to do or exercise under this Agreement). Each of the Sellers agrees
that such agency and proxy are coupled with an interest, are therefore
irrevocable without the consent of the Seller Representative and shall survive
the death, incapacity, bankruptcy, dissolution or liquidation of any Seller. All
decisions and actions by the Seller Representative (to the extent authorized by
this Agreement) shall be binding upon all of the Sellers, and no Seller shall
have the right to object, dissent, protest or otherwise contest the same;
provided, however, that the Seller Representative shall not take any such action
where (x) any single Seller would be held solely liable for a Loss (without such
Seller's consent) or (y) such action materially and adversely affects the
substantive rights or obligations of one Seller, or group of Sellers, without a
similar proportionate effect upon the substantive rights or obligations of all
Sellers, unless each such disproportionately affected Seller consents in writing
thereto.

     10.03 Authority; Indemnification. Each Seller agrees that Buyer shall be
entitled to rely on any action taken by the Seller Representative, on behalf of
such Seller, pursuant to Section 10.02 above (an "Authorized Action"), and that
each Authorized Action shall be binding on each Seller as fully as if such
Seller had taken such Authorized Action. Buyer agrees that the Seller
Representative, as the Seller Representative, shall have no liability to Buyer
for any Authorized Action, except to the extent that such Authorized Action is
found by a final order of a court of competent jurisdiction to have constituted
fraud or willful misconduct. Each Seller hereby severally, for itself only and
not jointly and severally, agrees to indemnify and hold harmless the Seller
Representative against all expenses (including reasonable attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the Seller Representative in connection with any action, suit or proceeding
to which the Seller Representative is made a party by reason of the fact it is
or was acting as the Seller Representative pursuant to the terms of this
Agreement or the Holdback Agreement and any expenses incurred by the Seller
Representative in connection with the performance of its duties hereunder.

     10.04 Exculpation. The Seller Representative shall not have by reason of
this Agreement a fiduciary relationship in respect of any Seller, except in
respect of amounts received on behalf of such


                                       37



Seller. The Seller Representative shall not be liable to any Seller for any
action taken or omitted by it or any agent employed by it hereunder or under any
other document entered into in connection herewith, except that the Seller
Representative shall not be relieved of any liability imposed by law for willful
misconduct. The Seller Representative shall not be liable to the Sellers for any
apportionment or distribution of payments made by the Seller Representative in
good faith, and if any such apportionment or distribution is subsequently
determined to have been made in error the sole recourse of any Seller to whom
payment was due, but not made, shall be to recover from other Sellers any
payment in excess of the amount to which they are determined to have been
entitled. The Seller Representative shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement. Neither the Seller Representative nor any agent
employed by it shall incur any liability to any Seller by virtue of the failure
or refusal of the Seller Representative for any reason to consummate the
transactions contemplated hereby or relating to the performance of its other
duties hereunder, except for actions or omissions constituting fraud or bad
faith.

     10.05 Payment of Expenses.

          The Sellers parties hereto acknowledge that $1,000,000 (the "Seller
Representative Reserve") of the amounts to be paid to Sellers pursuant to
Section 1.03(b)(i) shall be remitted by Buyer (on behalf of the Sellers) to the
Seller Representative or its designee in accordance with Sections 1.03(b)(i)(D),
1.03(b)(i)(E) and 1.03(b)(i)(F), and shall be held in a separate account of the
Seller Representative (the "Seller Representative Account"). The Seller
Representative Reserve may be utilized by the Seller Representative to cover
costs and expenses incurred, or payments made, by the Seller Representative in
performing its obligations, duties and rights as the Seller Representative
hereunder (including, without limitation, pursuant to Section 10.02(a)(vii)
above). In connection with the performance of its obligations, duties or rights
hereunder, the Seller Representative shall have the right at any time and from
time to time to select and engage, at the cost and expense of the Sellers,
attorneys, accountants, investment bankers, advisors, consultants and clerical
personnel, obtain such other professional and expert assistance, maintain such
records as the Seller Representative may deem necessary or desirable and incur
other out-of-pocket expenses. Any income earned from investments of the Seller
Representative Reserve shall be deposited in the Seller Representative Account.
In the discretion of the Seller Representative, any amounts on deposit in the
Seller Representative Account, including, without limitation, any income earned
from investments of funds in the Seller Representative Account, may be
distributed from time-to-time by the Seller Representative to each Seller in
accordance with their Percentage Share. The Seller Representative Reserve, after
payment of any amounts in accordance with this Section 10.05, shall be
distributed to each Seller in accordance with their Percentage Share as and when
determined by the Seller Representative. Notwithstanding anything contained in
this Agreement or elsewhere to the contrary, no Person or Persons other than the
Seller Representative shall (i) be entitled to exercise any of the rights or
powers of the Seller Representative hereunder, (ii) have any access whatsoever
to the Seller Representative Account or (iii) have any right to make a call or
demand upon any of the Sellers (including the Seller Representative) to
contribute any amounts to cover expenses or otherwise.

                                   ARTICLE XI

                       ADDITIONAL COVENANTS AND AGREEMENTS

     11.01 Disclosure Generally. If and to the extent any information required
to be furnished in any schedule is contained in this Agreement or in any other
schedule (or updated schedule), such information shall be disclosed with
references to the applicable section of this Agreement, but nonetheless shall be


                                       38



deemed to be included in all schedules (or updated schedules) (or sections
thereof) to the extent that it is reasonably apparent that such disclosure is
applicable to such other representations and warranties in which the information
is required to be included. The inclusion of any information in any schedule (or
updated schedule) shall not be deemed to be an admission or acknowledgment by
the Company or the Sellers, in and of itself, that such information is material
to or outside the ordinary course of the businesses of the Company and its
Subsidiaries.

     11.02 Acknowledgment by Buyer.

          (a) THE REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND THE SELLERS
SET FORTH IN THIS AGREEMENT AND THE TRANSACTION DOCUMENTS CONSTITUTE THE SOLE
AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS TO
BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND
BUYER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND
WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED (INCLUDING, BUT NOT LIMITED
TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION OR PROJECTIONS,
RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANY) ARE SPECIFICALLY
DISCLAIMED BY THE COMPANY AND THE SELLERS. The Company, the Subsidiaries and the
Sellers do not make or provide, and Buyer hereby waives, any warranty or
representation, express or implied, as to the quality, merchantability, fitness
for a particular purpose, conformity to samples, or condition of the Company's
or any of the Subsidiaries' assets or any part thereto. No claim shall be
brought or maintained by the Company, its Subsidiaries or Buyer or their
respective successors or permitted assigns against any officer, director or
employee (present or former) of the Company, its Subsidiaries, the Sellers, the
Seller Representative or any direct or indirect equity holder of the Sellers,
and no recourse shall be brought or granted against any of them, by virtue of or
based upon any alleged misrepresentation or inaccuracy in, or breach of any of
the representations, warranties or covenants of the Company and/or the Sellers
set forth or contained in, this Agreement or any certificate delivered
hereunder, except to the extent provided in this Agreement.

          (b) In connection with Buyer's investigation of the Company and the
Subsidiaries, Buyer has received from or on behalf of the Company, the
Subsidiaries or the Sellers certain projections. Buyer acknowledges and agrees
that there are uncertainties inherent in attempting to make such estimates,
projections and other forecasts and plans, that Buyer is familiar with such
uncertainties, that Buyer is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all estimates, projections and other
forecasts and plans so furnished to it (including the reasonableness of the
assumptions underlying such estimates, projections and forecasts), and that,
except in the event of fraud by the Company or the Sellers, Buyer shall have no
claim against the Company, its Subsidiaries, the Sellers, the Seller
Representative or any direct or indirect equity holder of the Sellers with
respect thereto. Accordingly, neither the Company, the Subsidiaries nor the
Sellers make any representations or warranties whatsoever with respect to such
estimates, projections and other forecasts and plans (including the
reasonableness of the assumptions underlying such estimates, projections and
forecasts). Buyer agrees that none of the Sellers nor any other Person will have
or be subject to any liability to Buyer or any other Person resulting from the
distribution to Buyer, or Buyer's use of, any information regarding the Company
or any of the Subsidiaries or their respective businesses, including any
information, document or material made available to Buyer or its Affiliates in
management presentations or any other form in expectation of the transactions
contemplated by this Agreement.


                                       39



     11.03 Tax Matters. In addition to Article IX, the following provisions
shall govern the allocation of responsibility as between Buyer and Sellers for
certain tax matters following the Closing Date:

          (a) The Sellers, severally and not jointly, shall indemnify the
Company and its Subsidiaries and Buyer and hold them harmless from and against
(i) all Income Taxes and sales and use Taxes (or the non-payment thereof) of the
Company and its Subsidiaries for all taxable periods ending on or before the
Closing Date and the portion through the end of the Closing Date for any taxable
period that includes (but does not end on) the Closing Date ("Pre-Closing Tax
Period"), (ii) any and all Income Taxes and sales and use Taxes of any member of
an affiliated, consolidated, combined, or unitary group of which the Company or
any of its Subsidiaries (or any predecessor of any of the foregoing) is or was a
member on or prior to the Closing Date, including pursuant to Treasury
Regulation Section 1.1502-6 or any analogous or similar state, local, or foreign
law or regulation, (iii) any and all Income Taxes and sales and use Taxes of any
person (other than the Company and its Subsidiaries) imposed on the Company or
any of its Subsidiaries as a transferee or successor, by contract or pursuant to
any law, rule or regulation, which Taxes relate to an event or transaction
occurring before the Closing and (iv) all costs and expenses incurred by the
Company, its Subsidiaries or Buyer in connection with review, negotiation and
preparation of any returns related to such Taxes; provided, however, that in the
case of clauses (i), (ii) and (iii) above, Sellers shall be liable only to the
extent that such Taxes are in excess of (x) any amount under indemnification
agreements actually received by the Buyer on account of such Loss, including
without limitation the Prior Acquisition Agreement and (y) any amount of such
Taxes taken into account in the determination of the Pre-Closing Tax Amount. All
indemnification payments made pursuant to this Section 11.03 shall be calculated
net of any Tax Benefit, as defined in Section 9.06. Subject to the other terms,
conditions and restrictions contained herein, each Seller shall be responsible
for paying such Seller's Percentage Share of any such Losses pursuant to this
Section 11.03.

          (b) Straddle Period. In the case of any taxable period that includes
(but does not end on) the Closing Date (a "Straddle Period"), the amount of any
Income Taxes for the Pre-Closing Tax Period shall be determined based on an
interim closing of the books as of the close of business on the day before the
Closing Date (and for such purpose, the taxable period of any partnership or
other pass-through entity in which the Company or any of its Subsidiaries holds
a beneficial interest shall be deemed to terminate at such time).

          (c) Responsibility for Filing Tax Returns.

               (i) The Company shall prepare or cause to be prepared and file or
     cause to be filed all Tax Returns for the Company and its Subsidiaries that
     are filed after the Closing Date. The Company shall permit the Seller
     Representative to review and comment on each such Tax Return relating to
     taxable periods (i) ending on or before the Closing Date, (ii) with respect
     to any Straddle Period, or (iii) in which Transaction Tax Benefits are or
     may be realized, prior to the filing of such Tax Return, and the Company
     shall make such revisions to such Tax Returns as are reasonably requested
     by Seller Representative. The Company shall promptly provide copies of any
     schedules, work papers, records and other materials used in the preparation
     of each such Tax Return, including as relating to the method of computation
     of separate taxable income or other relevant measure of income, as well as
     any other materials reasonably requested by the Seller Representative. With
     respect to Tax Returns that relate to Taxes for which the Sellers are
     liable pursuant to Section 11.03(a), such returns shall be prepared,
     subject to applicable law, consistent with the past practice of the Company
     and its Subsidiaries and the Company shall not file such


                                       40



     return without the written consent of the Seller Representative, which
     consent shall not be unreasonably withheld or delayed.

               (ii) Neither the Buyer nor any of its Affiliates shall (or shall
     cause or permit the Company or any of the Subsidiaries to) file, amend,
     refile or otherwise modify any Tax Return relating in whole or in part to
     the Company or any of the Subsidiaries with respect to any Pre-Closing Tax
     Period (or with respect to any Straddle Period) without the written consent
     of the Seller Representative, which consent shall not be unreasonably
     withheld.

          (d) Refunds and Tax Benefits. Any Tax refunds that are received by
Buyer or the Company and its Subsidiaries, and any amounts credited against
Taxes to which Buyer or the Company and its Subsidiaries become entitled
(including without limitation any such refunds, credits and other amounts
attributable to Transaction Tax Benefits), that relate to Tax periods or
portions thereof ending on or before the Closing Date and were not taken into
account in determining the Pre-Closing Tax Amount as finally determined pursuant
to Section 1.04 (provided, however, that if the Pre-Closing Tax Amount as so
determined is negative, the amount of Tax refunds and credits taken into account
in clause (ii) of the definition of Pre-Closing Tax Amount in excess of the
amount of liabilities taken into account in clause (i) of such definition shall
not be treated as taken into account for purposes of this Section 11.03(d)),
shall be for the account of Sellers, and Buyer shall pay over to Seller
Representative any such refund or the amount of any such credit within 15 days
after receipt or entitlement thereto. To the extent any management bonuses
included as current liabilities in Net Working Capital, as finally determined,
are not claimed as deductions in a Tax Return with respect to a period ending on
or before the Closing Date (the "Pre-Closing Tax Returns"), the Buyer shall pay
over to the Sellers an amount equal to the amount by which the Pre-Closing Tax
Amount would have been reduced if such management bonuses had been claimed as
deductions in a Pre-Closing Tax Return, which payment shall be made on or before
May 15, 2007.

          (e) Tax Indemnification Procedures.

               (i) After the Closing, the Buyer shall promptly notify Sellers in
     writing of any demand, claim or notice of the commencement of an audit
     received from any Tax authority or any other Person with respect to Taxes
     for which the Sellers are liable pursuant to Section 11.03(a) of this
     Agreement; provided, however, that a failure to give such notice will not
     affect such rights to indemnification under Section 11.03(a), except to the
     extent that the Sellers are actually prejudiced thereby. Such notice shall
     contain factual information (to the extent known) describing the asserted
     Tax liability and shall include copies of the relevant portion of any
     notice or other document received from any Tax authority or any other
     Person in respect of any such asserted Tax liability.

               (ii) Payment of any amount due under Section 11.03(a) of this
     Agreement shall be made within ten (10) days following written notice by
     the Buyer that payment of such amounts to the appropriate Tax authority or
     other applicable third party is due by the Buyer, provided that the Sellers
     shall not be required to make any payment earlier than five (5) Business
     Days before it is due to the appropriate Tax authority or applicable third
     party. In the case of a Tax that is contested in accordance with the
     provisions of Section 11.03(f) of this Agreement, payment of such contested
     Tax will not be considered due earlier than the date a "final
     determination" to such effect is made by such Tax authority or a court. For
     this purpose, a "final determination" shall mean a settlement, compromise,
     or other agreement with the relevant Tax authority, whether contained in an
     Internal Revenue Service Form 870 or other comparable form,


                                       41



     or otherwise, or such procedurally later event, such as a closing agreement
     with the relevant Tax authority, and agreement contained in Internal
     Revenue Service Form 870-D or other comparable form, an agreement that
     constitutes a "determination" under Section 1313(a)(4) of the Code, a
     deficiency notice with respect to which the period for filing a petition
     with the Tax Court or the relevant state, local or foreign tribunal has
     expired or a decision of any court of competent jurisdiction that is not
     subject to appeal or as to which the time for appeal has expired.

               (iii) All amounts required to be paid pursuant to Section
     11.03(a) shall be paid promptly in immediately available funds by wire
     transfer to a bank account designated by the indemnified party.

               (iv) Any payments required pursuant to Section 11.03(a) that are
     not made within the time period specified in this section shall bear
     interest at a rate and in the manner provided in the Code for interest on
     underpayments of federal income tax.

          (f) Tax Audits and Contests; Cooperation on Tax Matters.

               (i) The Seller Representative shall control the conduct, through
     counsel of its own choosing and at its own expenses, of any audit, claim
     for refund, or administrative or judicial proceeding involving any asserted
     Tax liability or refund with respect to the Company or any of the
     Subsidiaries relating to Pre-Closing Tax Period, other than the taxable
     periods that include but do not end on the Closing Date (any such audit,
     claim for refund, or proceeding relating to an asserted Tax liability
     referred to herein as a "Contest").

               (ii) The Buyer shall have the right to participate in a Contest
     at its own expense. Neither the Buyer nor the Company nor the Seller
     Representative shall settle, compromise and/or concede a Contest without
     the consent of the other party (which consent shall not be unreasonably
     withheld or delayed) if such settlement, compromise and/or concession is
     reasonably expected to have a material adverse effect on such other party.
     If the Seller Representative fails to assume control of the conduct of any
     such Contest within a reasonable period following the receipt by the Seller
     Representative of notice of such Contest, the Buyer shall have the right to
     assume control of such Contest and shall be able to settle, compromise
     and/or concede such Contest in its sole discretion.

               (iii) Buyer, the Company and its Subsidiaries and Sellers shall
     cooperate fully, as and to the extent reasonably requested by the other
     Party, in connection with the filing of Tax Returns pursuant to this
     Section 11.03 and any audit, litigation or other proceeding with respect to
     Taxes. Such cooperation shall include the retention and (upon the other
     Party's request) the provision of records and information that are
     reasonably relevant to any such audit, litigation or other proceeding and
     making employees available on a mutually convenient basis to provide
     additional information and explanation of any material provided hereunder.
     The Company and its Subsidiaries and Sellers agree (A) to retain all books
     and records with respect to Tax matters pertinent to the Company and its
     Subsidiaries relating to any taxable period beginning before the Closing
     Date until the expiration of the statute of limitations (and, to the extent
     notified by Buyer or Sellers, any extensions thereof) of the respective
     taxable periods, and to abide by all record retention agreements entered
     into with any taxing authority, and (B) to give the other Party reasonable
     written notice prior to transferring, destroying or discarding any such
     books and records and, if the other Party so requests, the Company and its
     Subsidiaries or Sellers, as the case may be, shall allow the other Party to
     take possession of such books and records.


                                       42



               (iv) Buyer and Sellers further agree, upon request, to use their
     reasonable best efforts to obtain any certificate or other document from
     any governmental authority or any other Person as may be necessary to
     mitigate, reduce or eliminate any Tax that could be imposed (including, but
     not limited to, with respect to the transactions contemplated hereby).

               (v) Buyer and Sellers further agree, upon request, to provide the
     other Party with all information that either Party may be required to
     report pursuant to Internal Revenue Code Section 6043, or Internal Revenue
     Code Section 6043A, or Treasury Regulations promulgated thereunder.

          (g) Tax-Sharing Agreements. All tax-sharing agreements or similar
agreements with respect to or involving the Company and its Subsidiaries shall
be terminated as of the Closing Date and, after the Closing Date, the Company
and its Subsidiaries shall not be bound thereby or have any liability
thereunder.

          (h) Certain Taxes and Fees. All transfer, documentary, use, stamp and
registration Taxes, and all conveyance fees and recording charges (including any
penalties and interest) incurred in connection with the consummation of the
transactions contemplated by this Agreement shall be borne 50% by Buyer and 50%
by Sellers.

          (i) Tax Treatment of Indemnification Payments. It is the intention of
the parties to treat any indemnification payment made under this agreement,
under this Section 11.03 and under Article IX, as adjustments to the Final
Common Purchase Price, and the parties agree to file their Tax Returns
accordingly.

          (j) Tax Elections. The Buyer shall not, without the prior consent of
the Seller Representative (which may, in its sole and absolute discretion,
withhold such consent), make, or cause to permit to be made, any Tax election,
or adopt or change any method of accounting, or undertake any other
extraordinary action on the Closing Date, that would affect the Sellers or the
Company or any of the Subsidiaries prior to the Closing Date.

          (k) Allocation of Transaction Tax Benefits. Notwithstanding anything
in this Agreement to the contrary, (i) the parties intend that the Sellers
receive the benefits of any Transaction Tax Benefits; (ii) to the extent that
any Transaction Tax Benefits are taken into account in a Tax year ending on the
Closing Date, the Sellers' liability for Taxes attributable to such Tax year
shall be determined after taking such Transaction Tax Benefits into account;
(iii) to the extent that any Transaction Tax Benefits are taken into account in
a Straddle Period, such Transaction Tax Benefits shall be allocated to the
portion of the Straddle Period ending on the Closing Date and the Sellers'
liability for Taxes attributable to the pre-closing portion of such Straddle
Period shall be determined after taking such Transaction Tax Benefits into
account; (iv) to the extent that Transaction Tax Benefits are taken into account
in a Tax year beginning after the Closing Date, any Tax refund or reduction in
Tax liability attributable to such Transaction Tax Benefits shall be paid to
Sellers pursuant to Section 11.03(d); and (v) to the extent that a Transaction
Tax Benefit can be carried back to a taxable period ending on or before the
Closing Date, the Company shall do so.

          (l) Post-Closing Transactions not in Ordinary Course. The Buyer agrees
to report all transactions not in the ordinary course of business occurring on
the Closing Date after the Buyer's purchase of the Company's stock as occurring
on the day following the Closing Date to the extent permitted by Treasury
Regulation Section 1.1502-76(b)(1)(ii)(B) (and any similar provisions of state,
local, or foreign tax law).


                                       43



          (m) Inconsistencies. To the extent of any inconsistency between this
Section 11.03 and Article IX, the provisions of this Section 11.03 shall
control.

     11.04 Further Assurances. From time to time, as and when requested by any
party hereto and at such party's expense, any other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as the requesting party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.

     11.05 Provision Respecting Representation of Company. Each of the parties
to this Agreement hereby agrees, on its own behalf and on behalf of its
directors, members, partners, officers, employees and Affiliates, that Kirkland
& Ellis LLP may serve as counsel to each and any of the Sellers, the Seller
Representative and their respective Affiliates (individually and collectively,
"Seller Group"), on the one hand, and the Company and its Subsidiaries, on the
other hand, in connection with the negotiation, preparation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, and that, following consummation of the transactions contemplated
hereby, Kirkland & Ellis LLP (or any successor) may serve as counsel to any
member of the Seller Group or any director, member, partner, officer, employee
or Affiliate of Seller Group, in connection with any litigation, claim or
obligation arising out of or relating to this Agreement or the transactions
contemplated by this Agreement notwithstanding such representation, and each of
the parties hereto hereby consents thereto and waives any conflict of interest
arising therefrom, and each of such parties shall cause any Affiliate thereof to
consent to waive any conflict of interest arising from such representation.

                                  ARTICLE XII

                                  DEFINITIONS

     12.01 Definitions. For purposes hereof, the following terms, when used
herein with initial capital letters, shall have the respective meanings set
forth herein:

          "Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person.
For the purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct the management and policies of a Person
whether through the ownership of voting securities, contract or otherwise.

          "Affiliated Group" shall mean an affiliated group as defined in
Section 1504 of the Internal Revenue Code (or any analogous combined,
consolidated or unitary group defined under state, local or foreign income Tax
law) of which the Company is or has been a member.

          "Aggregate Preferred Purchase Price" means the sum of the Preferred
Per Share Prices for all shares of Preferred issued and outstanding immediately
prior to the Closing.

          "Cash on Hand" means, with respect to the Company and it Subsidiaries,
all cash, cash equivalents and marketable securities, as of 11:59 p.m. (New York
City time) on the day immediately preceding the Closing Date, net of any issued
but uncleared checks and drafts but including any deposits in transit.

          "Company's Accounting Practices and Procedures" means the customary
accounting methods, policies, practices and procedures, including classification
and estimation methodology used by


                                       44



the Company in the preparation of the Latest Balance Sheet, it being understood
that Section 4.05 of the Disclosure Schedules sets forth the extent that such
Company's Accounting Practices and Procedures are not prepared in accordance
with GAAP.

          "EB Side Letter" means the Side Letter between the Buyer, the Company
and the Seller Representative, dated as of the date hereof.

          "Employment Agreement Amendments" means each of the Amended and
Restated Employment Agreements, executed on or before the date hereof, between
the Company and each of Rick Turner and Frank Cristelli, as attached hereto as
Exhibit E.

          "Environmental Requirements" shall mean all federal, state, local and
foreign statutes, regulations, and ordinances, all judicial and administrative
orders and determinations and all common law enacted and in effect on or prior
to the Closing Date concerning pollution protection of human health from
environmental hazards or the protection of the environment, including without
limitation all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or cleanup
of any hazardous materials, substances or wastes.

          "Escrow Amount" means the amount of $3,000,000.

          "GAAP" means United States generally accepted accounting principles,
consistently applied.

          "Holdback Agreement" means the Holdback and Escrow Agreement between
the Company, the Seller Representative, the Escrow Agent and the Buyer (in form
and substance substantially as Exhibit F attached hereto).

          "Holdback Share" means a fraction, the numerator of which is the total
proceeds received by any Seller in respect of Common, and Warrants to purchase
Common held by such Seller, and the denominator of which is the sum of (i) the
Final Common Purchase Price and (ii) the Common Warrant Cancellation Payments
(expressed as a percentage). Section 1.02 of the Disclosure Schedule sets forth
the Holdback Share (if any) for each Seller (as the same may be amended from
time to time by the Seller Representative to reflect the actual stockholdings of
the Sellers as of the Closing Date).

          "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.

          "Income Tax" means any federal, state, local, or foreign income Tax
measured by or imposed on net income.

          "Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Tax, including any
schedule or attachment thereto.

          "Indebtedness" means, without duplication, the sum of (i) all
obligations of the Company and its Subsidiaries for borrowed money and any
accrued interest or prepayment premiums or fees related thereto, (ii) all other
indebtedness of the Company and its Subsidiaries evidenced by bonds, debentures,
notes or similar instruments, including all accrued and unpaid interest thereon,
(iii) all obligations of the Company and its Subsidiaries as lessee or lessees
under leases that have been recorded as capital leases in accordance with GAAP,
(iv) all payment obligations under any interest rate swap agreements or interest


                                       45



rate hedge agreements to which the Company or any of its Subsidiaries is party
and (v) all guarantees of any of the foregoing. For the avoidance of doubt,
Indebtedness shall not include amounts owed under any (a) guarantees, letters of
credit, performance bonds, sureties and/or similar obligations of any kind or
nature issued by or on behalf of the Company or any of the Subsidiaries in
connection with any customer contracts or customer proposals, (b) accounts,
payables or loans of any kind or nature solely between and among the Company and
its Subsidiaries and (c) any liabilities included in the calculation of
Aggregate Preferred Purchase Price.

          "Indebtedness Payoff Amount" means the amount required to repay all
Indebtedness of the Company and any Subsidiary outstanding as of immediately
prior to the Closing and any termination fees associated with termination of
Letters of Credit as set forth on Section 7.08 of the Disclosure Schedules.

          "Intellectual Property" means patents, trademarks, service marks,
domain names, copyrights and registrations, applications for the registration of
any of the foregoing, and any trade secrets, confidential information, and
know-how.

          "Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute or
treaty.

          "Material Adverse Effect" means any change, effect, event, occurrence,
state of facts or development (which may include the discontinuation of
relationships with Major Customers or Major Suppliers) that is materially
adverse to the current business, financial condition or results of operations of
the Company and its Subsidiaries taken as a whole or the ability of the Company
and its Subsidiaries or the Sellers to consummate the transactions contemplated
hereby; provided, however, that none of the following shall be deemed in
themselves, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
will be, a Material Adverse Effect: (a) any adverse change, effect, event,
occurrence, state of facts or development solely attributable to the
announcement or pendency of the transactions contemplated by this Agreement; (b)
any adverse change, effect, event, occurrence, state of facts or development
attributable to conditions affecting the industry in which the Company and its
Subsidiaries participate, the U.S. economy as a whole or the U.S. capital
markets in general or any foreign or state capital market in which the Company
and its Subsidiaries operate; or (c) the effect of any change arising in
connection with any "act of God" including weather, natural disasters and
earthquakes, hostilities, acts of war, sabotage or terrorism or military actions
or any escalation or material worsening of any such hostilities, acts of war,
sabotage or terrorism or military actions; provided, further, that current
business shall not include future prospects of the Company and its Subsidiaries.

          "Multiemployer Plan" shall have the meaning set forth in Section 3(37)
or 4001(a)(3) of ERISA.

          "Net Working Capital" means the result of (i) all current assets
(excluding Cash on Hand and any current or deferred Income Tax benefits or
assets) of the Company and its Subsidiaries minus (ii) all current liabilities
(excluding Indebtedness and any current or deferred Income Tax liabilities) of
the Company and its Subsidiaries, in each case determined in accordance with
GAAP, applied on a basis consistent with the Company's Accounting Practices and
Procedures; provided that, notwithstanding anything herein to the contrary, for
purposes of calculating "Net Working Capital", in no event will the
determination of "Net Working Capital" include (1) any amounts included in the
computation of the


                                       46



Aggregate Preferred Purchase Price, (2) any intercompany accounts and/or (3) any
liability or obligation related to the Sellers' Expenses or any other liability
that otherwise reduces the Common Purchase Price.

          "Net Working Capital Amount" means the Net Working Capital of the
Company and its Subsidiaries as of 11:59 p.m. (New York City time) on the day
immediately preceding the Closing Date.

          "OSHA" means the Occupational Safety and Health Act, (29 U.S.C.
Section 651 et seq.) and the regulations thereunder as enacted and in effect on
or prior to the Closing Date.

          "Percentage Share" means a fraction (based on estimates at Closing),
the numerator of which is the total proceeds received by any Seller in respect
of Common, Preferred and Warrants held by such Seller, and the denominator of
which is the sum of (i) the Final Common Purchase Price, (ii) the Aggregate
Preferred Purchase Price and (iii) the Warrant Cancellation Payments (expressed
as a percentage). Section 1.02 of the Disclosure Schedule sets forth the
Percentage Share for each Seller (as the same may be amended from time to time
by the Seller Representative to reflect the actual proceeds received and
stockholdings of the Sellers as of the Closing Date).

          "Permitted Liens" means (i) any restriction on transfer arising under
applicable securities law, (ii) liens for current Taxes or other governmental
charges not yet due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings by the Company and its
Subsidiaries; (iii) mechanics', carriers', workers', repairers' and similar
statutory liens arising or incurred in the ordinary course of business for
amounts which are not delinquent and which are not, individually or in the
aggregate, significant; (iv) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the Real
Property which are not violated by the current use and operation of the Real
Property or the operation of the business; (v) covenants, conditions,
restrictions, easements and other similar matters of record affecting title to
the Real Property which do not materially impair the occupancy or use of the
Real Property for the purposes for which it is currently used or proposed to be
used in connection with the Company's and its Subsidiaries' businesses; (vi)
liens arising under worker's compensation, unemployment insurance, social
security, retirement and similar legislation; (vii) purchase money liens and
liens securing rental payments under capital lease arrangements; (viii) liens of
lessors and licensors arising under lease agreements or license arrangements;
(ix) liens for any financing secured by such Real Property; (x) any material
survey matters and (xi) other recorded liens which do not exceed $30,000
individually or $100,000 in the aggregate.

          "Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

          "Pre-Closing Tax Amount" means the excess of (expressed as either a
positive or negative number) (i) the unpaid income Tax liability of the Company
and any of its Subsidiaries for all Pre-Closing Tax Periods, over (ii) the
amount of income Tax payments made on or before the Closing Date by the Company
or its Subsidiaries (including estimated tax payments) that the Company and its
Subsidiaries will be entitled to recover after the Closing Date from any taxing
authority (as refunds, credits against current or future Tax liabilities, or
otherwise) with respect to Taxes for all Pre-Closing Tax Periods, in each case
(1) taking into account any Transaction Tax Benefits and/or any carry-backs of
such amounts (without duplication), (2) excluding any asset or liability related
to Taxes to the extent included in the determination of the Net Working Capital
Amount and (3) determined on the basis of the past practices of the Company and
its Subsidiaries with respect to the treatment of each item that impacts the
determination of the Pre-Closing Tax Amount. If the amount determined pursuant
to the preceding


                                       47



formula is negative, the Pre-Closing Tax Amount shall be zero for purposes of
Article I of this Agreement.

          "Preferred Per Share Price" means, with respect to a share of
Preferred, the Liquidation Value (as defined in the Company's Amended and
Restated Certificate of Incorporation) of such share plus all dividends on such
share that are accrued and unpaid as of the Closing Date, in each case as set
forth in the Closing Payment Certificate.

          "Real Property" means the Leased Real Property and Owned Real
Property.

          "Sellers' Expenses" shall mean all fees and expenses payable to the
Company's and Sellers' advisors in connection with the transactions contemplated
by this Agreement, bonuses paid to current employees arising solely as a result
of the transactions contemplated by this Agreement (including those under the
2005 Management Bonus Plan) and any and all federal, state and local employer
payroll-related Taxes, employer 401(k) contributions, FICA, Medicare and other
employer liabilities, obligations or payments attributable to the bonuses to be
paid to certain employees of the Company in connection with the Closing and
other related compensation, in each case to the extent unpaid as of the Closing
Date and not otherwise accounted for or accrued for in the calculation of Net
Working Capital; provided that, for the avoidance of doubt, in no event shall
"Sellers' Expenses" be deemed to include any fees and expenses to any Person to
the extent relating to Buyer's financing for the transactions contemplated
hereby.

          "Subsidiary or Subsidiaries" means, with respect to any Person of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers, or trustees 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 or (ii) if a limited
liability company, partnership, association or other business entity (other than
a corporation), a majority of partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof and
for this purpose, a Person or Persons owns a majority ownership interest in such
a business entity (other than a corporation) is such Person or Persons shall be
allocated a majority of such business entity's gains or losses or shall be or
control any managing director or general partner of such business entity (other
than a corporation).

          "Target Net Working Capital Amount" means $39,000,000.

          "Tax" or "Taxes" means any federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, real property gains, registration, value added, excise,
natural resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, special assessment, personal
property, capital stock, social security, unemployment, disability, payroll,
license, employee or other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or additional amounts in
respect of the foregoing.

          "Tax Return" or "Tax Returns" means any return, report, information
return or other document (including schedules or any related or supporting
information) filed or required to be filed with any governmental entity or other
authority in connection with the determination, assessment or collection of any
Tax or the administration of any laws, regulations or administrative
requirements relating to any Tax.


                                       48



          "Transaction Documents" means this Agreement, the Warrant Cancellation
Agreement, the Holdback Agreement and the other agreements entered into in
connection with the transactions contemplated hereby.

          "Transaction Tax Benefits" means all Tax deductions, Tax refund
receivables, reduction in Tax liabilities and other Tax benefits for the Company
and its Subsidiaries related to the transactions contemplated hereby as may be
related to the payment of any portion of Indebtedness Payoff Amount, the
write-off of deferred financing costs, Sellers' Expenses, or to the cancellation
of Warrants, as described under Transaction Tax Benefits set forth on Section
12.01 of the Disclosure Schedules (it being understood that the amounts set
forth on Section 12.01 of the Disclosure Schedules are subject to adjustment).

     12.02 Cross-Reference of Other Definitions. Each capitalized term listed
below is defined in the corresponding Section of this Agreement:



Term                                                                Section No.
- ----                                                               -------------
                                                                
Agreement                                                               Preamble
Audited Financial Statements                                             4.05(a)
Authorized Action                                                          10.03
Buyer                                                                   Preamble
Buyer Indemnified Parties                                                9.02(a)
Buyer's Representatives                                                     6.02
Cap                                                                      9.02(b)
Claimed MAE Update                                                       6.05(c)
Closing                                                                  1.03(a)
Closing Date                                                             1.03(a)
Closing Date Working Capital Increase Amount                             1.01(b)
Closing Payment Certificate                                              1.01(a)
Closing Statement                                                        1.04(a)
Common                                                                  Recitals
Common Warrant Cancellation Payments                                        1.05
Company                                                                 Preamble
Company Securities                                                       4.04(b)
Company Stockholders Agreement                                              1.06
Confidentiality Agreement                                                   6.02
Contest                                                              11.03(f)(i)
Deductible                                                               9.02(b)
Deficiency                                                           1.04(c)(ii)
Disclosure Schedules                                                 ARTICLE III
EB Side Letter                                                           9.02(a)
Environmental Permits                                                    4.16(b)
ERISA                                                                    4.13(a)
Escrow Agent                                                       1.03(b)(i)(C)
Estimated Cash on Hand                                                   1.01(a)
Estimated Common Purchase Price                                          1.01(b)
Estimated Net Working Capital Amount                                     1.01(a)



                                       49



                                                                
Estimated Sellers' Expenses                                              1.01(a)
Estimated Warrant Cancellation Payments                                  1.01(a)
Excess                                                                1.04(c)(i)
Final Adjustment Amount                                                  1.04(b)
Final Common Purchase Price                                              1.04(b)
Financial Statements                                                     4.05(a)
Fundamental Representations and Warranties                                  9.01
Guarantor                                                                  13.14
Indemnitee                                                                  9.05
Indemnification Notice                                                      9.05
Indemnitor                                                                  9.05
Independent Auditor                                                      1.04(a)
Insurance Proceeds                                                          9.06
Internal Revenue Code                                                    4.13(a)
Key Elements                                                                6.08
Latest Balance Sheet                                                     4.05(a)
Leased Real Property                                                     4.07(c)
Licenses                                                                    4.20
Losses                                                                   9.02(a)
MAE Update                                                               6.05(a)
Major Customers                                                          4.09(c)
Major Suppliers                                                          4.09(c)
Net Insurance Proceeds                                                      9.06
New Plans                                                                   7.07
Objections Statement                                                     1.04(a)
Old Plans                                                                   7.07
Olympus                                                                  2.01(l)
Owned Real Property                                                      4.07(b)
Per Item Threshold                                                       9.02(b)
Plans                                                                    4.13(a)
Pre-Closing Tax Period                                                  11.03(a)
Pre-Closing Tax Returns                                                 11.03(d)
Preferred                                                               Recitals
Preferred Warrant Cancellation Payments                                     1.05
Prior Acquisition Agreement                                                 9.06
Proceeding                                                               7.02(a)
Purchase Price True-Up Holdback                                    1.03(b)(i)(C)
Securities Act                                                              5.07
Seller(s)                                                               Preamble
Seller Group                                                               11.05
Seller Indemnified Parties                                                  9.03
Seller Representative                                                   Preamble
Seller Representative Account                                              10.05
Seller Representative Reserve                                              10.05
Shares                                                                  Recitals
Shortfall                                                           1.04(c)(iii)
Significant Contracts                                                    4.09(b)
Significant Update                                                       6.05(a)
Straddle Period                                                         11.03(b)




                                       50



                                                                
Survival Period                                                             9.01
the Company's knowledge                                                    13.03
Tax Benefit                                                                 9.06
Unaudited Financial Statements                                           4.05(a)
Warrants                                                                Recitals
Warrant Cancellation Agreements                                             1.05
Warrant Cancellation Payments                                               1.05



                                  ARTICLE XIII

                                  MISCELLANEOUS

     13.01 Press Releases and Communications. Prior to the Closing, no press
release or public announcement related to this Agreement or the transactions
contemplated herein, or any other announcement or communication to the
employees, consultants, customers or suppliers of the Company or any of its
Subsidiaries, shall be issued or made by any party hereto without the joint
approval of Buyer and the Seller Representative, except (i) those required by
law (in the reasonable opinion of counsel) in which case Buyer and the Seller
Representative shall have the right to review such press release, announcement
or communication prior to its issuance, distribution or publication and (ii)
subject to our review and reasonable comments thereto, the Buyer or its
affiliates making any filings or disclosures under the Securities Act or the
Exchange Act, or under the rules and regulations of any national securities
exchange on which such party's shares of capital stock are listed.

     13.02 Expenses. Each of Buyer and the Sellers shall pay all of their own
expenses (including attorneys' and accountants' fees and expenses) in connection
with the negotiation of this Agreement, the performance of their obligations
hereunder and the consummation of the transactions contemplated by this
Agreement (whether consummated or not); provided that the Sellers shall be
responsible for all Sellers' Expenses not paid by the Company or Buyer at or
prior to the Closing or included as a reduction to the Purchase Price.
Notwithstanding the foregoing, Buyer acknowledges and agrees that (i) the
Company and its Subsidiaries have incurred certain of the costs and expenses of
the Sellers directly related to the transactions contemplated hereby in
connection with this Agreement and the transactions contemplated hereby and (ii)
to the extent not paid prior to the Closing, such costs and expenses shall be
included in the Sellers' Expenses and shall be taken into account for purposes
of determining the Estimated Common Purchase Price and the Final Common Purchase
Price payable pursuant to Article I) (and shall be paid by the Company, its
Subsidiaries or Sellers, or by Buyer on behalf of the Company or the Sellers
pursuant to Section 1.03(b)(i)). Except as provided in the preceding sentence,
Buyer shall not have any liability for any such costs or expenses of the Sellers
or the Company and its Subsidiaries after the Closing.

     13.03 Knowledge Defined. For purposes of this Agreement, the term "the
Company's knowledge" or words of similar import as used herein shall mean the
actual knowledge of each of Rick Turner, Susan Baacke, Frank Cristelli, William
Holcomb, Jerry Ellison, Joe Parsons, Bobby Bergey, Bob Herigot and Jim Kellogg.

     13.04 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when personally delivered, one
day after deposit with Federal Express or similar reputable overnight courier
service or five days after being mailed by first class mail, return receipt
requested. Notices, demands and communications to each Seller shall, unless
another address is specified in writing,


                                       51



be sent to the address indicated for such Seller on Section 13.04 of the
Disclosure Schedules attached hereto, and notices, demands and communications to
Buyer, the Company, and the Seller Representative shall, unless another address
is specified in writing, be sent to the addresses indicated below:

          Notices to Buyer, or, following the Closing, the Company:

          Gunderson Rail Services LLC
          One Centerpointe Drive
          Suite 200
          Lake Oswego, OR 97035
          Attn: Timothy A. Stuckey
          Tel: (503) 684-7000
          Fax: (503) 620-4004

          with a copy to:

          Tonkon Torp LLP
          888 SW Fifth Ave., 16th Floor
          Portland, Oregon 97204
          Attn: Sherrill A. Corbett
          Tel: (503) 802-2049
          Fax: (503) 972-3749

          Notices to the Seller Representative and, prior to Closing, the
          Company:

          c/o Olympus Growth Fund IV, L.P.
          One Station Place, 4th Floor
          Stamford, Connecticut 06902
          Attn: L. David Cardenas
          Tel: (203) 353-5900
          Fax: (203) 252-5910

          with a copy to:

          Kirkland & Ellis LLP
          200 East Randolph Drive
          Chicago, Illinois 60601
          Attn: John A Schoenfeld, P.C.
          Tel: (312) 861-1000
          Fax: (312) 861-2200

     Notwithstanding the foregoing, any party may send any notice, request,
demand, claim, or other communication required or permitted hereunder to the
intended recipient at the address set forth above by personal delivery,
messenger service, ordinary mail and/or facsimile transmission; provided,
however, that no such notice, request, demand, claim, or other communication
will be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any party may change the address to which notices,
requests, demands, claims, and other communications required or permitted
hereunder are to be delivered by giving the other party(ies) notice in the
manner herein set forth.


                                       52



     13.05 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned or delegated by
Buyer without the prior written consent of the Seller Representative; provided
that, Buyer may assign this Agreement (a) to an Affiliate of Buyer without the
consent of the Seller Representative or (b) after the Closing, in connection
with a sale to a third party of all or substantially all of the assets or
business of the Company and its Subsidiaries, in each case whether directly or
indirectly, through purchase, acquisition, merger, consolidation, or otherwise.
Nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies or liabilities under or by reason of
this Agreement, other than sections which are specifically for the benefit of
Seller Indemnified Parties, holders of Warrants and amounts to which Sellers'
Expenses are owed as set forth in Article I, Section 6.09, Section 7.02, Section
7.03 Section 7.07, Article IX, Section 11.02, Section 11.05, Section 13.02 and
this Section 13.05), each of which is intended to be for the benefit of the
Persons covered thereby or to be paid thereunder and may be enforced by such
Persons.

     13.06 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.

     13.07 References. The table of contents and the section and other headings
and subheadings contained in this Agreement and the exhibits hereto are solely
for the purpose of reference, are not part of the agreement of the parties
hereto, and shall not in any way affect the meaning or interpretation of this
Agreement or any exhibit hereto. All references to days or months shall be
deemed references to calendar days or months. All references to "$" or "dollars"
shall be deemed references to United States dollars. Unless the context
otherwise requires, any reference to a "Section," "Exhibit," or "Schedule" shall
be deemed to refer to a section of this Agreement, exhibit to this Agreement or
a schedule to this Agreement, as applicable. The words "hereof," "herein" and
"hereunder" and words of similar import referring to this Agreement refer to
this Agreement as a whole and not to any particular provision of this Agreement.

     13.08 No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any Person.

     13.09 Amendment and Waiver. Any provision of this Agreement or the
schedules or exhibits may be amended or waived only in a writing signed by
Buyer, the Company and the Seller Representative. No waiver of any provision
hereunder or any breach or default thereof shall extend to or affect in any way
any other provision or prior or subsequent breach or default.

     13.10 Specific Performance. Notwithstanding anything to the contrary
herein, Sellers agree that Buyer shall have the right, in addition to any other
rights and remedies existing in its favor, to enforce its rights and the
obligations of Sellers hereunder not only by an action or actions for damages
but also by an action or actions for specific performance, injunctive and/or
other equitable relief. Furthermore, Buyer agrees that the Sellers shall have
the right, in addition to any other rights and remedies existing in their favor,
to enforce their rights and the obligations of Buyer hereunder not only by an
action or actions for damages but also by an action or actions for specific
performance, injunctive and/or other equitable relief.


                                       53



     13.11 Complete Agreement. This Agreement and the documents referred to
herein (including the Confidentiality Agreement and the EB Side Letter) contain
the complete agreement between the parties hereto and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.

     13.12 Counterparts. This Agreement may be executed in multiple counterparts
(including by means of facsimile signature pages), any one of which need not
contain the signatures of more than one party, but all such counterparts taken
together shall constitute one and the same instrument.

     13.13 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 13.13.

     13.14 Guarantee. Subject to the terms and conditions of this Agreement, The
Greenbrier Companies, Inc. (the "Guarantor") will cause Buyer to perform its
pre-Closing and Closing obligations under this Agreement and will cause Buyer to
consummate the purchase transaction contemplated thereby and to pay the
Aggregate Preferred Purchase Price and the Common Purchase Price and all other
payments required to be made by Buyer under this Agreement as and to the extent
required by the Agreement. Subject to the terms and conditions hereof, Guarantor
waives (i) any and all defenses specifically available to a guarantor (other
than non-performance of any of Seller's obligations hereunder and other than
performance in full by Buyer), and (ii) any notices, including, without
limitation, any notice of any amendment of this Agreement or waiver or other
similar action granted pursuant to this Agreement.

     13.15 Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of laws of any jurisdiction other than the State of Delaware.

     13.16 Legal Representation. Each of the Sellers acknowledges and agrees
that the law firm of Kirkland & Ellis LLP is representing only the Company and
the Seller Representative with respect to the transactions contemplated hereby.
Each Seller understands that he, she or it is strongly encouraged to retain his
own attorney, account and other representatives to advise him, her or it with
respect to the transactions contemplated by this Agreement and the legal, tax,
accounting, financial and other impact thereon on such Seller.

                                     * * * *


                                       54



          IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the day and year first above written.

                                        COMPANY:

                                        MERIDIAN RAIL HOLDINGS CORP.


                                        By: /s/ L. David Cardenas
                                            ------------------------------------
                                        Name: L. David Cardenas
                                        Title: Vice President


                                        BUYER:

                                        GUNDERSON RAIL SERVICES LLC


                                        By: /s/ William A. Furman
                                            ------------------------------------
                                        Name: William A. Furman
                                        Its: Manager


                                        SELLER REPRESENTATIVE:

                                        OLYMPUS GROWTH FUND IV, L.P.

                                        By: OGP IV, LLC
                                        Its: General Partner


                                        By: /s/ L. David Cardenas
                                            ------------------------------------
                                        Name: L. David Cardenas
                                        Its: Member


                                        GUARANTOR, solely with respect to
                                        Section 13.14:

                                        THE GREENBRIER COMPANIES, INC.


                                        By: /s/ William A. Furman
                                            ------------------------------------
                                        Name: William A. Furman
                                        Its: President, Chief Executive Officer

                   Signature Page to Stock Purchase Agreement



                                        SELLERS:

                                        OLYMPUS GROWTH FUND IV, L.P.

                                        By: OGP IV, LLC
                                        Its: General Partner


                                        By: /s/ L. David Cardenas
                                            ------------------------------------
                                        Name: L. David Cardenas
                                        Its: Member


                                        OLYMPUS EXECUTIVE FUND, L.P.

                                        By: OEF, L.P.
                                        Its: General Partner

                                        By: LJM, L.L.C.
                                        Its: General Partner


                                        By: /s/ Louis J. Mischianti
                                            ------------------------------------
                                        Name: Louis J. Mischianti
                                        Its: Member


                                        RBS Equity Corporation, in its capacity
                                        as an Equityholder of the Company and
                                        not as a Lender under the Company's
                                        Senior Credit Facility


                                        By: /s/ Ron Kantowits
                                            ------------------------------------
                                        Name: Ron Kantowits
                                        Its: Managing Director


                                        OCM Mezzanine Fund, L.P.

                                        By: Oaktree Capital Management LLC
                                        Its: General Partner


                                        By: /s/ William Casperson
                                            ------------------------------------
                                        Name: William Casperson
                                        Its: Managing Director


                                        By: /s/ Raj Makam
                                            ------------------------------------
                                        Name: Raj Makam
                                        Its: Managing Director

                   Signature Page to Stock Purchase Agreement



                                        CIT Lending Services Corporation


                                        By: /s/ Michael Graham
                                            ------------------------------------
                                        Name: Michael Graham
                                        Its: Vice President


                                        K&E Investment Partners,
                                        L.P. - 2004-B DIF

                                        By: K&E Investment Management, LLC
                                        Its: General Partner


                                        By: /s/ Jack Levin
                                            ------------------------------------
                                        Its: Manager


                                        By: /s/ Rick Turner
                                            ------------------------------------
                                            Rick Turner


                                        By: /s/ Frank Cristelli
                                            ------------------------------------
                                            Frank Cristelli


                                        By: /s/ William Holcomb
                                            ------------------------------------
                                            William Holcomb


                                        By: /s/ Susan Baacke
                                            ------------------------------------
                                            Susan Baacke


                                        By: /s/ Jerry Ellison
                                            ------------------------------------
                                            Jerry Ellison


                                        By: /s/ Colby Keener
                                            ------------------------------------
                                            Colby Keener

                   Signature Page to Stock Purchase Agreement

EX-12

                                                                               .
                                                                               .
                                                                               .

                                                                    Exhibit 12.1

The Greenbrier Companies
Computation of Ratio of Earnings to Fixed Charges
(in thousands)



                                                                                  Year ended August 31,
                                                            ---------------------------------------------------------
                                                              2002        2003        2004         2005        2006
                                                            ---------------------------------------------------------
                                                                                              
Earnings (loss) before income tax, minority interest and
  equity in unconsolidated subsidiaries                     $(47,230)   $ 10,758    $ 31,194     $ 50,000    $ 61,065

Interest expense                                              19,055      14,489      11,553       14,000      26,985
Estimated interest portion of rent expense                     6,287       6,136       5,388        5,591       6,465
                                                            ---------------------------------------------------------
                                                            $(21,888)   $ 31,383    $ 48,135     $ 69,591    $ 94,515
                                                            =========================================================

Fixed charges                                               $ 25,342    $ 20,625    $ 16,941     $ 19,591    $ 33,450

Ratio of earnings to fixed charges                             (0.86)       1.52        2.84         3.55        2.83

EX-21.1

                                                                    Exhibit 21.1

                                       THE GREENBRIER COMPANIES, INC.
                                            LIST OF SUBSIDIARIES
                                           AS OF AUGUST 31, 2006



                                                                   Names Under
                                                 State of           Which Does
           Name                                Incorporation         Business
- ---------------------------------------       --------------       ------------
                                                             
3048389 Nova Scotia Limited                    Nova Scotia,            N/A
                                                  Canada

Autostack Company LLC                               OR                 N/A

Greenbrier-Concarril LLC                            DE                 N/A

Greenbrier Europe B.V.                          Netherlands            N/A

Greenbrier Germany GmbH                           Germany              N/A
                                                                    Greenbrier

Greenbrier Leasing Company LLC                      OR              Intermodal

Greenbrier Leasing Limited                     Nova Scotia,            N/A
                                                  Canada

Greenbrier Leasing Limited Partner, LLC             DE                 N/A

Greenbrier Management Services, LLC                 DE                 N/A

Greenbrier Leasing, L.P.                            DE                 N/A

Greenbrier Railcar LLC.                             OR                 N/A

Greenbrier U.K. Limited                       United Kingdom           N/A

Gunderson-Concarril, S.A. de C.V.                 Mexico               N/A

Gunderson LLC                                       OR                 N/A

Gunderson Marine LLC                                OR                 N/A

Gunderson Rail Services, LLC                        OR                 N/A

Greenbrier Railcar Leasing, Inc.                    WA                 N/A

TrentonWorks Limited                           Nova Scotia,            N/A
                                                  Canada

WagonySwidnica S.A.                               Poland               N/A

Gunderson Specialty Products, LLC                   DE                 N/A

Ohio Castings Company, LLC                          DE                 N/A

Chicago Castings Company, LLC                       DE                 N/A

Alliance Castings Company, LLC                      DE                 N/A

EX-23

                                                                    EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos.
33-52032, 333-116102, and 333-127922 on Forms S-8 and Registration Statement No.
333-136014 on Form S-3 of our reports dated November 1, 2006, relating to the
consolidated financial statements of The Greenbrier Companies, Inc. and
subsidiaries and management's report on the effectiveness of internal control
over financial reporting appearing in this Annual Report on Form 10-K of The
Greenbrier Companies, Inc. for the year ended August 31, 2006.


Deloitte & Touche, LLP

Portland, Oregon
November 1, 2006

EX-31.1(A)

Exhibit 31.1

CERTIFICATIONS

I, William A. Furman, certify that:

1.	I have reviewed this annual report on Form 10-K of The Greenbrier Companies for the annual period ended August 31, 2006;
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 officers 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles;
c)	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
d)	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 officers 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 registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably like 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.

Date: October 31, 2006

/s/ William A. Furman

William A. Furman

President and

Chief Executive Officer, Director

The Greenbrier Companies

68                                        The Greenbrier Companies 2006 Annual Report

EX-31.2(B)

Exhibit 31.2

CERTIFICATIONS (cont’d)

I, Joseph K. Wilsted, certify that:

1.	I have reviewed this annual report on Form 10-K of The Greenbrier Companies for the annual period ended August 31, 2006;
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 officers 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles;
c)	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
d)	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 officers 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 registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably like 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.

Date: October 31, 2006

/s/ Joseph K. Wilsted

Joseph K. Wilsted

Senior Vice President and

Chief Financial Officer

The Greenbrier Companies

The Greenbrier Companies 2006 Annual Report                                         69

EX-32.1(C)

Exhibit 31.1

CERTIFICATIONS

I, William A. Furman, certify that:

1.	I have reviewed this annual report on Form 10-K of The Greenbrier Companies for the annual period ended August 31, 2006;
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 officers 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles;
c)	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
d)	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 officers 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 registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably like 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.

Date: October 31, 2006

/s/ William A. Furman

William A. Furman

President and

Chief Executive Officer, Director

The Greenbrier Companies

68                                        The Greenbrier Companies 2006 Annual Report

EX-32.2(D)

Exhibit 32.2

CERTIFICATIONS (cont’d)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 AS

ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of The Greenbrier Companies, Inc. (the Company) on Form 10-K for the annual period ended August 31, 2006 as filed with the Securities and Exchange Commission on the date therein specified (the Report), I, Joseph K. Wilsted, Senior Vice President and Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 31, 2006

/s/ Joseph K. Wilsted

Joseph K. Wilsted

Senior Vice President and

Chief Financial Officer

The Greenbrier Companies 2006 Annual Report                                         71