10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

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

for the quarterly period ended May 31, 2005

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)

Delaware
(State of Incorporation) 93-0816972
(I.R.S. Employer Identification No.)

One Centerpointe Drive, Suite 200, Lake Oswego, OR 97035
(Address of principal executive offices)           (Zip Code)

(503) 684-7000
(Registrant’s telephone number, including area code)

     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 þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

     The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding on June 28, 2005 was 14,924,641 shares.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Condensed Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	Item 4. CONTROLS AND PROCEDURES
	Item 1. Legal Proceedings
	Item 6. Exhibits
SIGNATURES
EXHIBIT 10.2
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

THE GREENBRIER COMPANIES, INC.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

Consolidated Balance Sheets
(In thousands, except per share amounts, unaudited)

	May 31,			August 31,
	2005			2004
Assets
Cash and cash equivalents	$	67,288		$	12,110
Restricted cash		499			1,085
Accounts and notes receivable		125,135			120,007
Inventories		179,458			113,122
Investment in direct finance leases		13,395			21,244
Equipment on operating leases		173,466			162,258
Property, plant and equipment		69,722			56,415
Other		25,930			22,512
	$	654,893		$	508,753
Liabilities and Stockholders’ Equity
Revolving notes	$	16,443		$	8,947
Accounts payable and accrued liabilities		194,194			178,550
Participation		21,447			37,107
Deferred revenue		3,882			2,550
Deferred income taxes		26,663			26,109
Notes payable		215,739			97,513
Subordinated debt		9,785			14,942
Subsidiary shares subject to mandatory redemption		3,746			3,746
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock — $0.001 par value; 25,000 shares authorized; none outstanding		—			—
Common stock — $0.001 par value; 50,000 shares authorized; 14,922 and 14,884 issued and outstanding at May 31, 2005 and August 31, 2004		15			15
Additional paid-in capital		60,761			57,165
Retained earnings		104,598			88,054
Accumulated other comprehensive loss		(2,380	)		(5,945	)
		162,994			139,289
	$	654,893		$	508,753

The accompanying notes are an integral part of these statements.

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THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2005			2004			2005			2004
Revenue
Manufacturing	$	266,090		$	207,136		$	700,295		$	473,164
Leasing & services		19,944			18,157			58,701			53,888
		286,034			225,293			758,996			527,052
Cost of revenue
Manufacturing		241,491			189,275			642,149			432,857
Leasing & services		9,561			10,301			30,512			31,542
		251,052			199,576			672,661			464,399
Margin		34,982			25,717			86,335			62,653
Other costs
Selling and administrative		15,276			12,352			41,392			33,336
Interest and foreign exchange		2,285			2,932			9,639			8,136
Special charges		2,913			—			2,913			1,234
		20,474			15,284			53,944			42,706
Earnings before income taxes and equity in unconsolidated subsidiaries		14,508			10,433			32,391			19,947
Income tax expense		(5,881	)		(4,116	)		(12,833	)		(5,446	)
Earnings before equity in unconsolidated subsidiaries		8,627			6,317			19,558			14,501
Equity in earnings (loss) of unconsolidated subsidiaries		417			58			(322	)		(1,734	)
Net earnings	$	9,044		$	6,375		$	19,236		$	12,767
Basic earnings per common share	$	0.60		$	0.44		$	1.29		$	0.88
Diluted earnings per common share	$	0.58		$	0.42		$	1.24		$	0.84
Weighted average common shares:
Basic		15,020			14,628			14,957			14,500
Diluted		15,605			15,224			15,564			15,111

The accompanying notes are an integral part of these statements.

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THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss)
(In thousands, except per share amounts, unaudited)

													Accumulated
							Additional						Other			Total
	Common Stock						Paid-in			Retained			Comprehensive			Stockholders’
	Shares			Amount			Capital			Earnings			Loss			Equity
Balance September 1, 2004		14,884		$	15		$	57,165		$	88,054		$	(5,945	)	$	139,289
Net earnings		—			—			—			19,236			—			19,236
Translation adjustment (net of tax)		—			—			—			—			1,561			1,561
Reclassification of derivative financial instruments recognized in net earnings (net of tax )		—			—			—			—			(1,961	)		(1,961	)
Unrealized gain on derivative financial instruments (net of tax)		—			—			—			—			3,965			3,965
Comprehensive income																	22,801
Net proceeds from equity offering		5,175			5			127,461			—			—			127,466
Shares repurchased		(5,342	)		(5	)		(127,533	)								(127,538	)
Cash dividends ($0.18 per share)		—			—			—			(2,692	)		—			(2,692	)
Restricted stock awards		5			—			(142	)		—			—			(142	)
Stock options exercised (net of tax)		200			—			3,810			—			—			3,810
Balance May 31, 2005		14,922		$	15		$	60,761		$	104,598		$	(2,380	)	$	162,994

The accompanying notes are an integral part of these statements.

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THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Cash Flows
(In thousands, unaudited)

	Nine Months Ended
	May 31,
	2005			2004
Cash flows from operating activities
Net earnings	$	19,236		$	12,767
Adjustments to reconcile net earnings to net cash used in operating activities:
Deferred income taxes		679			2,046
Depreciation and amortization		16,840			15,529
Gain on sales of equipment		(4,300	)		(236	)
Special charges		—			1,234
Other		499			959
Decrease (increase) in assets:
Accounts and notes receivable		(34,535	)		(26,751	)
Inventories		(19,589	)		10,991
Other		(8,628	)		1,367
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities		(5	)		5,967
Participation		(15,660	)		(19,170	)
Deferred revenue		1,148			(38,198	)
Net cash used in operating activities		(44,315	)		(33,495	)
Cash flows from investing activities
Principal payments received under direct finance leases		4,524			7,348
Proceeds from sales of equipment		23,125			10,719
Investment in and advances to unconsolidated subsidiaries		(49	)		(4,755	)
Acquisition of joint venture interest		8,435			—
Decrease in restricted cash		624			4,089
Capital expenditures		(49,478	)		(33,277	)
Net cash used in investing activities		(12,819	)		(15,876	)
Cash flows from financing activities
Changes in revolving notes		6,541			2,150
Proceeds from issuance of notes payable		175,000			—
Repayments of notes payable		(66,334	)		(16,504	)
Repayment of subordinated debt		(5,157	)		(4,955	)
Dividends		(2,692	)		—
Net proceeds from equity offering		127,466			—
Re-purchase and retirement of stock		(127,538	)		—
Stock options exercised and restricted stock awards		3,668			3,884
Purchase of subsidiary shares subject to mandatory redemption		—			(1,277	)
Net cash provided by (used in) financing activities		110,954			(16,702	)
Effect of exchange rate changes		1,358			2,568
Increase (decrease) in cash and cash equivalents		55,178			(63,505	)
Cash and cash equivalents
Beginning of period		12,110			77,298
End of period	$	67,288		$	13,793
Cash paid during the period for
Interest	$	8,367		$	8,992
Income taxes	$	9,444		$	6,015
Non-cash activity
Transfer of inventories to equipment on operating leases	$	—		$	3,735
Supplemental disclosure of subsidiary acquired
Assets acquired, net of cash	$	(19,051	)	$	—

The accompanying notes are an integral part of these statements.

4

	Nine Months Ended
	May 31,
	2005		2004
Liabilities assumed		19,529		—
Investment previously booked for unconsolidated joint venture		7,957		—
Cash acquired	$	8,435	$	—

The accompanying notes are an integral part of these statements.

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THE GREENBRIER COMPANIES, INC.

Notes to Consolidated Financial Statements
(Unaudited)

Note 1 – Interim Financial Statements

     The Consolidated Financial Statements of The Greenbrier Companies, Inc. and Subsidiaries (Greenbrier or the Company) as of May 31, 2005 and for the three and nine months ended May 31, 2005 and 2004 have been prepared without audit and reflect all adjustments (consisting of normal recurring accruals except for special charges) which, in the opinion of management, are necessary for a fair presentation of the financial position and operating results for the periods indicated. The results of operations for the three and nine months ended May 31, 2005 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2005. Certain reclassifications have been made to the prior year’s Consolidated Financial Statements to conform to the current year presentation.

     Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company’s 2004 Annual Report on Form 10-K.

     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.

     Stock Incentive Plan – 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.

     Management estimates – 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, 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 those estimates.

     Prospective Accounting Changes – In December 2004, the Financial Accounting Standards Board (FASB) issued 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 Company is required to implement SFAS No. 123R as of September 1, 2005 and has determined the implementation will not have a material effect on its Consolidated Financial Statements based on the existing options outstanding.

     In May 2005, the 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.

6

THE GREENBRIER COMPANIES, INC.

Note 2 – 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 manufacturing support. The Mexican operations, previously accounted for under the equity method, are consolidated for financial reporting purposes beginning in December 2004.

     The balance sheet of the acquired entity at December 1, 2004 was as follows:

(in thousands)

Assets
Cash and cash equivalents	$	8,435
Accounts and notes receivable		12,712
Inventories		38,593
Property, plant and equipment		11,515
Goodwill and other		1,421
	$	72,676
Liabilities and Stockholders’ Equity
Accounts payable and accrued liabilities	$	10,530
Payable to Greenbrier		45,053
Notes payable		9,000
Stockholders’ equity:		8,093
	$	72,676

     The following unaudited pro forma financial information for the three and nine months ended May 31, 2005 and May 31, 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)

	Three Months Ended				Nine Months Ended
	May 31,				May 31,
	2005		2004		2005		2004
Revenue	$	286,034	$	240,563	$	787,682	$	557,998
Net earnings	$	9,044	$	6,378	$	18,736	$	12,026
Basic earnings per share	$	0.60	$	0.44	$	1.25	$	0.83
Diluted earnings per share	$	0.58	$	0.42	$	1.20	$	0.80

     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.

7

THE GREENBRIER COMPANIES, INC.

Note 3- Special Charges

     The results of operations for the three and nine months ended May 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 during the quarter through a $175 million senior unsecured note offering.

     The results of operations for the nine months ended May 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 regarding the acquisition of European designs and patents.

Note 4 – Accounts and Notes Receivable

(In thousands)

	May 31,			August 31,
	2005			2004
Trade receivables	$	125,063		$	80,125
Receivables from unconsolidated subsidiary		—			35,739
Long-term receivable from unconsolidated subsidiaries		2,343			5,739
Allowance for doubtful accounts		(2,271	)		(1,596	)
	$	125,135		$	120,007

     Receivables from an unconsolidated subsidiary represent advances to the Mexican operations for inventory purchases. In December 2004, the Company acquired 100% ownership of this entity, which is now consolidated.

Note 5 – Inventories

(In thousands)

	May 31,			August 31,
	2005			2004
Manufacturing supplies and raw materials	$	30,955		$	31,282
Work-in-process		100,490			65,498
Railcars held for sale or refurbishment		51,752			20,157
Lower of cost or market adjustment		(3,739	)		(3,815	)
	$	179,458		$	113,122

Note 6 – 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. The warranty accrual is periodically reviewed and updated based on warranty trends.

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THE GREENBRIER COMPANIES, INC.

(In thousands)

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2005			2004			2005			2004
Balance at beginning of period	$	14,149		$	11,011		$	12,691		$	9,515
Charged to cost of revenue		887			1,186			2,867			3,254
Payments		(722	)		(681	)		(2,527	)		(1,645	)
Currency translation effect		(563	)		(101	)		552			291
Acquisition		—			—			168			—
Balance at end of period	$	13,751		$	11,415		$	13,751		$	11,415

Note 7 – Notes Payable

(In thousands)

	May 31,		August 31,
	2005		2004
Senior unsecured notes	$	175,000	$	—
Term loans		40,528		45,943
Equipment notes payable		—		51,199
Other notes payable		211		371
	$	215,739	$	97,513

     On May 11, 2005, the Company issued, through a private placement, $175.0 million aggregate principal amount of 8 3/8% senior unsecured notes due 2015 (the Notes). Payment on the Notes is guaranteed by certain of the Company’s domestic subsidiaries. Interest will be paid semiannually in arrears commencing November 15, 2005.

     At any time prior to May 15, 2008, Greenbrier may redeem up to 35% of the aggregate principal amount of Notes at a redemption price of 108.4% of the principal amount, plus accrued and unpaid interest and liquidated damages, if any, to the redemption date, with the net cash proceeds of one or more equity offerings. On or after May 15, 2010, Greenbrier has the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) of 104.2% in 2010, 102.8% in 2011, 101.4% in 2012, and 100.0% in 2013 and thereafter plus accrued and unpaid interest and liquidated damages, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on May 15. Upon a change of control, Greenbrier is required to offer to purchase all of the Notes then outstanding for cash at 101.0% of the principal amount thereof plus accrued and unpaid interest and liquidated damages, if any, to the purchase date.

     Greenbrier is obligated to file a registration statement with respect to an offer to exchange the Notes for a new issue of identical notes registered with the Securities and Exchange Commission prior to August 9, 2005 and is also obligated to cause the registration statement to be effective before November 7, 2005.

     Term loans are due in varying installments through July 2012 and are collateralized by certain property, plant and equipment. As of May 31, 2005, 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 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 May 31, 2005, such agreements had a notional amount of $26.2 million and mature between August 2006 and March 2011.

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THE GREENBRIER COMPANIES, INC.

The remaining principal payments on the notes payable are as follows:

(In thousands)

Year Ending August 31,
2005 (Remaining three months)	$	1,470
2006		13,945
2007		5,365
2008		4,824
2009		5,013
Thereafter		185,122
	$	215,739

Note 8 – Shareholders’ 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. After the offering, the estate of Alan James owned 2.8% and William Furman owned 13.9% of the outstanding common stock of the Company.

     The following is a reconciliation of net earnings to comprehensive income:

(In thousands)

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2005			2004			2005			2004
Net earnings	$	9,044		$	6,375		$	19,236		$	12,767
Reclassification of derivative financial instruments recognized in net earnings, net of tax		(1,302	)		(764	)		(1,961	)		(2,789	)
Unrealized gain on derivative financial instruments, net of tax		(1,480	)		1,668			3,965			4,072
Foreign currency translation adjustment, net of tax		(1,706	)		215			1,561			(391	)
Comprehensive income	$	4,556		$	7,494		$	22,801		$	13,659

     Accumulated other comprehensive loss, net of tax effect, consisted of the following:

(In thousands)

	Unrealized
	Gains (Losses)			Foreign			Accumulated
	on Derivative			Currency			Other
	Financial			Translation			Comprehensive
	Instruments			Adjustment			Loss
Balance, August 31, 2004	$	(1,339	)	$	(4,606	)	$	(5,945	)
Nine month activity		2,004			1,561			3,565
Balance, May 31, 2005	$	665		$	(3,045	)	$	(2,380	)

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THE GREENBRIER COMPANIES, INC.

Note 9 – Earnings per share

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

(In thousands)

	Three Months Ended				Nine Months Ended
	May 31,				May 31,
	2005		2004		2005		2004
Weighted average common shares outstanding		15,020		14,628		14,957		14,500
Dilutive effect of employee stock options		585		596		607		611
Weighted average diluted common shares outstanding		15,605		15,224		15,564		15,111

     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 for the three and nine months ended May 31, 2004 and 2005.

Note 10– Stock Based Compensation

     Greenbrier does not recognize compensation expense relating to employee stock options as it only grants options 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)

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2005			2004			2005			2004
Net earnings as reported	$	9,044		$	6,375		$	19,236		$	12,767
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax (1)		(31	)		(64	)		(114	)		(264	)
Net earnings, pro forma	$	9,013		$	6,311		$	19,122		$	12,503
Basic earnings per share
As reported	$	0.60		$	0.44		$	1.29		$	0.88
Pro forma	$	0.60		$	0.43		$	1.28		$	0.86
Diluted earnings per share
As reported	$	0.58		$	0.42		$	1.24		$	0.84
Pro forma	$	0.58		$	0.41		$	1.23		$	0.83

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

Note 11 – 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 floating interest rates on certain debt. The Company’s foreign currency forward exchanges and interest rate swaps are designated as cash flow hedges, and therefore the unrealized gains and losses are recorded in accumulated other comprehensive income.

     At May 31, 2005 exchange rates, forward exchange contracts for the sale of United States dollars aggregated $90.5 million, Pound Sterling aggregated $5.3 million and Euro aggregated $13.5 million. Adjusting these contracts

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THE GREENBRIER COMPANIES, INC.

to the fair value of these cash flow hedges at May 31, 2005 resulted in an unrealized pre-tax gain of $2.0 million that was recorded in the line item accumulated other comprehensive income. As these contracts mature at various dates through March 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 other comprehensive income (loss) would be reclassified to the current year’s results of operations.

     At May 31, 2005 exchange rates, interest rate swap agreements had a notional amount of $26.2 million and mature between August 2006 and March 2011. The fair value of these cash flow hedges at May 31, 2005 resulted in an unrealized pre-tax loss of $1.7 million. The loss is included in accumulated other comprehensive income (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 May 31, 2005 interest rates, approximately $0.6 million would be reclassified to interest expense in the next 12 months.

Note 12– 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 in the Consolidated Financial Statements contained in the Company’s 2004 Annual Report on Form 10-K. 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 table is derived directly from the segments’ internal financial reports used for corporate management purposes.

(In thousands)

	Three Months Ended					Nine Months Ended
	May 31,					May 31,
	2005			2004		2005			2004
Revenue:
Manufacturing	$	278,736		$	170,559	$	733,973		$	464,127
Leasing & services		26,252			22,198		71,376			63,633
Intersegment eliminations		(18,954	)		32,536		(46,353	)		(708	)
	$	286,034		$	225,293	$	758,996		$	527,052
Margin:
Manufacturing	$	24,599		$	17,861	$	58,146		$	40,307
Leasing & services		10,383			7,856		28,189			22,346
	$	34,982		$	25,717	$	86,335		$	62,653

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THE GREENBRIER COMPANIES, INC.

     The following table summarizes selected geographic information. Eliminations are sales between geographic areas.

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2005			2004			2005			2004
Revenue:
United States	$	148,093		$	109,894		$	423,307		$	289,016
Canada		62,876			54,977			163,347			134,698
Mexico		58,991			—			96,662			14
Europe		21,187			30,871			99,188			91,695
Eliminations		(5,113	)		29,551			(23,508	)		11,629
	$	286,034		$	225,293		$	758,996		$	527,052
Earnings: (1)
United States	$	9,747		$	8,009		$	25,425		$	18,432
Canada		2,635			893			3,382			21
Mexico		3,007			(19	)		2,998			(71	)
Europe		483			946			2,401			3,111
Eliminations		(1,364	)		604			(1,815	)		(1,546	)
	$	14,508		$	10,433		$	32,391		$	19,947

(1) Before income tax expense and equity in unconsolidated subsidiaries.

Note 13– Commitments and Contingencies

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

     Litigation was initiated against the Company on April 20, 2004 in the Supreme Court of Nova Scotia by a customer, BC Rail Partnership, alleging breach of contract and negligent manufacture and design of railcars which were involved in a 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 (BNSF). BNSF alleges the failure of a component part on a railcar manufactured by Greenbrier in 1988, resulted in a derailment and a chemical spill. The complaint alleges in excess of $14 million in damages. Answers have been filed in both cases and the parties have agreed to stay the Nebraska action and proceed with the litigation in Texas. No trial date has been set.

     On September 23, 2004, two current and one former Company employees filed a civil complaint in Multnomah County Circuit Court, State of Oregon, alleging that Greenbrier failed to comply with Oregon wage and hour laws. Plaintiffs seek injunctive relief and unspecified unpaid wages, penalty wages, costs, disbursements and attorneys’ fees. No trial date has been set.

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

     Environmental studies have been conducted of owned and leased properties that indicate additional investigation and some remediation on certain properties may be necessary. The Portland, Oregon manufacturing facility is

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THE GREENBRIER COMPANIES, INC.

located on the Willamette River. The United States Environmental Protection Agency (EPA) has classified portions of the river bed, including the portion fronting the facility, as a federal “national priority list” or “superfund” site due to sediment contamination (the Portland Harbor Site). The Company 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 it 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 have signed an Administrative Order on Consent to perform a remedial investigation/feasibility study of the Portland Harbor Site under EPA oversight, and five additional entities have not signed such consent but are nevertheless contributing money to the effort. The study is expected to be completed in 2007. 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. Under this oversight, the Company is also conducting groundwater remediation relating to a historical spill on the property.

     There is no indication that Company operations have contributed to contamination of the Willamette River bed, although uses by prior owners and operators of the property may have contributed. Nevertheless, this classification of the Willamette River may have an impact on the value of the Company’s investment in the property and has resulted in the Company initially bearing a portion of the cost of an EPA mandated remedial investigation, feasibility study, natural resources damages assessment and incurring costs mandated by the State of Oregon to control groundwater discharges to the Willamette River. Neither the cost of the investigation nor the groundwater control effort is currently determinable. However, a portion of the outlay related to the state of Oregon mandated costs has been reimbursed by an unaffiliated party, and other outlays may also be recoverable. The Company may be required to perform periodic maintenance dredging in order to continue to launch vessels from its launch ways on the river, and classification as a superfund site could result in some limitations on future dredging and launch activity. Because these investigations are still underway, the Company is unable to determine the amount of its ultimate liability relating to these matters. Based on the results of the pending investigations and future assessments of natural resources damages, the Company may be required to incur costs associated with additional phases of investigation or remedial action, and the Company may be liable for damages to natural resources. Any of these matters could adversely affect the Company’s business and results of operations. Management believes that the Company’s operations adhere to sound environmental practices, applicable laws and regulations.

     Greenbrier and one of its European customers have raised performance concerns regarding a component that the Company has installed in 372 railcars produced in Europe. The supplier of the component has effectively filed for the United Kingdom equivalent of bankruptcy protection. The customer is seeking a price adjustment on cars which have been delivered and is resisting further deliveries. The Company disputes the customer’s position and is continuing to address performance of the component. Given the condition of the supplier, Greenbrier’s recourse against the supplier may be limited or of no value.

     The Internal Revenue Service (IRS) is currently conducting an audit of the Company’s federal income tax returns for the fiscal years ended 1999 through 2002. In connection with the audit, the IRS has focused particular attention on the Company’s decision in 2002 to write-off substantial portions of its investment in European operations. The IRS has not completed its fieldwork or proposed any assessment or deficiency. However, upon completion of its audit, the IRS may propose adjustments or assessments.

     The Company has entered into contingent rental assistance agreements, with a maximum aggregate payment obligation of $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 periods that range from one to seven 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 three and nine months ended May 31, 2005, no accruals were made to cover estimated obligations as it was determined that a rental shortfall was not probable. For the three and nine months ended May 31, 2004, minimal accruals were made to cover estimated obligations. There is no liability accrued at May 31, 2005. 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.

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THE GREENBRIER COMPANIES, INC.

     A portion of leasing & services revenue is derived from utilization leases, under which “car hire” is earned. Car hire 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 which amounted to $6.7 million and $18.9 million for the three and nine months ended May 31, 2005 and $6.6 million and $19.4 million for the three and nine months ended May 31, 2004.

     Greenbrier has jointly committed with Babcock & Brown Rail Management, LLC to purchase approximately $250.0 million of new railcars to be leased to third party customers, of which $152.0 million remain to be purchased from unaffiliated manufacturers.

     At May 31, 2005, an unconsolidated subsidiary had $9.3 million of third party debt, for which the Company has guaranteed 33% or approximately $3.1 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.

     In accordance with customary business practices in Europe, the Company has $20.1 million in bank and third party performance, advance payment, and warranty guarantee facilities, all of which has been utilized as of May 31, 2005. To date, no amounts have been drawn against these performance, advance payment, and warranty guarantees.

     The Company has outstanding letters of credit aggregating $1.8 million associated with materials purchases and facilities leases.

Note 14 – Subsequent Event

     Subsequent to May 31, 2005, the Company replaced its three North American revolving credit facilities with a senior secured credit facility for approximately $150.0 million. This facility consists of a five-year, $125.0 million, revolving line of credit for domestic operations and a CDN$30.0 million revolving line of credit for Canadian operations. Available borrowings are based on defined levels of inventory, receivables, leased equipment and property, plant and equipment. Advances bear interest at rates that depend on the type of borrowing and the ratio of debt to total capitalization, as defined.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

     We currently have 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 also manufacture new freight cars through the use of unaffiliated subcontractors. The leasing & services segment owns approximately 10,000 railcars and provides management services for approximately 128,000 railcars for railroads, shippers and other leasing and transportation companies. Segment performance is evaluated based on margins.

     Our manufacturing backlog of railcars for sale and lease as of May 31, 2005 was approximately 11,500 railcars with an estimated value of $650.0 million compared to 9,700 railcars valued at $600.0 million as of May 31, 2004. Substantially all of the current backlog has been priced to cover anticipated material price increases and surcharges. As these sales price increases are an anticipated pass-through of vendor material price increases and surcharges, they

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THE GREENBRIER COMPANIES, INC.

are not necessarily indicative of increased margins on future production. There is still risk that material prices could increase beyond amounts used to develop our sale contracts which would adversely impact margins in our backlog. Although the North American railcar market has recently improved, the European market is experiencing a decline in demand for railcars.

     The available supply of rail castings to the industry continues to be adversely affected as a result of reorganization and consolidation of domestic suppliers. Our investment in a joint venture that operates castings production facilities has helped us maintain production despite industry-wide casting shortages. Shortages of other railcar components such as wheels, axles and couplers may impact production rates at our new railcar and repair and refurbishment facilities.

     In September 1998 we 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, we acquired Bombardier’s interest for $9.0 million payable over five years. We lease a portion of the plant from Bombardier and have entered into a service agreement under which Bombardier provides labor and manufacturing support. The Mexican operations, previously accounted for under the equity method, are consolidated for financial reporting purposes beginning in December 2004.

     On July 26, 2004, Alan James, a member of our board of directors, filed an action in the Court of Chancery of the State of Delaware against us and all of our directors serving on July 26, 2004, other than Mr. James. On December 16, 2004, the Company filed with the Securities and Exchange Commission a Current Report on Form 8-K detailing additional allegations and concerns which had been expressed by Mr. James. Mr. James passed away on January 28, 2005. On April 20, 2005, all of the estate’s litigation claims and allegations against Greenbrier were dismissed with prejudice.

     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. After the offering, the estate of Alan James owned 2.8% and William Furman owned 13.9% of the outstanding common stock of the Company.

     On May 11, 2005, the Company issued, through a private placement, $175 million aggregate principal amount of 8?% senior unsecured notes due 2015 (the Notes). Payment on the Notes is guaranteed by certain of the Company’s domestic subsidiaries. Interest will be paid semiannually in arrears commencing November 15, 2005. Portions of the proceeds from the Notes were used to payoff certain outstanding revolving notes and notes payable.

Critical Accounting Policies

     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. These estimates may affect the amounts of assets, liabilities, revenues, and expenses reported in a given period. Estimates and assumptions are periodically evaluated and may be adjusted in future periods.

     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 on 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 the Company, 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 assets to an amount that will more likely than not be realized. Management’s 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.

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THE GREENBRIER COMPANIES, INC.

     Maintenance obligations – We are responsible for maintenance on a portion of the managed and owned lease fleet under terms of maintenance obligations defined in the underlying lease or management agreement. 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 needed 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 liability is periodically reviewed and updated based on maintenance trends and known future repair or refurbishment requirements. Historically, we have not had material adjustments to these estimates as they are reviewed frequently and cover long-term contracts. 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. In aggregate, warranty costs have not been materially different from the estimates. However, as we cannot predict future claims, the potential exists for the difference to be material.

Results of Operations

     Our purchase on December 1, 2004 of Bombardier’s equity interest in the railcar manufacturing joint venture 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.

Three Months Ended May 31, 2005 Compared to Three Months Ended May 31, 2004

Manufacturing Segment

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

     Manufacturing revenue for the three months ended May 31, 2005 was $266.1 million compared to $207.1 million in the corresponding prior period, an increase of $59.0 million, or 28.5%. The increase is primarily due to $59.0 million in revenue from our Mexican subsidiary, which was accounted for under the equity method in the prior comparable period. New railcar deliveries were approximately 3,600 in the current period consistent with the prior comparable period. Deliveries in the three months ended May 31, 2004 include approximately 400 units delivered from the Mexican operation accounted for under the equity method and 600 units, delivered to a customer in a prior period for which revenue recognition had been deferred pending removal of contractual contingencies that were removed during the quarter ended May 31, 2004.

     Manufacturing margin percentage for the three months ended May 31, 2005 was 9.2% compared to 8.6% for the three months ended May 31, 2004 as a result of manufacturing higher margin car types and production efficiencies. Current period margins were reduced by 0.8% as a result of production issues in Europe on two contracts. The prior period was impacted by recognition of margin on 600 units produced in a prior period when the pricing environment was less favorable and a write off of obsolete inventory.

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THE GREENBRIER COMPANIES, INC.

Leasing & Services Segment

     Leasing & services revenue increased $1.7 million, or 9.3%, to $19.9 million for the three months ended May 31, 2005 compared to $18.2 million for the three months ended May 31, 2004. The increase is primarily a result of performance incentives earned on certain management agreements and increases in gains on sale of assets from the lease fleet. 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. Gains on sale were $0.8 million for the three months ended May 31, 2005 compared to minimal gains in the prior comparable period.

     Leasing & services operating margin percentage was 52.1% and 43.3% for the three months ended May 31, 2005 and 2004. The increase was primarily a result of gains on sales from the lease fleet and rate adjustments due to increased utilization on certain management agreements.

Other Costs

     Selling and administrative expense was $15.3 million for the three months ended May 31, 2005 compared to $12.4 million for the comparable prior period, an increase of $2.9 million, or 23.4%. The increase in expense is primarily the result of higher employee costs of $1.6 million, a $0.5 million increase in professional fees associated with compliance with Sarbanes-Oxley legislation and the inclusion of $0.5 million in expenses for our Mexican operation. Selling and administrative expense as a percentage of revenue decreased to 5.3% for the three months ended May 31, 2005 from 5.5% in the prior comparable period.

     Interest expense and foreign exchange decreased $0.6 million to $2.3 million for the three months ended May 31, 2005, compared to $2.9 million in the prior comparable period. Prior period results include foreign exchange losses of $0.1 million as compared to foreign exchange gains of $0.9 million in the current period. Foreign exchange fluctuations were offset by a $0.4 million increase in interest expense resulting primarily from increased borrowings.

     The three months ended May 31, 2005 include 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.

Income Tax

     Income tax expense for the three months ended May 31, 2005 and 2004 represents a tax rate of 42.0% on United States operations and varying tax rates on foreign operations. The effective tax rate was 40.5% and 39.5% for the three months ended May 31, 2005 and 2004. The fluctuations in effective tax rate are due to the geographical mix of pre-tax earnings and losses.

Equity in Earnings of Unconsolidated Subsidiaries

     Equity in earnings of unconsolidated subsidiaries improved by $0.3 million for the three months ended May 31, 2005 as compared to the three months ended May 31, 2004 as a result of a $0.6 million improvement in our earnings from the castings operation. The castings operation recorded a loss in the three months ended May 31, 2004 due to temporary shutdowns associated with equipment failures and start-up issues. The three months ended May 31, 2004 also included $0.3 million in earnings from our Mexican operation that was accounted for under the equity method in the prior period and is consolidated in the current period.

Nine Months Ended May 31, 2005 Compared to Nine Months Ended May 31, 2004

Manufacturing Segment

     Manufacturing revenue for the nine months ended May 31, 2005 was $700.3 million compared to $473.2 million in the corresponding prior period, an increase of $227.1 million, or 48.0%. The increase is due to higher new railcar revenue of $176.3 million, a $10.3 million increase in marine revenue associated with the timing of revenue

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THE GREENBRIER COMPANIES, INC.

recognition, a $20.1 million improvement in repair and refurbishment activities and $20.4 million associated with differences in foreign currency translation rates between periods. The $176.3 million increase in railcar revenue is comprised of $91.1 million from higher deliveries and price increases and $85.2 million in revenue from our Mexican subsidiary which was accounted for under the equity method in the prior comparable period. New railcar deliveries were approximately 9,900 in the current period compared to 7,800 in the prior comparable period.

     Manufacturing margin percentage for the nine months ended May 31, 2005 was 8.3% compared to 8.5% for the nine months ended May 31, 2004. As sales prices and costs increase by the same amount to cover surcharges, margins as a percentage of revenue decline. The realized benefits of higher margin railcar types and production efficiencies in the current period were somewhat offset by production issues in Europe, higher material costs on certain contracts produced in the first half of the year that did not contain escalation clauses to cover scrap surcharges and lower margin from the Mexican operation due to temporary production issues that occurred in the second quarter. The prior period margins were negatively impacted by costs to repair certain defective parts provided by third party vendors.

Leasing & Services Segment

     Leasing & services revenue increased $4.8 million, or 8.9%, to $58.7 million for the nine months ended May 31, 2005 compared to $53.9 million for the nine months ended May 31, 2004. The increase is primarily a result of gains on the sale of equipment from the lease fleet of $4.3 million in the current period compared to $0.2 million in the prior comparable period, additional management fees resulting from performance incentives earned on certain management contracts, partially offset by a decline in finance lease revenue upon lease maturation.

     Leasing & services operating margin percentage increased to 48.0% for the nine months ended May 31, 2005 from 41.5% for the nine months ended May 31, 2004. The increase was primarily a result of gains on sales from the lease fleet and rate adjustments due to increased utilization on certain management contracts.

Other Costs

     Selling and administrative expense was $41.4 million for the nine months ended May 31, 2005 compared to $33.3 million for the comparable prior period, an increase of $8.1 million, or 24.3%. The increase in expense is primarily the result of a $5.0 million increase in employee-related costs, higher professional fees of $2.3 million associated with litigation, strategic initiatives and compliance with Sarbanes-Oxley legislation and the inclusion of $0.8 million in expenses from our Mexican operation that was accounted for under the equity method in the prior comparable period. Current period costs include $2.5 million in legal and professional fees associated with the resolution of and responses to litigation and allegations made by Alan James, a former member of the board of directors.

     Interest expense and foreign exchange increased $1.5 million to $9.6 million for the nine months ended May 31, 2004, compared to $8.1 million in the prior comparable period. Prior period results include foreign exchange gains of $0.7 million compared to foreign exchange losses of $0.7 million in the nine months ended May 31, 2005. Interest increased $0.1 million as a result of increased borrowings.

     The nine months ended May 31, 2005 include 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 nine months ended May 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 regarding the acquisition of European designs and patents.

Income Tax

     Income tax for the nine months ended May 31, 2005 and 2004 represents a tax rate of 42.0% on United States operations and varying tax rates on foreign operations. The effective tax rate for the nine months ended May 31, 2005 and 2004 was 39.6% and 27.3%. The fluctuations in effective tax rate are due to the geographical mix of pre-

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THE GREENBRIER COMPANIES, INC.

tax earnings and losses. In addition, special charges in the nine months ended May 31, 2004 include a $6.3 million non-taxable purchase price adjustment relating to the purchase of European designs and patents.

Equity in Loss of Unconsolidated Subsidiaries

     Equity in loss of unconsolidated subsidiaries was $0.3 million for the nine months ended May 31, 2005 compared to $1.7 million for the nine months ended May 31, 2004. Equity in earnings of the castings joint venture was $0.3 million for the nine months ended May 31, 2005 compared to a loss of $1.1 million in the prior comparable period. The loss in the prior period was primarily due to start-up costs and temporary plant shutdowns associated with equipment issues at the castings joint venture which began operation in September 2003.

     The Mexican railcar manufacturing joint venture contributed approximately $0.6 million of the loss for the nine months ended May 31, 2005 and 2004. As a result of the buyout of our joint venture partner’s interest in the venture, the financial results of the entity were consolidated beginning on December 1, 2004. Accordingly, the nine months ended May 31, 2005 only include results through November 30, 2004.

Liquidity and Capital Resources

     Greenbrier has been financed through cash generated from operations and borrowings. At May 31, 2005, cash and cash equivalents increased $55.2 million to $67.3 million from $12.1 million at August 31, 2004.

     Cash used in operations for the nine months ended May 31, 2005 was $44.3 million compared to $33.5 million in the prior comparable period. Usage during the nine months ended May 31, 2005 was primarily related to a $16.8 million participation payment under an agreement with Union Pacific Railroad and a change in timing of working capital needs including increased accounts receivable as a result of current production for a customer with longer payment terms and a $21.4 million receivable from the sale of railcars held for sale.

     Inventories increased $66.3 million from August 31, 2004 levels primarily as a result of $33.8 million associated with the consolidation of Mexican operations previously accounted for under the equity method and the addition of $31.6 million in railcars held for sale or refurbishment that will be sold to third parties in the normal course of business.

     Cash used in investing activities was $12.8 million for the nine months ended May 31, 2005 compared to $15.9 for the prior comparable period. Cash utilization in the nine months ended May 31, 2005 was primarily for capital expenditures, offset partially by proceeds from sale of equipment of $23.1 million and $8.4 million of net cash acquired in the acquisition of the remaining joint venture interest in Mexico.

     Capital expenditures totaled $49.5 million and $33.3 million for the nine months ended May 31, 2005 and 2004. Of these capital expenditures, approximately $39.3 million and $29.8 million were attributable to leasing & services operations. Leasing & services capital expenditures for 2005 are expected to be approximately $67.0 million. Capital expenditures have increased as the Company replaces the maturing direct finance lease portfolio. Greenbrier regularly sells assets from its lease fleet, some of which may have been purchased within the current year and included in capital expenditures.

     Approximately $10.2 million and $3.5 million of capital expenditures for the nine months ended May 31, 2005 and 2004 were attributable to manufacturing operations. Capital expenditures for manufacturing additions are expected to be approximately $19.0 million in 2005.

     Cash provided by financing activities was $111.0 million for the nine months ended May 31, 2005 compared to cash used in financing activities of $16.7 million for the nine months ended May 31, 2004. The nine months ended May 31, 2005 include proceeds from borrowings of $175.0 million, offset by debt paydowns of $71.5 million.

     All amounts originating in foreign currency have been translated at the May 31, 2005 exchange rate for the purpose of the following discussion. Credit facilities aggregated $134.8 million as of May 31, 2005. Available borrowings under the credit facilities are principally based upon defined levels of receivables, inventory and leased

20

THE GREENBRIER COMPANIES, INC.

equipment, which at May 31, 2005 levels would provide for maximum borrowing of $134.8 million, of which $16.4 million is outstanding. A $60.0 million revolving line of credit is available through January 2006 to provide working capital and interim financing of equipment for the leasing & services operations in North America. A $35.0 million line of credit to be used for working capital is available through March 2006 for United States manufacturing operations. A $19.9 million line of credit is available through October 2005 for working capital for Canadian manufacturing operations. Lines of credit totaling $19.8 million are available principally through June 2006 for European operations. Advances under the lines of credit bear interest at rates that vary depending on the type of borrowing and certain defined ratios. At May 31, 2005, there were no borrowings outstanding under the United States manufacturing and leasing & services lines and the Canadian manufacturing line. The European manufacturing line had $16.4 million outstanding.

     Subsequent to May 31, 2005, we replaced our three North American revolving credit facilities with a senior secured credit facility for approximately $150.0 million. This facility consists of a five-year, $125.0 million revolving line of credit for domestic operations and a CDN$30.0 million revolving line of credit for Canadian operations. Available borrowings are based on defined levels of inventory, receivables, leased equipment and property, plant and equipment. Advances bear interest at rates that depend on the type of borrowing and the ratio of debt to total capitalization, as defined.

     In accordance with customary business practices in Europe, the Company has $20.1 million in bank and third party performance, advance payment and warranty guarantee facilities, all of which has been utilized as of May 31, 2005. To date no amounts have been drawn under these performance, advance payment and warranty guarantees.

     We have advanced $2.3 million in long term advances to an unconsolidated subsidiary which are secured by accounts receivable and inventory. We have also guaranteed $3.1 million of this subsidiary’s third party debt.

     We have outstanding letters of credit aggregating $1.8 million associated with materials purchases and facilities leases.

     A dividend of $.08 per common share was declared in June 2005. Dividends of $.06 per common share have been paid quarterly from the fourth quarter of 2004 through the second quarter of 2005.

     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 counterparty non-performance.

     We expect existing funds and cash generated from operations, together with borrowings under credit facilities and long-term financing, to be sufficient to fund dividends, working capital needs, planned capital expenditures and expected debt repayments for the foreseeable future.

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.

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 the Company with the Securities and Exchange Commission. These forward-looking statements rely on a number of assumptions concerning future events and include statements relating to:

• availability of financing sources and borrowing base for working capital, other business development activities, capital spending and railcar warehousing activities;

21

THE GREENBRIER COMPANIES, INC.

• ability to renew or obtain sufficient lines of credit and performance guarantees on acceptable terms;

• ability to utilize beneficial tax strategies;

• ability to grow our railcar services and lease fleet and management services business;

• ability to obtain purchase orders which contain provisions for the escalation of prices due to increased costs of materials and components;

• ability to obtain adequate certification and licensing of products; and

• short- and long-term revenue and earnings effects of the above items.

     Forward-looking statements are subject to a number of uncertainties and other factors outside Greenbrier’s control. The following are among the factors that could cause actual results or outcomes to differ materially from the forward-looking statements:

• a delay or failure of acquired businesses, products or services to compete successfully;

• decreases in carrying value of assets due to impairment;

• severance or other costs or charges associated with lay-offs, shutdowns, or reducing the size and scope of operations;

• changes in future maintenance requirements;

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

• domestic and global business conditions and growth or reduction in the surface transportation industry;

• actual future costs and the availability of materials and a trained workforce;

• ability to maintain good relationships with third party labor providers or collective bargaining units;

• availability of subcontractors;

• steel price increases, scrap surcharges and other commodity price fluctuations and their impact on railcar demand and margin;

• changes in product mix and the mix between the manufacturing and leasing & services segments;

• labor disputes, energy shortages or operating difficulties that might disrupt manufacturing operations or the flow of cargo;

• production difficulties and product delivery delays as a result of, among other matters, changing technologies or non-performance of alliance partners, subcontractors or suppliers;

• ability to obtain suitable contracts for railcars held for sale;

• lower than anticipated residual values for leased equipment;

• discovery of defects in railcars resulting in increased warranty costs or litigation;

• resolution or outcome of investigations and pending or future litigation;

• the ability to consummate expected sales;

• 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 the contracts as anticipated;

• financial condition of principal customers;

• market acceptance of products;

• ability to determine and obtain adequate levels of insurance at acceptable rates;

• competitive factors, including introduction of competitive products, price pressures, limited customer base and competitiveness of our manufacturing facilities and products;

• industry over-capacity and our manufacturing capacity utilization;

• continued industry demand at current and anticipated levels for railcar products:

• domestic and global political, regulatory or economic conditions including such matters as terrorism, war, embargoes or quotas;

• ability to adjust to the cyclical nature of the railcar industry;

• the effects of car hire deprescription on leasing revenue;

• changes in interest rates;

• actions by various regulatory agencies;

• changes in fuel and/or energy prices;

• availability and price of essential raw materials, specialties or components, including steel castings, to permit manufacture of units on order;

22

THE GREENBRIER COMPANIES, INC.

• ability to replace lease revenue and earnings from maturing and terminating leases with revenue and earnings from additions to the lease fleet, lease renewals and management services; and

• financial impacts from currency fluctuations in the Company’s worldwide operations.

     Any forward-looking statements should be considered in light of these factors. Greenbrier assumes no obligation to update or revise any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements or if Greenbrier later becomes aware that these assumptions are not likely to be achieved, except as required under securities laws.

23

THE GREENBRIER COMPANIES, INC.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

     Greenbrier has operations in Canada, Mexico, Germany and Poland that conduct business in their local currencies as well as other regional currencies. To mitigate its exposure to transactions denominated in currencies other than the functional currency of each entity, Greenbrier enters into forward exchange contracts to protect its margin on a portion of its forecast foreign currency sales. At May 31, 2005, $109.3 million of forecast sales were hedged by forward 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. The Company believes the exposure to foreign exchange risk is not material.

     In addition to Greenbrier’s exposure to transaction gains or losses, the Company is also exposed to foreign currency exchange risk related to the net asset position of its foreign subsidiaries. At May 31, 2005, the net assets of foreign subsidiaries aggregated $29.3 million and a uniform 10% strengthening of the United States dollar relative to the foreign currencies would result in a decrease in stockholders’ equity of $2.9 million, or 1.8% of total stockholders’ equity. This calculation assumes that each exchange rate would change in the same direction relative to the United States dollar.

Interest Rate Risk

     The Company has managed its floating rate debt with interest rate swap agreements, effectively converting $26.2 million of variable rate debt to fixed rate debt. At May 31, 2005, the exposure to interest rate risk is limited since approximately 90% of the Company’s debt has fixed rates. As a result, Greenbrier is only exposed to interest rate risk relating to its revolving debt and a portion of term debt. At May 31, 2005, a uniform 10% increase in interest rates would result in approximately $0.1 million of additional annual interest expense.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic filings under the Exchange Act within the required time period.

Changes in Internal Controls over Financial Reporting

     There has been no change in the Company’s internal control over financial reporting that occurred during the quarter ended May 31, 2005 that materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

24

THE GREENBRIER COMPANIES, INC.

     PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     There is hereby incorporated by reference the information disclosed in Note 13 to the unaudited Consolidated Financial Statements, Part I of this quarterly report.

Item 6. Exhibits

10.2	Revised purchase agreement among The Greenbrier Companies, Inc. and Banc of America Securities LLC and Bear Stearns & Co, Inc., as initial purchasers, dated as of May 5, 2005.
31.1	Certification pursuant to Rule 13 (a) – 14 (a)
31.2	Certification pursuant to Rule 13 (a) – 14 (a)
32.1	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

25

THE GREENBRIER COMPANIES, INC.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE GREENBRIER COMPANIES, INC.
Date: June 30, 2005	By:	/s/ Larry G. Brady
		Larry G. Brady
		Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

26

EX-10.2

                                                                    Exhibit 10.2

This exhibit 10.2 amends and restates and replaces exhibit 10.2 previously filed
on Form 8-K on May 11, 2005. This revised purchase agreement was filed to
correct a typographical error in the previously filed purchase agreement.

                                                                  EXECUTION COPY

                         THE GREENBRIER COMPANIES, INC.,
                             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. AND
                       GUNDERSON SPECIALTY PRODUCTS, LLC.

                                  $175,000,000

                          8-3/8% Senior Notes due 2015

                               PURCHASE AGREEMENT

                                dated May 5, 2005

                         BANC OF AMERICA SECURITIES LLC
                            BEAR, STEARNS & CO. INC.



                               PURCHASE AGREEMENT

May 5, 2005

BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
  As Initial Purchasers
c/o Banc of America Securities LLC
9 West 57th Street
New York, New York 10019

Ladies and Gentlemen:

      Introductory. The Greenbrier Companies, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several Initial Purchasers named
in Schedule A (the "Initial Purchasers"), acting severally and not jointly, the
respective amounts set forth in such Schedule A of an $175,000,000 aggregate
principal amount of the Company's 8-3/8% Senior Notes due 2015 (the "Notes").
Banc of America Securities LLC and Bear, Stearns & Co. Inc. have agreed to act
as the several Initial Purchasers in connection with the offering and sale of
the Notes (the "Offering").

      The Notes will be issued pursuant to an indenture, to be dated as of May
11, 2005 (the "Indenture"), among the Company, the Guarantors (as defined below)
and U.S. Bank National Association, as trustee (the "Trustee"). Notes will be
issued only in book-entry form in the name of Cede & Co., as nominee of The
Depository Trust Company (the "Depositary") pursuant to a letter of
representations, to be dated on or before the Closing Date (as defined in
Section 2 hereof) among the Company, the Guarantors, the Trustee and the
Depositary.

      The holders of the Notes will be entitled to the benefits of a
registration rights agreement, to be dated as of May 11, 2005 (the "Registration
Rights Agreement"), among the Company, the Guarantors and the Initial
Purchasers, pursuant to which the Company and the Guarantors will agree to file
with the Commission (as defined below), under the circumstances set forth
therein, (i) a registration statement under the Securities Act (as defined
below) relating to another series of debt securities of the Company with terms
substantially identical to the Notes (the "Exchange Notes") to be offered in
exchange for the Notes (the "Exchange Offer") and (ii) to the extent required by
the Registration Rights Agreement, a shelf registration statement pursuant to
Rule 415 of the Securities Act relating to the resale by certain holders of the
Notes, and in each case, to use its best efforts to cause such registration
statements to be declared effective.



      The payment of principal of, premium and Liquidated Damages (as defined in
the Registration Rights Agreement), if any, and interest on the Notes and the
Exchange Notes will be fully and unconditionally guaranteed on a senior
unsecured basis, jointly and severally by (i) Autostack Corporation, an Oregon
corporation, Greenbrier-Concarril, LLC, a Delaware limited liability company,
Greenbrier Leasing Corporation, a Delaware corporation, Greenbrier Leasing
Limited Partner, LLC, a Delaware limited liability company, Greenbrier
Management Services, LLC, a Delaware limited liability company, Greenbrier
Leasing, L.P., a Delaware limited partnership, Greenbrier Railcar, Inc., a
Delaware corporation, Gunderson, Inc., an Oregon corporation, Gunderson Marine,
Inc., a Oregon corporation, Gunderson Rail Services, Inc., a Oregon corporation
and Gunderson Specialty Products, LLC, a Delaware limited liability company and
(ii) any subsidiary of the Company formed or acquired after the Closing Date
that executes an additional guarantee in accordance with the terms of the
Indenture, and their respective successors and assigns (collectively, the
"Guarantors"), pursuant to their guarantees (the "Guarantees"). The Notes and
the Guarantees endorsed thereon are herein collectively referred to as the
"Notes"; and the Exchange Notes and the Guarantees endorsed thereon are herein
collectively referred to as the "Exchange Notes".

      The Company understands that the Initial Purchasers propose to make an
offering of the Notes on the terms and in the manner set forth herein and in the
Offering Memorandum (as defined below) and agrees that the Initial Purchasers
may resell, subject to the conditions set forth herein, all or a portion of the
Notes to purchasers (the "Subsequent Purchasers") at any time after the date of
this Agreement. The Notes are to be offered and sold to or through the Initial
Purchasers without being registered with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933 (as amended, the "Securities
Act," which term, as used herein, includes the rules and regulations of the
Commission promulgated thereunder), in reliance upon exemptions therefrom.
Pursuant to the terms of the Notes and the Indenture, investors who acquire
Notes shall be deemed to have agreed that Notes may only be resold or otherwise
transferred, after the date hereof, if such Notes are registered for sale under
the Securities Act or if an exemption from the registration requirements of the
Securities Act is available (including the exemptions afforded by Rule 144A
under the Securities Act ("Rule 144A") or Regulation S under the Securities Act
("Regulation S")).

      The Company has prepared and delivered to each Initial Purchaser copies of
a Preliminary Offering Memorandum, dated April 26, 2005 (the "Preliminary
Offering Memorandum"), and has prepared and will deliver to each Initial
Purchaser, copies of the Offering Memorandum, dated May 5, 2005 describing the
terms of the Notes, each for use by such Initial Purchaser in connection with
its solicitation of offers to purchase the Notes. As used herein, "Offering
Memorandum" shall mean, with respect to any date or time referred to in this
Agreement, the Company's Offering Memorandum, dated May 5, 2005 including
amendments or supplements thereto, any exhibits thereto and the Incorporated
Documents (as defined in Section 1 hereof), in the most recent form that has
been prepared and delivered by the Company to the Initial Purchasers in
connection with their solicitation of offers to purchase the Notes. Further, any
reference to the Preliminary Offering Memorandum or the Offering Memorandum
shall be deemed to refer to and include any Additional Issuer Information (as
defined in Section 3 hereof) furnished by the Company prior to the completion of
the distribution of the Notes.

                                       2


      All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the Offering
Memorandum (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information which
are incorporated by reference in the Offering Memorandum; and all references in
this Agreement to amendments or supplements to the Offering Memorandum shall be
deemed to mean and include the filing of any document under the Securities
Exchange Act of 1934 (as amended, the "Exchange Act", which term, as used
herein, includes the rules and regulations of the Commission promulgated
thereunder) which is incorporated or deemed to be incorporated by reference in
the Offering Memorandum.

      SECTION 1. Representations and Warranties. Each of the Company and the
Guarantors, jointly and severally, hereby represents, warrants and covenants to
each Initial Purchaser as follows:

            (a) The Preliminary Offering Memorandum as of its date and the
Offering Memorandum as of its date and as of the Closing Date does not and will
not, and any supplement or amendment thereto will not, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph shall not apply to
statements in or omissions from and the Offering Memorandum made in reliance
upon and in conformity with information (as set forth in Section 8(b)) relating
to the Initial Purchasers furnished to the Company and the Guarantors in writing
by the Initial Purchasers expressly for use therein. No stop order preventing
the use of the Offering Memorandum, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued. Each of the Preliminary Offering
Memorandum and the Offering Memorandum, as of its date, contains all the
information specified in, and meeting the requirements of, Rule 144A. The
Company has not distributed and will not distribute, prior to the later of the
Closing Date and the completion of the Initial Purchasers' distribution of the
Notes, any offering material in connection with the offering and sale of the
Notes other than the Preliminary Offering Memorandum or the Offering Memorandum.

            (b) Deloitte & Touche LLP, which certified the financial statements
and supporting schedules and information of the Company and its subsidiaries
that are included or incorporated by reference in the Offering Memorandum, is an
independent registered public accounting firm with respect to the Company as
required by the Securities Act, the Exchange Act and the rules and regulations
of the Commission (the "Rules and Regulations").

            (c) Subsequent to the respective dates as of which information is
given in Offering Memorandum, except as disclosed in the Offering Memorandum,
the Company has not declared, paid or made any dividends (other than the
dividend declared and paid by the Company during its third quarter) or other
distributions of any kind on or in respect of its capital stock and there has
been no material adverse change or effect or any development involving a
prospective material adverse change or effect, whether or not arising from
transactions in the ordinary course of business, in or affecting (i) the
business, condition (financial or otherwise), results of operations,
stockholders' equity, properties or prospects of the Company and each subsidiary
of the Company (the "Subsidiaries"), taken as a whole, (ii) the long-term debt
or capital stock of the

                                       3



Company or any of its Subsidiaries or (iii) the Offering or any other
transaction contemplated by this Agreement or the Offering Memorandum (a
"Material Adverse Effect"). Since the date of the latest balance sheet presented
or incorporated by reference in the Offering Memorandum, neither the Company nor
any Subsidiary has incurred or undertaken any liability or obligation, whether
direct or indirect, liquidated or contingent, matured or unmatured, or entered
into any transaction, including any acquisition or disposition of any business
or asset, which is material to the Company and the Subsidiaries individually or
taken as a whole, except for liabilities, obligations and transactions which are
disclosed in the Offering Memorandum or the acquisition, disposition or leasing
of railcars in the ordinary course of business.

            (d) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Offering Memorandum in the column headed "Actual"
under the caption "Capitalization" and, after giving effect to the Offering and
the other transactions contemplated by this Agreement, the Registration Rights
Agreement, the Indenture and the Offering Memorandum, will be as set forth in
the column headed "As Adjusted" under the caption "Capitalization." All of the
issued and outstanding shares of capital stock of the Company are fully paid and
nonassessable and have been duly authorized and validly issued, in compliance
with all applicable state, federal and foreign securities laws and not in
violation of or subject to any preemptive or similar right that does or will
entitle any person, upon the issuance or sale of any security, to acquire from
the Company or any Subsidiary any capital stock or other security of the Company
or any Subsidiary or any security convertible into, or exercisable or
exchangeable for, capital stock or any other such security (any "Relevant
Security"), except for such rights as may have been fully satisfied or waived
prior to the date of the Offering Memorandum.

            (e) The Subsidiaries listed in Exhibit A are the only subsidiaries
(within the meaning of Rule 405 under the Securities Act) or joint ventures of
the Company, except for entities that when taken together would not constitute a
"significant subsidiary" with the meaning of Rule 102 of Regulation S-X. Except
for the Subsidiaries and as otherwise disclosed in the Offering Memorandum, the
Company holds no ownership or other interest, nominal or beneficial, direct or
indirect, in any corporation, partnership, joint venture or other business
entity. All of the issued shares of capital stock of or other ownership
interests in each Subsidiary have been duly authorized and validly issued and
are fully paid and nonassessable. All of the issued shares of capital stock or
other ownership interests in each Subsidiary or in the case of the entities
listed on Exhibit B, such shares or ownership interest representing the
percentage of the voting control of the Subsidiary set forth next to the name of
the Subsidiary on Exhibit B, are owned directly or indirectly by the Company
free and clear of any lien, charge, mortgage, pledge, security interest, claim,
equity, trust or other encumbrance, preferential arrangement, defect or
restriction of any kind whatsoever (any "Lien").

            (f) Each of the Company and the Subsidiaries has been duly organized
or formed and validly exists as a corporation, partnership or limited liability
company in good standing under the laws of its jurisdiction of organization or
formation. Each of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation, partnership or
limited liability company in each jurisdiction in which the character or
location of its properties (owned, leased or licensed) or the nature or conduct
of its business makes such qualification necessary, except for those failures to
be so qualified or in good

                                       4


standing which (individually and in the aggregate) could not reasonably be
expected to have a Material Adverse Effect. Each of the Company and the
Subsidiaries has all requisite corporate (or other entity) power and authority,
and, except as could not reasonably be expected to have a Material Adverse
Effect, all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses, filings and permits of, with and from
all judicial, regulatory and other legal or governmental agencies and bodies and
all third parties, foreign and domestic (collectively, the "Consents"), to own,
lease and operate its properties and conduct its business as it is now being
conducted and as disclosed in the Offering Memorandum, and each such Consent is
valid and in full force and effect, and neither the Company nor any Subsidiary
has received notice of any investigation or proceedings which has resulted in
or, if decided adversely to the Company or any Subsidiary, could reasonably be
expected to result in, the revocation of, or imposition of a materially
burdensome restriction on, any such Consent. Each of the Company and the
Subsidiaries is in compliance with all applicable laws, rules, regulations,
ordinances, directives, judgments, decrees and orders, foreign and domestic,
except where failure to be in compliance could not reasonably be expected to
have a Material Adverse Effect. No Consent contains a materially burdensome
restriction not adequately disclosed in the Offering Memorandum.

            (g) The Company has the corporate right, power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated by this Agreement, the Registration
Rights Agreement, the Indenture and the Offering Memorandum. This Agreement and
the transactions contemplated by this Agreement, the Registration Rights
Agreement, the Indenture and the Offering Memorandum have been duly authorized
by the Company. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and except as enforceability
may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

            (h) The execution, delivery, and performance of this Agreement and
consummation of the transactions contemplated by this Agreement, the
Registration Rights Agreement, the Indenture and the Offering Memorandum do not
and will not (A) conflict with, require consent under or result in a breach of
any of the terms and provisions of, or constitute a default (or an event which
with notice or lapse of time, or both, would constitute a default) under, or
result in the creation or imposition of any Lien upon any property or assets of
the Company or any Subsidiary pursuant to, any indenture, mortgage, deed of
trust, loan agreement or other agreement, instrument, franchise, license or
permit to which the Company or any Subsidiary is a party or by which the Company
or any Subsidiary or their respective properties, operations or assets may be
bound, (B) violate or conflict with any provision of the certificate or articles
of incorporation, by-laws, certificate of formation, limited liability company
agreement or other organizational documents of the Company or any Subsidiary or
(C) violate or conflict with any law, rule, regulation, ordinance, directive,
judgment, decree or order of any judicial, regulatory or other legal or
governmental agency or body, domestic or foreign, except (in the case of clauses
(A) and (C) above) as could not reasonably be expected to have a Material
Adverse Effect.

                                       5


            (i) No Consent of, with or from any judicial, regulatory or other
legal or governmental agency or body or any third party, foreign or domestic, is
required for the execution, delivery and performance of this Agreement or
consummation of the transactions contemplated by this Agreement, the
Registration Rights Agreement, the Indenture and the Offering Memorandum,
including the issuance, sale and delivery of the Notes to be issued, sold and
delivered hereunder except for such Consent as may be required (i) under
applicable state securities laws in connection with the purchase and resale of
the Notes by the Initial Purchaser and (ii) with respect to the Exchange Notes
(including the Guarantees of the Exchange Notes) under the Securities Act and
applicable state securities laws as contemplated by the Registration Rights
Agreement.

            (j) Except as disclosed in the Offering Memorandum, there is no
judicial, regulatory, arbitral or other legal or governmental proceeding or
other litigation or arbitration, domestic or foreign, pending to which the
Company or any Subsidiary is a party or of which any property, operations or
assets of the Company or any Subsidiary is the subject which, individually or in
the aggregate, if determined adversely to the Company or any Subsidiary, could
reasonably be expected to have a Material Adverse Effect; to the best of the
Company's knowledge, no such proceeding, litigation or arbitration is threatened
or contemplated; and the defense of all such proceedings, litigation and
arbitration against or involving the Company or any Subsidiary could not
reasonably be expected to have a Material Adverse Effect.

            (k) The financial statements, including the notes thereto, and the
supporting schedules included or incorporated by reference in the Offering
Memorandum present fairly the financial position as of the dates indicated and
the cash flows and results of operations for the periods specified of the
Company and its consolidated subsidiaries and the other entities for which
financial statements are included or incorporated by reference in the Offering
Memorandum; except as otherwise stated in the Offering Memorandum, said
financial statements have been prepared in conformity with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved; and the supporting schedules included in the
Offering Memorandum present fairly the information required to be stated
therein. No other financial statements or supporting schedules which would be
required by the Securities Act, the Exchange Act or the Rules and Regulations to
be included in the Offering Memorandum if the Offering Memorandum were a
prospectus included in a registration statement on Form S-1, have not been so
included. The other financial and statistical information included or
incorporated by reference in the Offering Memorandum present fairly the
information included therein and, except for non-GAAP financial measures (as
such term is defined in Item 10(e) of Regulation S-K of the Rules and
Regulations), non-financial operating data (which are addressed below in this
Section 1(k)) and market and industry data (which are addressed below in Section
1(m)), have been prepared on a basis consistent with that of the financial
statements that are included or incorporated by reference in the Offering
Memorandum and the books and records of the respective entities presented
therein. The non-GAAP financial measures and non-financial operating data (which
terms do not include market or industry data) included or incorporated by
reference in the Offering Memorandum have been derived from, and are consistent
with, the books and records of the Company and its subsidiaries.

            (l) There are no pro forma or as adjusted financial statements which
would be required by the Securities Act, the Exchange Act or the Rules and
Regulations to be included in

                                       6


the Offering Memorandum if the Offering Memorandum were a prospectus included in
a registration statement on Form S-1, which have not been so included.

            (m) The statistical, industry-related and market-related data
included in the Offering Memorandum (i) are based on or derived from sources
which the Company reasonably and in good faith believes are reliable and
accurate, and such data agree with the sources from which they are derived, or
(ii) with respect to the items set forth in Exhibit C hereto, represent the
Company's reasonable estimates determined in good faith.

            (n) The Company is subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act and files reports with the Commission on EDGAR.
The common stock of the Company is registered pursuant to Section 12 of the
Exchange Act and its outstanding shares of common stock are listed on the New
York Stock Exchange (the "NYSE"), and the Company has taken no action designed
to, or likely to have the effect of, terminating the registration of its common
stock under the Exchange Act or de-listing its common stock from the NYSE, nor
has the Company received any notification that the Commission or the NYSE is
contemplating terminating such registration or listing.

            (o) The Company and its Subsidiaries maintain a system of internal
accounting and other controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with United States generally
accepted accounting principles and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accounting for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

            (p) Neither the Company nor any of its "Affiliates" (as defined
under Rule 144 under the Securities Act) has taken, directly or indirectly, any
action which constitutes or is designed to cause or result in, or which could
reasonably be expected to constitute, cause or result in, the stabilization or
manipulation of the price of any security to facilitate the sale or resale of
the Notes, provided that this representation and warranty does not cover any
actions of the estate of Alan James (the "Estate") or any representatives or
agents acting on behalf of the Estate (collectively with the Estate, the "James
Group").

            (q) Neither the Company nor any of its Affiliates has, prior to the
date hereof, made any offer or sale of any securities which could be
"integrated" for purposes of the Securities Act or the Rules and Regulations
with the offer and sale of the Notes pursuant to the Offering Memorandum. Except
as disclosed in the Offering Memorandum, neither the Company nor any of its
Affiliates has sold or issued any Relevant Security during the six-month period
preceding the date of the Offering Memorandum, including but not limited to any
sales pursuant to Rule 144A or Regulation D or S under the Securities Act, other
than shares of its common stock issued pursuant to employee benefit plans,
qualified stock option plans or the employee compensation plans or pursuant to
outstanding options, rights or warrants as described in the Offering Memorandum.
The representations and warranties in this paragraph 1(q) do not cover any
actions of the James Group.

                                       7


            (r) Except as disclosed in the Offering Memorandum, no holder of any
Relevant Security has any rights to require registration of any Relevant
Security as part or on account of, or otherwise in connection with, the offer
and sale of the Notes contemplated hereby, and any such rights so disclosed have
either been fully complied with by the Company or effectively waived by the
holders thereof, and any such waivers remain in full force and effect.

            (s) The documents incorporated or deemed to be incorporated by
reference in the Offering Memorandum (the "Incorporated Documents"), at the time
they were or hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the Securities Act, the
Exchange Act and the Rules and Regulations, and, when read together with the
other information in the Offering Memorandum, do not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

            (t) The Company is not and, at all times up to and including
consummation of the transactions contemplated by this Agreement, the
Registration Rights Agreement, the Indenture and the Offering Memorandum, and
after giving effect to application of the net proceeds of the Offering as
contemplated by the Offering Memorandum, will not be, subject to registration as
an "investment company" under the Investment Company Act of 1940, as amended,
and is not and will not be an entity "controlled" by an "investment company"
within the meaning of such act.

            (u) There are no contracts or other documents (including, without
limitation, any voting agreement), which would be required by the Securities
Act, the Exchange Act or the Rules and Regulations to be described in the
Offering Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1, which have not been so described.

            (v) No relationship, direct or indirect, exists between or among any
of the Company or any Affiliate of the Company, on the one hand, and any
director, officer, stockholder, customer or supplier of the Company or any
Affiliate of the Company, on the other hand, which would be required by the
Securities Act, the Exchange Act or the Rules and Regulations to be described in
the Offering Memorandum if the Offering Memorandum were a prospectus included in
a registration statement on Form S-1, which have not been so described. There
are no outstanding loans, advances (except normal advances for business expenses
in the ordinary course of business) or guarantees of indebtedness by the Company
to or for the benefit of any of the officers or directors of the Company or any
of their respective family members, except as disclosed in the Offering
Memorandum and except for one salary advance that is immaterial in amount. The
Company has not, in violation of the Sarbanes-Oxley Act, directly or indirectly,
including through a Subsidiary, extended or maintained credit, arranged for the
extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer of the Company.

            (w) Except as disclosed in the Offering Memorandum, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or any Initial Purchaser
for a brokerage commission, finder's

                                       8


fee or other like payment in connection with the transactions contemplated by
this Agreement, the Registration Rights Agreement, the Indenture and the
Offering Memorandum.

            (x) The Company and each Subsidiary owns or leases all such
properties as are necessary to the conduct of its business as presently operated
and as proposed to be operated as described in the Offering Memorandum. The
Company and the Subsidiaries have good and marketable title in fee simple to all
real property and good and marketable title to all personal property owned by
them, in each case free and clear of all Liens except such as are described in
the Offering Memorandum or such as do not (individually or in the aggregate)
materially affect the value of such property or interfere with the use made or
proposed to be made of such property by the Company and the Subsidiaries; and
any real property and buildings held under lease or sublease by the Company and
the Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material to, and do not interfere with, the use
made and proposed to be made of such property and buildings by the Company and
the Subsidiaries. Neither the Company nor any Subsidiary has received any notice
of any claim adverse to its ownership of any real or personal property or of any
claim against the continued possession of any real property, whether owned or
held under lease or sublease by the Company or any Subsidiary.

            (y) The Company and each Subsidiary (i) own or possess adequate
right to use all patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations, copyrights,
licenses, formulae, customer lists, and know-how and other intellectual property
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures, "Intellectual Property")
necessary for the conduct of their respective businesses as being conducted and
as described in the Offering Memorandum and (ii) have no reason to believe that
the conduct of their respective businesses does or will conflict with any such
right of others. To the best of the Company's knowledge, all material technical
information developed by and belonging to the Company which has not been
patented has been kept confidential. Except as described in the Offering
Memorandum, neither the Company nor any Subsidiary has granted or assigned to
any other person or entity any right to manufacture, have manufactured, assemble
or sell the current products and services of the Company and its Subsidiaries or
those products and services described in the Offering Memorandum. Except as
would, if determined adversely to the Company or its Subsidiaries, not have
individually or in the aggregate, a Material Adverse Effect, the Company is not
aware of any infringement by third parties of any such Intellectual Property;
there is no pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others challenging the Company's or any Subsidiary's
rights in or to any such Intellectual Property, and the Company is unaware of
any facts which would form a reasonable basis for any such claim; and there is
no pending or, to the Company's knowledge, threatened action, suit, proceeding
or claim by others that the Company or any Subsidiary infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
rights of others, and the Company is unaware of any other fact which would form
a reasonable basis for any such claim.

            (z) The Company and the Subsidiaries maintain insurance in such
amounts and covering such risks as the Company reasonably considers adequate for
the conduct of its business and the value of its properties and as is customary
for companies engaged in similar

                                       9


businesses in similar industries, all of which insurance is in full force and
effect, except where the failure to maintain such insurance could not reasonably
be expected to have a Material Adverse Effect. There are no material claims by
the Company or any Subsidiary under any such policy or instrument as to which
any insurance company is denying liability or defending under a reservation of
rights clause, except (i) that insurance liability has been denied with respect
to the litigation filed by Mr. James and described under "Recent Developments --
Settlement with the Estate of Alan James" in the Offering Memorandum, and (ii)
the insurer is defending under a reservation of rights in the litigation pending
in Tarrant County, Texas that is described under "Business -- Legal Matters" in
the Offering Memorandum. The Company reasonably believes that it will be able to
renew its existing insurance as and when such coverage expires or will be able
to obtain replacement insurance adequate for the conduct of the business and the
value of its properties at a cost that would not have a Material Adverse Effect.

            (aa) The Company has in effect insurance covering the Company, its
directors and officers for liabilities or losses arising in connection with this
Offering, including, without limitation, liabilities or losses arising under the
Securities Act, the Exchange Act, the Rules and Regulations and applicable
foreign securities laws.

            (bb) Each of the Company and the Subsidiaries has accurately
prepared and timely filed (including through permitted extensions) all federal,
state, foreign and other tax returns that are required to be filed by it, except
where the failure to file would not have a Material Adverse Effect, and has paid
or made provision for the payment of all taxes, assessments, governmental or
other similar charges, including without limitation, all sales and use taxes and
all taxes which the Company or any Subsidiary is obligated to withhold from
amounts owing to employees, creditors and third parties, with respect to the
periods covered by such tax returns (whether or not such amounts are shown as
due on any tax return), except to the extent that any of such taxes, assessments
or charges are being contested in good faith. No deficiency assessment with
respect to a proposed adjustment of the Company's or any Subsidiary's federal,
state, local or foreign taxes is pending or, to the best of the Company's
knowledge, threatened. The accruals and reserves on the books and records of the
Company and the Subsidiaries in respect of tax liabilities for any taxable
period not finally determined are adequate to meet any assessments and related
liabilities for any such period and, since August 31, 2004, the Company and the
Subsidiaries have not incurred any liability for taxes other than in the
ordinary course of its business. There is no tax lien, whether imposed by any
federal, state, foreign or other taxing authority, outstanding against the
assets, properties or business of the Company or any Subsidiary.

            (cc) No labor disturbance by the employees of the Company or any
Subsidiary exists or, to the best of the Company's knowledge, is imminent and
the Company is not aware of any existing or imminent labor disturbances by the
subcontracted labor at the Company's facility in Sahagun, Mexico or the
employees of any of its or any Subsidiary's principal suppliers, manufacturers,
customers or contractors, which, in either case (individually or in the
aggregate), could reasonably be expected to have a Material Adverse Effect.

            (dd) No nonexempt "prohibited transaction" (as defined in either
Section 406 of the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder ("ERISA") or
Section 4975 of the Internal Revenue

                                       10


Code of 1986, as amended from time to time (the "Code")), has occurred with
respect to any employee benefit plan for which the Company or any Subsidiary
would have any liability; each employee benefit plan for which the Company or
any Subsidiary would have any liability is in compliance in all material
respects with applicable law, including (without limitation) ERISA and the Code;
neither the Company nor any Subsidiary has nor has it maintained any employee
benefit plans as such term is defined in Section 3(3) of ERISA that are subject
to Title IV of ERISA; and each plan for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the IRS as to its qualification
is so qualified and nothing has occurred, whether by action or by failure to
act, which would reasonably be expected to cause the loss of such qualification.

            (ee) The execution, delivery, and performance of this Agreement and
consummation of the transactions contemplated by this Agreement, the
Registration Rights Agreement, the Indenture and the Offering Memorandum do not
and will not involve any prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986.

            (ff) Except as disclosed in the Offering Memorandum with respect to
the Portland Harbor Superfund Site and the ongoing soil and groundwater
remediation at the Gunderson, Portland facility, and except as could not
reasonably be expected to have a Material Adverse Effect,

                  (i) Neither the Company nor any Subsidiary has unlawfully
released any hazardous substance in a manner likely to give rise to any
liability under any applicable law, rule, regulation, order, judgment, decree or
permit relating to pollution or protection of human health and safety and
environment ("Environmental Law").

                  (ii) Neither the Company nor any Subsidiary has agreed
contractually to indemnify any past or current owner or operator of any property
currently owned or operated by the Company or any Subsidiary, for liability
related to such prior ownership or operation of such property, under any
Environmental Law, including any obligation for cleanup or remedial action.

                  (iii) There is no pending or, to the best of the Company's
knowledge, threatened administrative, regulatory or judicial action, claim or
notice of noncompliance or violation, investigation or proceedings relating to
any Environmental Law against the Company or any Subsidiary.

            (gg) Neither the Company, any Subsidiary nor, to the Company's
knowledge, any of its employees or agents has at any time during the last five
years (i) made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law or (ii) made any
payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States of any jurisdiction
thereof.

            (hh) Neither the Company nor any Subsidiary (i) is in violation of
its certificate or articles of incorporation, by-laws, certificate of formation,
limited liability company

                                       11


agreement or other organizational documents, (ii) is in default under, and no
event has occurred which, with notice or lapse of time, or both, would
constitute a default under or result in the creation or imposition of any Lien
upon any property or assets of the Company or any of its subsidiaries pursuant
to, any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
property or assets is subject or (iii) is in violation in any respect of any
law, rule, regulation, ordinance, directive, judgment, decree or order of any
judicial, regulatory or other legal or governmental agency or body, foreign or
domestic, except (in the case clauses (ii) and (iii) above) violations or
defaults that could not (individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect and except (in the case of clause
(ii) alone) for any Lien disclosed in the Offering Memorandum;

            (ii) The Company is in compliance with applicable provisions of the
Sarbanes-Oxley Act that are effective.

            (jj) The Company has implemented the "disclosure controls and
procedures" (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act)
required in order for the Chief Executive Officer and Chief Financial Officer of
the Company to engage in the review and evaluation process mandated by the
Exchange Act. The Company's "disclosure controls and procedures" are reasonably
designed to ensure that all information (both financial and non-financial)
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Rules and Regulations, and that all such
information is accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure and to make
the certifications of the Chief Executive Officer and Chief Financial Officer of
the Company required under the Exchange Act with respect to such reports.

            (kk) Deloitte & Touche LLP and the audit committee of the Company's
Board of Directors have been advised of (i) all significant deficiencies and
material weaknesses in the design or operation of internal controls over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
Act) which are reasonably likely to adversely affect the Company's ability to
record, process, summarize and report financial information and (ii) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls over financial reporting.
The Chief Executive Officer and Chief Financial Officer have indicated in the
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2004
and its Quarterly Reports on Form 10-Q for the fiscal quarters ended November
30, 2004 and February 28, 2005 any change in the Company's internal controls
over financial reporting that occurred during the Company's most recent fiscal
quarter reported on in such Annual Report or Quarterly Report that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

            (ll) The section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operation - Critical Accounting Policies" in
the Offering Memorandum accurately and fully describes in accordance with
applicable SEC rules (i) accounting policies which the Company believes are the
most important in the portrayal of the financial condition and results of
operations of the Company and its consolidated subsidiaries and which require
management's most difficult, subjective or complex judgments ("critical

                                       12


accounting policies"), (ii) judgments and uncertainties affecting the
application of critical accounting policies and (iii) explanation of the
likelihood that materially different amounts would be reported under different
conditions or using different assumptions.

            (mm) The Company's board of directors, senior management and audit
committee have reviewed and agreed with the selection, application and
disclosure of critical accounting policies and have consulted with their legal
advisers and independent accountants with regard to such disclosure.

            (nn) The section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
in the Offering Memorandum accurately and fully describes in accordance with
applicable SEC rules (i) all material trends, demands, commitments, events,
uncertainties and risks, and the potential effects thereof, that the Company
believes would materially affect liquidity and are reasonably likely to occur
and (ii) all off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on the financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources of the Company and the Subsidiaries
taken as a whole.

            (oo) Except as disclosed in the Offering Memorandum, there are no
outstanding guarantees or other contingent obligations (other than under product
warranties given in the ordinary course of business) of the Company or any
Subsidiary that could reasonably be expected to have a Material Adverse Effect.

            (pp) The Company and its Subsidiaries have all material
certifications required by the Association of American Railroads ("AAR") as a
railcar builder, repair and refurbishment facility and component manufacturer,
and products sold and leased by the Company and its Subsidiaries in North
America meet applicable AAR, Transport Canada and Federal Railroad
Administration standards.

            (qq) No event or circumstance has occurred or arisen that could
reasonably be expected to give rise to a requirement that the Company make
additional disclosure on Form 8-K and has not been so disclosed.

            (rr) The Settlement Agreement between the Company and the estate of
Alan James dated April 20, 2005 (the "Settlement Agreement"), has been duly
executed and delivered by the Company and, to the Company's knowledge, each
other party thereto, and constitutes the legal, valid and binding obligation of
the Company, and, to the Company's knowledge, each other party thereto,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and except as enforceability
may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The
Settlement Agreement is in full force and effect, and neither the Company nor,
to the Company's knowledge, any other party thereto, is in breach of, or default
under, the Settlement Agreement, and no event has occurred that with notice or
lapse of time or both would constitute such a breach or default thereunder by
the Company or, to the Company's knowledge, any other party thereto. There is no
pending or, to the Company's knowledge, threatened action,

                                       13


suit, proceeding or claim by any person or any judicial, regulatory or other
legal or governmental agency or body challenging the validity, enforcement or
other aspect of the Settlement Agreement, and the Company is unaware of any
facts which would form a reasonable basis for any such claim. No governmental
entity having competent jurisdiction has taken any action or issued any order
restraining, enjoining or otherwise prohibiting the transactions contemplated by
the Settlement Agreement.

            (ss) The Stock Purchase Agreement among the Company, William Furman,
George Chelius, as Executor of the Will and Estate of Alan James and as Trustee
and Eric Epperson, as Executor of the Will and Estate of Alan James and as
Trustee dated April 20, 2005 (the "Stock Purchase Agreement"), has been duly
executed and delivered by the Company and, to the Company's knowledge, each
other party thereto, and constitutes the legal, valid and binding obligation of
the Company, and, to the Company's knowledge, each other party thereto,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and except as enforceability
may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The Stock
Purchase Agreement is in full force and effect, and neither the Company nor, to
the Company's knowledge, any other party thereto, is in breach of, or default
under, the Stock Purchase Agreement, and no event has occurred that with notice
or lapse of time or both would constitute such a breach or default thereunder by
the Company or, to the Company's knowledge, any other party thereto. There is no
pending or, to the Company's knowledge, threatened action, suit, proceeding or
claim by any person or any judicial, regulatory or other legal or governmental
agency or body challenging the validity, enforcement or other aspect of the
Stock Purchase Agreement, and the Company is unaware of any facts which would
form a reasonable basis for any such claim.

            (tt) The Indenture has been duly authorized by the Company and each
Guarantor and, when duly executed and delivered by the Company and each
Guarantor, will be the legal, valid and binding agreement of the Company and
each Guarantor, enforceable against each of them in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). On the Closing Date, the Indenture will comply in all
material respects with the requirements of the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder. The
Offering Memorandum contains a summary of the terms of the Indenture, which is
accurate in all material respects.

            (uu) The Registration Rights Agreement has been duly authorized by
the Company and each Guarantor and, when duly executed and delivered by the
Company and each Guarantor, will be the legal, valid and binding obligation of
the Company and each Guarantor, enforceable against each of them in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at

                                       14


law) and except that rights to indemnity and contribution thereunder may be
limited by applicable law and public policy. The Offering Memorandum contains a
summary of the terms of the Registration Rights Agreement, which is accurate in
all material respects.

            (vv) The Notes have been duly authorized by the Company for issuance
and sale to the Initial Purchasers pursuant to this Agreement and, when
executed, authenticated and issued in accordance with the terms of the Indenture
and delivered against payment therefor in accordance with the terms hereof and
thereof, the Notes will be the legal, valid and binding obligations of the
Company, enforceable against it in accordance with their terms and entitled to
the benefits of the Indenture, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

            (ww) The Guarantees of the Notes have been duly authorized by each
of the Guarantors and, when executed and delivered in accordance with the terms
of the Indenture and when the Notes have been executed, authenticated and issued
in accordance with the terms of the Indenture and delivered against payment
therefor in accordance with the terms hereof and thereof, the Guarantees of the
Notes will be the legal, valid and binding obligations of each of the
Guarantors, enforceable against each of them in accordance with their terms and
entitled to the benefits of the Indenture, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and except as enforceability
may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

            (xx) The Exchange Notes have been duly authorized for issuance by
the Company and, when issued, authenticated and delivered in accordance with the
terms of the Exchange Offer and the Indenture, the Exchange Notes will be the
legal, valid and binding obligations of the Company, enforceable against it in
accordance with their terms and entitled to the benefits of the Indenture,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

            (yy) The Guarantees of the Exchange Notes have been duly authorized
by each of the Guarantors and, when issued, authenticated and delivered in
accordance with the terms of the Indenture and when the Exchange Notes have been
issued and authenticated in accordance with the terms of the Exchange Offer and
the Indenture, the Guarantees of the Exchange Notes will be the legal, valid and
binding obligations of each of the Guarantors, enforceable against each of them
in accordance with their terms and entitled to the benefits of the Indenture,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

            (zz) Subject to compliance by the Initial Purchasers with Sections 2
and 7 hereof, it is not necessary in connection with the offer, sale and
delivery of the Notes to the

                                       15


Initial Purchasers and to each Subsequent Purchaser in the manner contemplated
by this Agreement and the Offering Memorandum to register the Notes under the
Securities Act or, until such time as the Exchange Notes are issued pursuant to
an effective registration statement, to qualify the Indenture under the Trust
Indenture Act of 1939 (the "Trust Indenture Act," which term, as used herein,
includes the rules and regulations of the Commission promulgated thereunder).

            (aaa) None of the Company, its Affiliates, or any person acting on
its or any of their behalf (other than the Initial Purchasers, as to whom the
Company makes no representation or warranty) has engaged or will engage, in
connection with the offering of the Notes, in any form of general solicitation
or general advertising within the meaning of Rule 502 under the Securities Act.
With respect to those Notes sold in reliance upon Regulation S, (i) none of the
Company, its Affiliates or any person acting on its or their behalf (other than
the Initial Purchasers, as to whom the Company makes no representation or
warranty) has engaged or will engage in any directed selling efforts within the
meaning of Regulation S and (ii) each of the Company and its Affiliates and any
person acting on its or their behalf (other than the Initial Purchasers, as to
whom the Company makes no representation or warranty) has complied and will
comply with the offering restrictions set forth in Regulation S. The Offering
Memorandum will contain the disclosure required by Rule 902. The Company is a
"reporting issuer" as defined in Rule 902 under the Securities Act.

            (bbb) The Notes are eligible for resale pursuant to Rule 144A and
will not be, at the Closing Date, of the same class as securities listed on a
national securities exchange registered under Section 6 of the Exchange Act or
quoted in a U.S. automated interdealer quotation system.

            (ccc) Each of the Company and the Guarantors is, and immediately
after the Closing Date will be, Solvent. As used herein, the term "Solvent"
means, with respect to any person on a particular date, that on such date (i)
the fair market value of the assets of such person is greater than the total
amount of liabilities (including contingent liabilities) of such person, (ii)
the present fair salable value of the assets of such person is greater than the
amount that will be required to pay the probable liabilities of such person on
its debts as they become absolute and matured, (iii) such person is able to
realize upon its assets and pay its debts and other liabilities, including
contingent obligations, as they mature and (iv) such person does not have
unreasonably small capital.

      Any certificate signed by an officer of the Company or any Guarantor and
delivered to the Initial Purchasers or to counsel for the Initial Purchasers
shall be deemed to be a representation and warranty by the Company or such
Guarantor to each Initial Purchaser as to the matters set forth therein.

      SECTION 2. Purchase, Sale and Delivery of the Notes.

            (a) The Notes. Each of the Company and the Guarantors agrees to
issue and sell to the Initial Purchasers, severally and not jointly, all of the
Notes, and the Initial Purchasers agree, severally and not jointly, to purchase
from the Company and the Guarantors the aggregate principal amount of Notes set
forth opposite their names on Schedule A, at a purchase price of

                                       16


97.5% of the principal amount thereof payable on the Closing Date, in each case,
on the basis of the representations, warranties and agreements herein contained,
and upon the terms, subject to the conditions thereto, herein set forth.

            (b) The Closing Date. Delivery of certificates for the Notes in
definitive form to be purchased by the Initial Purchasers and payment therefor
shall be made at the offices of Gibson, Dunn & Crutcher LLP, 333 South Grand
Avenue, Los Angeles, California 90071 (or such other place as may be agreed to
by the Company and the Initial Purchasers at 9:00 a.m. New York City time, on
May 11, 2005 or such other time and date as the Initial Purchasers shall
designate by notice to the Company (the time and date of such closing are called
the "Closing Date"). The Company hereby acknowledges that circumstances under
which the Initial Purchasers may provide notice to postpone the Closing Date as
originally scheduled include, but are in no way limited to, any reasonable
determination by the Company and the Initial Purchasers to recirculate to
investors copies of an amended or supplemented Offering Memorandum or a delay as
contemplated by the provisions of Section 16 hereof.

            (c) Delivery of the Notes. The Company shall deliver, or cause to be
delivered, to Banc of America Securities LLC for the accounts of the several
Initial Purchasers certificates for the Notes at the Closing Date against the
irrevocable release of a wire transfer of immediately available federal funds
for the amount of the purchase price therefor. The certificates for the Notes
shall be in such denominations and registered in the name of Cede & Co., as
nominee of the Depositary and shall be made available for inspection on the
business day preceding the Closing Date at a location in New York City, as the
Initial Purchasers may designate. Time shall be of the essence, and delivery at
the time and place specified in this Agreement is a further condition to the
obligations of the Initial Purchasers.

            (d) Delivery of Offering Memorandum to the Initial Purchasers. Not
later than 12:00 p.m., New York City time, on the second business day following
the date of this Agreement, the Company shall deliver or cause to be delivered
copies of the Offering Memorandum in such quantities and at such places as the
Initial Purchasers shall reasonably request.

            (e) Initial Purchasers as Qualified Institutional Buyers. Each
Initial Purchaser severally and not jointly represents and warrants to, and
agrees with, the Company that it is a "qualified institutional buyer" within the
meaning of Rule 144A (a "Qualified Institutional Buyer").

      SECTION 3. Additional Covenants. Each of the Company and the Guarantors
further covenants and agrees with each Initial Purchaser as follows:

            (a) Initial Purchasers' Review of Proposed Amendments and
Supplements. Prior to amending or supplementing the Offering Memorandum
(including any amendment or supplement through incorporation by reference of any
report filed under the Exchange Act), the Company shall furnish to the Initial
Purchasers for review a copy of each such proposed amendment or supplement, and
the Company shall not use any such proposed amendment or supplement to which the
Initial Purchasers reasonably object.

                                       17


            (b) Amendments and Supplements to the Offering Memorandum and Other
Securities Act Matters. If, prior to the completion of the placement of the
Notes by the Initial Purchasers with the Subsequent Purchasers, any event shall
occur or condition exist as a result of which, in the reasonable judgment of the
Company, it is necessary to amend or supplement the Offering Memorandum in order
to make the statements therein, in the light of the circumstances when the
Offering Memorandum is delivered to a Subsequent Purchaser, not misleading, or
if in the reasonable judgment of the Initial Purchasers or the Company, it is
otherwise necessary to amend or supplement the Offering Memorandum to comply
with law, the Company agrees to promptly prepare (subject to Section 3 hereof),
file with the Commission (with respect to Incorporated Documents) and furnish at
its own expense to the Initial Purchasers, amendments or supplements to the
Offering Memorandum so that the statements in the Offering Memorandum as so
amended or supplemented will not, in light of the circumstances when the
Offering Memorandum is delivered to a Subsequent Purchaser, be misleading or so
that the Offering Memorandum, as amended or supplemented, will comply with all
applicable law.

      Following the consummation of the Exchange Offer or the effectiveness of
an applicable shelf registration statement and for so long as the Notes are
outstanding if, in the reasonable judgment of the Initial Purchasers, the
Initial Purchasers or any of their Affiliates are required to deliver a
prospectus in connection with sales of, or market-making activities with respect
to, the Notes, to periodically amend the applicable registration statement so
that the information contained therein complies with the requirements of Section
10 of the Securities Act, to amend the applicable registration statement or
supplement the related prospectus or the documents incorporated therein when
necessary to reflect any material changes in the information provided therein so
that the registration statement and the prospectus will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances existing as
of the date the prospectus is so delivered, not misleading and to provide the
Initial Purchasers with copies of each amendment or supplement filed and such
other documents as the Initial Purchasers may reasonably request.

      The Company hereby expressly acknowledges that the indemnification and
contribution provisions of Sections 8 and 9 hereof are specifically applicable
and relate to each offering memorandum, registration statement, prospectus,
amendment or supplement referred to in this Section 3.

            (c) Copies of the Offering Memorandum. The Company agrees to furnish
the Initial Purchasers, without charge, as many copies of the Offering
Memorandum and any amendments and supplements thereto as they shall have
reasonably requested.

            (d) Blue Sky Compliance. Each of the Company and the Guarantors
shall cooperate with the Initial Purchasers and counsel for the Initial
Purchasers to qualify or register (or to obtain exemptions from qualifying or
registering) all or any part of the Notes for offer and sale under the
securities laws of the several states of the United States, the provinces of
Canada or any other jurisdictions designated by the Initial Purchasers, shall
comply with such laws and shall continue such qualifications, registrations and
exemptions in effect so long as required for the distribution of the Notes. None
of the Company or any of the Guarantors shall be required to qualify as a
foreign corporation or to take any action that would subject it to general
service of process in any such jurisdiction where it is not presently qualified
or where it would be subject to

                                       18


taxation as a foreign corporation. The Company will advise the Initial
Purchasers promptly upon receipt by the Company of any notice of the suspension
of the qualification or registration of (or any such exemption relating to) the
Notes for offering, sale or trading in any jurisdiction or any initiation or
threat of any proceeding for any such purpose, and in the event of the issuance
of any order suspending such qualification, registration or exemption, each of
the Company and the Guarantors shall use its best efforts to obtain the
withdrawal thereof at the earliest possible moment.

            (e) Use of Proceeds. The Company shall apply the net proceeds from
the sale of the Notes sold by it in the manner described under the caption "Use
of Proceeds" in the Offering Memorandum.

            (f) The Depositary. The Company will cooperate with the Initial
Purchasers and use its reasonable best efforts to permit the Notes to be
eligible for clearance and settlement through the facilities of the Depositary.

            (g) Additional Issuer Information. Prior to the completion of the
placement of the Notes by the Initial Purchasers with the Subsequent Purchasers,
the Company shall file, on a timely basis, with the Commission and the New York
Stock Exchange (the "NYSE") all reports and documents required to be filed under
Section 13 or 15 of the Exchange Act. Additionally, at any time when the Company
is not subject to Section 13 or 15 of the Exchange Act, for the benefit of
holders and beneficial owners from time to time of the Notes, the Company shall
furnish, at its expense, upon request, to holders and beneficial owners of Notes
and prospective purchasers of Notes information ("Additional Issuer
Information") satisfying the requirements of Rule 144A(d).

            (h) Future Reports to the Initial Purchasers. At any time when the
Company is not subject to Section 13 or 15 of the Exchange Act and any Notes or
Exchange Notes remain outstanding, the Company will furnish to the Initial
Purchasers: (i) as soon as practicable after the end of each fiscal year, copies
of the Annual Report of the Company containing the balance sheet of the Company
as of the close of such fiscal year and statements of income, stockholders'
equity and cash flows for the year then ended and the opinion thereon of the
Company's independent public or certified public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K
or other report filed by the Company with the Commission, the NASD, Inc.
("NASD") or any securities exchange; and (iii) as soon as available, copies of
any report or communication of the Company mailed generally to holders of its
capital stock or debt securities (including the holders of the Notes), if, in
each case, such documents are not filed with the Commission within the time
periods specified by the Commission's rules and regulations under Section 13 or
15 of the Exchange Act.

            (i) No Integration. The Company agrees that it will not and will
cause its Affiliates (other than estate of Alan James (the "Estate") or any
representatives or agents acting on behalf of the Estate) not to make any offer
or sale of securities of the Company of any class if, as a result of the
doctrine of "integration" referred to in Rule 502 under the Securities Act, such
offer or sale would render invalid (for the purpose of (i) the sale of the Notes
by the Company to the Initial Purchasers, (ii) the resale of the Notes by the
Initial Purchasers to Subsequent

                                       19


Purchasers or (iii) the resale of the Notes by such Subsequent Purchasers to
others) the exemption from the registration requirements of the Securities Act
provided by Section 4(2) thereof or by Rule 144A or by Regulation S thereunder
or otherwise.

            (j) Legended Notes. Each certificate for a Note will bear the legend
contained in "Notice to Investors" in the Offering Memorandum for the time
period and upon the other terms stated in the Offering Memorandum.

            (k) PORTAL. The Company will use its reasonable best efforts to
cause such Notes to be eligible for the PORTAL Market.

      The Initial Purchasers, may, in their sole discretion, waive in writing
the performance by the Company or any Guarantor of any one or more of the
foregoing covenants or extend the time for their performance.

      SECTION 4. Payment of Expenses. The Company and the Guarantors, jointly
and severally, agree to pay (or reimburse the Initial Purchasers for) all
expenses incurred in connection with the performance of their respective
obligations hereunder and the consummation of the transactions contemplated
hereby, including, without limitation, (i) all costs, fees and expenses incurred
in connection the issuance, sale and delivery of the Notes and the Exchange
Notes, (ii) all fees and expenses of the Company's and the Guarantors' counsel,
independent public or certified public accountants and other advisors, (iii) all
costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of each Preliminary Offering Memorandum and
the Offering Memorandum (including financial statements and exhibits), and all
amendments and supplements thereto, this Agreement, the Registration Rights
Agreement, the Indenture and the Notes, (iv) all filing fees, attorneys' fees
and expenses incurred by the Company in connection with qualifying or
registering (or obtaining exemptions from the qualification or registration of)
all or any part of the Notes for offer and sale under the securities laws of the
several states of the United States, the provinces of Canada or other
jurisdictions designated by the Initial Purchasers (including, without
limitation, the cost of preparing, printing and mailing preliminary and final
blue sky or legal investment memoranda and any related supplements to the
Preliminary Offering Memorandum or Offering Memorandum, (v) the fees and
expenses of the Trustee, including the fees and disbursements of counsel for the
Trustee in connection with the Indenture, the Notes and the Exchange Notes, (vi)
any fees payable in connection with the rating of the Notes or the Exchange
Notes with the ratings agencies and the listing of the Notes with the PORTAL
Market, (vii) all fees and expenses (including reasonable fees and expenses of
counsel) of the Company and the Guarantors in connection with approval of the
Notes by the Depositary for "book-entry" transfer, and the performance by the
Company and the Guarantors of their respective obligations under this Agreement,
and (viii) all expenses incident to the "road show" for the offering of the
Notes, including the cost of any chartered airplane or other transportation. It
is understood, however, that except as otherwise provided in this Agreement, the
Initial Purchasers will pay all of their own costs and expenses (including the
fees and disbursements of their counsel).

      SECTION 5. Conditions of the Obligations of the Initial Purchasers. The
obligations of the several Initial Purchasers to purchase and pay for the Notes
as provided herein on the Closing

                                       20


Date shall be subject to the accuracy of the representations and warranties on
the part of the Company and the Guarantors set forth in Section 1 hereof as of
the date hereof and as of the Closing Date as though then made and to the timely
performance by the Company of its covenants and other obligations hereunder, and
to each of the following additional conditions:

            (a) Accountants' Comfort Letter. On the date hereof, the Initial
Purchasers shall have received from Deloitte & Touche LLP, independent public or
certified public accountants for the Company, a letter dated the date hereof
addressed to the Initial Purchasers, in form and substance satisfactory to the
Initial Purchasers, containing statements and information of the type ordinarily
included in accountant's "comfort letters" to Initial Purchasers, delivered
according to Statement of Auditing Standards Nos. 72, 76 and 100 (or any
successor bulletins), with respect to the audited and unaudited financial
statements and certain financial information contained in or incorporated by
reference in the Offering Memorandum.

            (b) No Material Adverse Change or Ratings Agency Change. For the
period from and after the date of this Agreement and prior to the Closing Date:

                  (i) in the judgment of the Initial Purchasers there shall not
have occurred any Material Adverse Effect with respect to the business,
condition (financial or otherwise), results of operations, stockholders' equity,
properties or prospects of the Company and each Subsidiary of the Company listed
on Exhibit A hereto, taken as a whole; and

                  (ii) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any securities or indebtedness of the
Company or any of its subsidiaries by any "nationally recognized statistical
rating organization" as such term is defined for purposes of Rule 436 under the
Securities Act.

            (c) Opinion of Counsel for the Company. On the Closing Date, the
Initial Purchasers shall have received (i) the written opinion of Squire,
Sanders & Dempsey LLP, counsel for the Company, dated the Closing Date,
addressed to the Initial Purchasers to the effect set forth in Annex I and in
form and substance reasonably satisfactory to the Initial Purchasers, (ii) the
written opinion of Tonkon Torp LLP, counsel for the Company, dated the Closing
Date, addressed to the Initial Purchasers to the effect set forth in Annex II
and in form and substance reasonably satisfactory to the Initial Purchasers,
(iii) the written opinion of Norriss M. Webb, general counsel for the Company,
dated the Closing Date, addressed to the Initial Purchasers to the effect set
forth in Annex III and in form and substance reasonably satisfactory to the
Initial Purchasers and (iv) the written opinion of McCarthy Tetrault LLP,
Canadian regulatory counsel for the Company, dated the Closing Date, addressed
to the Initial Purchasers to the effect set forth in Annex III(A) and in form
and substance reasonably satisfactory to the Initial Purchasers

            (d) Opinion of Counsel for the Initial Purchasers. On the Closing
Date the Initial Purchasers shall have received the favorable opinion of Gibson,
Dunn & Crutcher LLP, counsel for the Initial Purchasers, dated as of such
Closing Date, with respect to such matters as may be reasonably requested by the
Initial Purchasers.

                                       21


            (e) Officers' Certificate. On the Closing Date the Initial
Purchasers shall have received a written certificate executed by the Chief
Executive Officer of the Company and each Guarantor and the Chief Financial
Officer or Officer of the Company and each Guarantor, dated as of the Closing
Date, to the effect set forth in Section 5(b)(ii) hereof, and further to the
effect that:

                  (i) for the period from and after the date of this Agreement
and prior to the Closing Date there has not occurred any Material Adverse Effect
with respect to the business, condition (financial or otherwise), results of
operations, stockholders' equity, properties or prospects of the Company and its
Subsidiaries, taken as a whole;

                  (ii) the representations, warranties and covenants of the
Company set forth in Section 1 hereof are true and correct with the same force
and effect as though expressly made on and as of the Closing Date; and

                  (iii) the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date.

            (f) Bring-down Comfort Letter. On the Closing Date the Initial
Purchasers shall have received from Deloitte & Touche LLP, independent public or
certified public accountants for the Company, a letter dated such date, in form
and substance satisfactory to the Initial Purchasers, to the effect that they
reaffirm the statements made in the letter furnished by them pursuant to Section
5(a) hereof, except that the specified date referred to therein for the carrying
out of procedures shall be no more than three business days prior to the Closing
Date.

            (g) PORTAL Listing. At the Closing Date the Notes shall have been
designated for trading on the PORTAL Market.

            (h) The Depositary. At the Closing Date the Notes shall be eligible
for clearance and settlement through the facilities of the Depositary.

            (i) Registration Rights Agreement. The Company shall have entered
into the Registration Rights Agreement and the Initial Purchasers shall have
received executed counterparts thereof.

            (j) Additional Documents. On or before the Closing Date, the Initial
Purchasers and counsel for the Initial Purchasers shall have received such
information, documents and opinions as they may reasonably require for the
purposes of enabling them to pass upon the issuance and sale of the Notes as
contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions or
agreements, herein contained.

            (k) Equity Offering. On or before the Closing Date, the Company
shall have consummated the sale of no less than 4,500,000 shares of its common
stock in a registered public offering pursuant to its registration statement on
Form S-3 (No. 333-121181).

      If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Initial
Purchasers by notice to the Company

                                       22


at any time on or prior to the Closing Date, which termination shall be without
liability on the part of any party to any other party, except that Sections 4,
6, 8 and 9 hereof shall at all times be effective and shall survive such
termination.

      SECTION 6. Reimbursement of Initial Purchasers' Expenses. If this
Agreement is terminated by the Initial Purchasers pursuant to Section 5 or 10
hereof, including if the sale to the Initial Purchasers of the Notes on the
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof, the Company agrees to reimburse the Initial Purchasers (or
such Initial Purchasers as have terminated this Agreement with respect to
themselves), severally, upon demand for all out-of-pocket expenses that shall
have been reasonably incurred by the Initial Purchasers in connection with the
proposed purchase and the offering and sale of the Notes, including, without
limitation, roadshow expenses, printing expenses, reasonable fees and
disbursements of legal counsel, travel expenses, postage, facsimile and
telephone charges.

      SECTION 7. Offer, Sale and Resale.

            (a) Each of the Initial Purchasers, on the one hand, and the Company
and each of the Guarantors, on the other hand, hereby agree to observe the
following procedures in connection with the offer and sale of the Notes:

                  (i) Offers and sales of the Notes will be made only by the
Initial Purchasers or Affiliates thereof qualified to do so in the jurisdictions
in which such offers or sales are made.

                  (ii) Upon original issuance by the Company, and until such
time as the same is no longer required under the applicable requirements of the
Securities Act, the Notes (and all securities issued in exchange therefor or in
substitution thereof, other than the Exchange Notes) shall bear the following
legend:

      "THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
      STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY
      NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A
      PERSON WHOM THE SELLER `REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
      BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING
      FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
      IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
      TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
      SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
      SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) IN
      ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
      THE SECURITIES ACT (BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
      REQUESTS) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION

                                       23


      STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL
      APPLICABLE BLUE SKY LAWS OF THE STATES OF THE UNITED STATES."

      Following the sale of the Notes by the Initial Purchasers to Subsequent
Purchasers pursuant to the terms hereof, the Initial Purchasers shall not be
liable or responsible to the Company for any losses, damages or liabilities
suffered or incurred by the Company, including any losses, damages or
liabilities under the Securities Act, arising from or relating to any resale or
transfer of any Note.

            (b) Each of the Initial Purchasers, severally and not jointly,
represents, warrants and covenants to the Company and the Guarantors that:

                  (i) Such Initial Purchaser (A) is not acquiring the Notes with
a view to any distribution thereof that would violate the Securities Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (B) each offer or sale of the Notes has been and will be made
to persons whom the offeror or seller reasonably believes to be Qualified
Institutional Buyers or non-U.S. persons outside the United States to whom the
offeror or seller reasonably believes offers and sales of the Notes may be made
in reliance upon Regulation S upon the terms and conditions set forth in Annex
IV hereto, which Annex IV is hereby expressly made a part hereof.

                  (ii) The Notes have been and will be offered only by
approaching prospective Subsequent Purchasers on an individual basis. No general
solicitation or general advertising (within the meaning of Rule 502 under the
Securities Act) has or will be used in the United States in connection with the
offering of the Notes.

                  (iii) Such Initial Purchaser and its affiliates or any person
acting on its or their behalf have not engaged and will not engage in any
directed selling efforts within the meaning of Regulation S with respect to the
Notes.

                  (iv) The Notes offered and sold by the Initial Purchasers in
reliance upon Regulation S have been and will be offered and sold only in
offshore transactions.

                  (v) Such Initial Purchaser will use its reasonable best
efforts to deliver a copy of the Offering Memorandum to Subsequent Purchasers
purchasing the Notes from the Initial Purchasers on or before the Closing Date.

      SECTION 8. Indemnification.

            (a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to reasonable attorneys' fees and any and all expenses whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which they or
any of them may become subject under the

                                       24


Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement of
a material fact contained in (A) the Preliminary Offering Memorandum or the
Offering Memorandum (or any amendment or supplement thereto) or (B) in any
materials or information provided to investors by, or with the approval of, the
Company in connection with the marketing of the offering of the Notes, including
any road show or investor presentations made to investors by the Company
(whether in person or electronically) ("Marketing Materials") but only if such
Marketing Materials are provided to investors together with the Preliminary
Offering Memorandum or the Offering Memorandum or (ii) the omission or alleged
omission to state in the Offering Memorandum, or in any supplement thereto or
amendment thereof, or in any Marketing Materials, a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that neither the Company nor any Guarantor will be liable in any such case to
the extent but only to the extent that any such loss, liability, claim, damage
or expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information relating to any Initial Purchaser
furnished to the Company and the Guarantors by or on behalf of such Initial
Purchaser expressly for use therein. This indemnity agreement will be in
addition to any liability which the Company and the Guarantors may otherwise
have, including but not limited to other liability under this Agreement.

            (b) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the Company
and the Guarantors and each other person, if any, who controls the Company or
any of the Guarantors within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against any losses, liabilities, claims, damages
and expenses whatsoever as incurred (including but not limited to reasonable
attorneys' fees and any and all expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum (or any amendment or supplement thereto), or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with information
relating to any Initial Purchaser furnished to the Company and the Guarantors in
by or on behalf of such Initial Purchaser specifically for use therein, which
are the (i) first sentence of the third paragraph, (ii) second sentence of the
fourth paragraph, (iii) third and fourth sentences of the sixth paragraph and
(iv) eighth and ninth paragraphs of the section entitled "Plan of Distribution"
in the Offering Memorandum; provided, however, that in no case shall any Initial
Purchaser be liable or responsible for any amount in excess of the underwriting
discount applicable to the Notes to be purchased by such Initial Purchaser
hereunder.

                                       25


            (c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of any claims or the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the claim or the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve
the indemnifying party from any liability which it may have under this Section 8
to the extent that it is not materially prejudiced as a result thereof and in
any event shall not relieve it from any liability that such indemnifying party
may have otherwise than on account of the indemnity agreement hereunder). In
case any such claim or action is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate, at its own expense in the defense of such
action, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided however, that counsel to the
indemnifying party shall not (except with the written consent of the indemnified
party) also be counsel to the indemnified party. The foregoing notwithstanding,
the indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by one of the indemnifying
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to have charge of the defense of such
action within a reasonable time after notice of commencement of the action,
(iii) the indemnifying party does not diligently defend the action after
assumption of the defense or (iv) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
indemnifying parties. No indemnifying party shall, without the prior written
consent of the indemnified parties, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
claim, investigation, action or proceeding in respect of which indemnity or
contribution may be or could have been sought by an indemnified party under this
Section 8 or Section 9 hereof (whether or not the indemnified party is an actual
or potential party thereto), unless (A) such settlement, compromise or judgment
(x) includes an unconditional release of the indemnified party from all
liability arising out of such claim, investigation, action or proceeding and (y)
does not include a statement as to or an admission of fault, culpability or any
failure to act, by or on behalf of the indemnified party and (B) the
indemnifying party confirms in writing its indemnification obligations hereunder
with respect to such settlement, compromise or judgment.

      SECTION 9. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 8 is for any
reason held to be unavailable from any indemnifying party or is insufficient to
hold harmless a party indemnified thereunder, the Company and the Guarantors, on
the one hand, and the Initial Purchasers, on the other hand, shall contribute to
the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages,

                                       26


liabilities and expenses suffered by the Company or any Guarantor, any
contribution received by the Company and the Guarantors from persons, other than
the Initial Purchasers, who may also be liable for contribution, including
persons who control the Company or any of the Guarantors within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act as incurred) to which
the Company, the Guarantors and the Initial Purchasers may be subject, in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial Purchasers, on the
other hand, from the offering of the Notes or, if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to above but also the relative fault of the
Company and the Guarantors, on the one hand, and the Initial Purchasers, on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Guarantors, on the one hand, and the Initial Purchasers, on the other
hand, shall be deemed to be in the same proportion as (i) the total proceeds
from the offering of the Notes (net of discounts and commissions but before
deducting expenses) received by the Company and the Guarantors and (ii) the
discounts and commissions received by the Initial Purchasers, respectively, in
each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault of the Company and the Guarantors, on the one
hand, and of each of the Initial Purchasers, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or any Guarantor
or the Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Guarantors and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 9 were determined
by pro rata allocation (even if the Initial Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
9. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 9 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any judicial, regulatory or
other legal or governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission. Notwithstanding the provisions of this Section 9,
(i) in no case shall any Initial Purchaser be required to contribute any amount
in excess of the amount by which the discounts and commissions applicable to the
Notes purchased by such Initial Purchaser pursuant to this Agreement exceeds the
amount of any damages which such Initial Purchaser has otherwise been required
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and each person, if any, who controls the Company
or any Guarantor within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act shall have the same rights to contribution as the Company and
the Guarantors, as applicable, subject in each case to clauses (i) and (ii) of
the immediately preceding sentence. Any party entitled to contribution will,
promptly after receipt of notice of

                                       27


commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 9, notify each party or parties from whom contribution may be
sought, but the failure to so notify such party or parties shall not relieve the
party or parties from whom contribution may be sought from any obligation it or
they may have under this Section 9 or otherwise. The obligations of the Initial
Purchasers to contribute pursuant to this Section 9 are several in proportion to
the respective principal amount of Notes purchased by each of the Initial
Purchasers hereunder and not joint.

      SECTION 10. Termination of this Agreement. Prior to the Closing Date, this
Agreement may be terminated by the Initial Purchasers by notice given to the
Company if at any time: (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
NYSE, or trading in securities generally on the NYSE shall have been suspended
or limited, or minimum or maximum prices shall have been generally established
on the stock exchange by the Commission or the NASD; (ii) a general banking
moratorium shall have been declared by any of federal, New York or Delaware
authorities; (iii) there shall have occurred any outbreak or escalation of
national or international hostilities or any crisis or calamity, or any change
in the United States or international financial markets, or any substantial
change or development involving a prospective substantial change in United
States' or international political, financial or economic conditions, as in the
judgment of the Initial Purchasers is material and adverse and makes it
impracticable or inadvisable to market the Notes in the manner and on the terms
described in the Offering Memorandum or to enforce contracts for the sale of
securities; (iv) in the judgment of the Initial Purchasers there shall have
occurred any Material Adverse Effect with respect to the business, condition
(financial or otherwise), results of operations, stockholders' equity,
properties or prospects of the Company and its Subsidiaries, taken as a whole;
or (v) the Company shall have sustained a loss by strike, fire, flood,
earthquake, accident or other calamity of such character as in the judgment of
the Initial Purchasers may interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured. Any termination pursuant to this Section 10 shall be without
liability on the part of (i) the Company or any Guarantor to any Initial
Purchaser, except that the Company and the Guarantors shall be obligated to
reimburse the expenses of the Initial Purchasers pursuant to Sections 4 and 6
hereof, (ii) any Initial Purchaser to the Company, or (iii) any party hereto to
any other party except that the provisions of Sections 8 and 9 hereof shall at
all times be effective and shall survive such termination.

      SECTION 11. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, the Guarantors, their respective officers and the
several Initial Purchasers set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Initial Purchaser, the Company, any Guarantor or any of their
partners, officers or directors or any controlling person, as the case may be,
and will survive delivery of and payment for the Notes sold hereunder and any
termination of this Agreement.

      SECTION 12. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered, couriered or facsimiled and confirmed to the
parties hereto as follows:

      If to the Initial Purchasers:

                                       28


         Banc of America Securities LLC
         9 West 57th Street
         New York, New York 10019
         Attention: Michael Browne

         with a copy to:

         Gibson, Dunn & Crutcher LLP,
         333 South Grand Avenue,
         Los Angeles, California, 90071,
         Attention: Karen Bertero

         If to the Company or the Guarantors:

         to the Company at its address set forth in the Offering Memorandum,
         Attention: Larry Brady.

         with a copy to:

         Squire, Sanders & Dempsey LLP,
         1300 Huntington Center,
         41 South High Street,
         Columbus Ohio 43215-6197
         Attention: Steve Mount

      Any party hereto may change the address or facsimile number for receipt of
communications by giving written notice to the others.

      SECTION 13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Initial Purchasers
pursuant to Section 16 hereof, and to the benefit of the indemnified parties
referred to in Sections 8 and 9 hereof, and in each case their respective
successors, and no other person will have any right or obligation hereunder. The
term "successors" shall not include any Subsequent Purchaser of other purchaser
of the Notes as such from any of the Initial Purchasers merely by reason of such
purchase.

      SECTION 14. Partial Unenforceability. The invalidity or unenforceability
of any section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other section, paragraph or provision hereof.
If any section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.

      SECTION 15. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The Company
and the Initial Purchasers irrevocably (a) submit to the jurisdiction of any
court of the State of New York or the United State District Court for the
Southern District of the State of New York for the

                                       29


purpose of any suit, action, or other proceeding arising out of this Agreement,
or any of the agreements or transactions contemplated by this Agreement, the
Registration Rights Agreement, the Indenture and the Offering Memorandum (each,
a "Proceeding"), (b) agree that all claims in respect of any Proceeding may be
heard and determined in any such court, (c) waive, to the fullest extent
permitted by law, any immunity from jurisdiction of any such court or from any
legal process therein, (d) agree not to commence any Proceeding other than in
such courts and (e) waive, to the fullest extent permitted by law, any claim
that such Proceeding is brought in an inconvenient forum. THE COMPANY (ON BEHALF
OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY LAW, ON BEHALF OF ITS
RESPECTIVE EQUITY HOLDERS AND CREDITORS) HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE INDENTURE AND THE OFFERING
MEMORANDUM.

      SECTION 16. Default of One or More of the Several Initial Purchasers. If
any one or more of the several Initial Purchasers shall fail or refuse to
purchase Notes that it or they have agreed to purchase hereunder on the Closing
Date, and the aggregate number of Notes which such defaulting Initial Purchaser
or Initial Purchasers agreed but failed or refused to purchase does not exceed
10% of the aggregate number of the Notes to be purchased on such date, the other
Initial Purchasers shall be obligated, severally, in the proportions that the
number of Notes set forth opposite their respective names on Schedule A bears to
the aggregate number of Notes set forth opposite the names of all such
non-defaulting Initial Purchasers, or in such other proportions as may be
specified by the Initial Purchasers with the consent of the non-defaulting
Initial Purchasers, to purchase the Notes which such defaulting Initial
Purchaser or Initial Purchasers agreed but failed or refused to purchase on the
Closing Date. If any one or more of the Initial Purchasers shall fail or refuse
to purchase Notes and the aggregate number of Notes with respect to which such
default occurs exceeds 10% of the aggregate number of Notes to be purchased on
the Closing Date, and arrangements satisfactory to the Initial Purchasers and
the Company for the purchase of such Notes are not made within 48 hours after
such default, this Agreement shall terminate without liability of any party to
any other party except that the provisions of Sections 4, 6, 8 and 9 hereof
shall at all times be effective and shall survive such termination. In any such
case either the Initial Purchasers or the Company shall have the right to
postpone the Closing Date, as the case may be, but in no event for longer than
seven days in order that the required changes, if any, to the Offering
Memorandum or any other documents or arrangements may be effected.

      As used in this Agreement, the term "Initial Purchaser" shall be deemed to
include any person substituted for a defaulting Initial Purchaser under this
Section 16. Any action taken under this Section 16 shall not relieve any
defaulting Initial Purchaser from liability in respect of any default of such
Initial Purchaser under this Agreement.

      SECTION 17. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This

                                       30


Agreement may not be amended or modified unless in writing by all of the parties
hereto, and no condition herein (express or implied) may be waived unless waived
in writing by each party whom the condition is meant to benefit. The section
headings herein are for the convenience of the parties only and shall not affect
the construction or interpretation of this Agreement.

                                       31


      If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.

                                 Very truly yours,

                                 THE GREENBRIER COMPANIES, INC.

                                 By: /s/ Larry G. Brady
                                     -------------------------------------------
                                     Name:  Larry G. Brady
                                     Title: Senior Vice President and CFO

                                 GREENBRIER-CONCARRIL, LLC

                                 By: /s/ Larry G. Brady
                                     -------------------------------------------
                                     Name:  Larry G. Brady
                                     Title: Vice President

                                 GREENBRIER LEASING CORPORATION

                                 By: /s/ Larry G. Brady
                                     -------------------------------------------
                                     Name:  Larry G. Brady
                                     Title: Vice President

                                 GREENBRIER LEASING LIMITED PARTNER, LLC

                                 By: Greenbrier Leasing Corporation, sole
                                 member and manager

                                 By: /s/ Larry G. Brady
                                     ---------------------------
                                 Name:  Larry G. Brady
                                 Title: Vice President

                                       32


                                 GREENBRIER MANAGEMENT SERVICES, LLC
                                  by: Greenbrier Leasing Corporation, sole
                                  member and manager

                                 By: /s/ Larry G. Brady
                                     -------------------------------------------
                                     Name   Larry G. Brady
                                     Title: Vice President

                                 GREENBRIER LEASING, L.P.

                                 By Greenbrier Management Services, LLC,
                                 General Partner

                                 By: Greenbrier Leasing Corporation, sole
                                 member

                                 By: /s/ Larry G. Brady
                                     -------------------------------------------
                                     Name:  Larry G. Brady
                                     Title: Vice President

                                 GUNDERSON, INC.

                                 By: /s/ L. Clark Wood
                                     -------------------------------------------
                                     Name:  L. Clark Wood
                                     Title: CEO

                                 GUNDERSON MARINE, INC.

                                 By: /s/ L. Clark Wood
                                     -------------------------------------------
                                     Name:  L. Clark Wood
                                     Title: President

                                     GUNDERSON RAIL SERVICES, INC.

                                 By: /s/ Larry G. Brady
                                     -------------------------------------------
                                     Name:  Larry G. Brady
                                     Title: Vice President

                                       33


                                     GUNDERSON SPECIALTY PRODUCTS, LLC

                                 By: /s/ L. Clark Wood
                                     -------------------------------------------
                                     Name:  L. Clark Wood
                                     Title: CEO

                                     AUTOSTACK CORPORATION

                                 By: /s/ Larry G. Brady
                                     -------------------------------------------
                                     Name:  Larry G. Brady
                                     Title: Vice President

                                     GREENBRIER RAILCAR, INC.

                                 By: /s/ Larry G. Brady
                                     -------------------------------------------
                                     Name:  Larry G. Brady
                                     Title: Vice President

                                       34


      The foregoing Purchase Agreement is hereby confirmed and accepted by the
Initial Purchasers as of the date first above written.

BANC OF AMERICA SECURITIES LLC

By: /s/ Michael Brown
    -----------------------------
    Managing Director

BEAR, STEARNS & CO. INC.

By: /s/ Cary H. Thompson
    -----------------------------
    Managing Director

                                       35


                                                                      SCHEDULE A



                                         AGGREGATE
                                     PRINCIPAL AMOUNT
                                      OF NOTES TO BE
         INITIAL PURCHASERS             PURCHASED
- ----------------------------------   ----------------
                                  
Banc of America Securities LLC ...   $     87,500,000
Bear, Stearns & Co. Inc...........         87,500,000
                                     ----------------
         Total....................   $    175,000,000
                                     ----------------


                                  Schedule A-1


                                                                       EXHIBIT A

                                  SUBSIDIARIES

3048389 Nova Scotia Limited
Alliance Castings Company, LLC
Autostack Corporation
Chicago Castings Company, LLC
Greenbrier-Concarril, LLC
Greenbrier Europe B.V.
Greenbrier Germany GmbH
Greenbrier Leasing Corporation
Greenbrier Leasing, L.P.
Greenbrier Leasing Limited
Greenbrier Leasing Limited Partner, LLC
Greenbrier Management Services, LLC
Greenbrier Railcar, Inc.
Greenbrier U.K. Limited
Gunderson, Inc.
Gunderson-Concarril, S.A. de C.V.
Gunderson Marine, Inc.
Gunderson Rail Services, Inc.
Gunderson Specialty Products, LLC
Ohio Castings Company, LLC
TrentonWorks Limited
WagonySwidnica S.A.

                                    Exhibit A


                                                                       EXHIBIT B

                               COMPANY STATEMENTS

1.    "Although no formal statistics are available for the European market, we
      believe we are the second largest new freight car manufacturer with an
      estimated 20% market share."

2.    "...we believe we also hold a leading market position in the manufacturing
      of railcars in Europe."

3.    "...we believe that approximately 2,000 railcars are refurbished each
      year..."

                                    Exhibit B



                                                                       EXHIBIT C

3048389 Nova Scotia Limited      The Greenbrier Companies, Inc. owns 100% of the
                                 common stock. Preferred investors also have an
                                 interest in this entity.

Ohio Castings Company, LLC       Gunderson Specialty Products, LLC owns 33 1/3%
                                 of the entity.

Alliance Castings Company, LLC   Ohio Castings Company, LLC owns 100% of this
                                 entity.

Chicago Castings Company, LLC    Ohio Castings Company, LLC owns 100% of this
                                 entity.

WagonySwidnica S.A.              Greenbrier Europe B.V. owns 97% of this entity.

                                    Exhibit C



                                                                         ANNEX I

                       FORM OF OPINION OF COMPANY COUNSEL

      (a) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware, with the corporate power and authority
to own its properties and conduct its business as described in the Offering
Memorandum.

      (b) Each of the Company and the Guarantors has all requisite corporate or
company power and authority to execute, deliver and perform its obligations
under this Agreement and each of the other Operative Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby,
including, without limitation, the corporate or company power and authority to
issue, sell and deliver the Notes and to issue and deliver the Guarantees as
provided herein.

      (c) The Purchase Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors.

      (d) The Registration Rights Agreement has been duly authorized, executed
and delivered by the Company and each of the Guarantors, and is the legal, valid
and binding agreement of the Company and each of the Guarantors, enforceable
against each of them in accordance with its terms.

      (e) The Indenture has been duly authorized, executed and delivered by the
Company and each of the Guarantors and is the legal, valid and binding agreement
of the Company and each of the Guarantors, enforceable against each of them in
accordance with its terms.

      (f) The Notes have been duly authorized and executed by the Company for
issuance and sale to the Initial Purchasers pursuant to the Purchase Agreement,
and, when authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms thereof, the
Notes will be the legal, valid and binding obligations of the Company,
enforceable against it in accordance with their terms and entitled to the
benefits of the Indenture.

      (g) The Guarantees of the Notes have been duly authorized and executed by
each of the Guarantors and, when delivered in accordance with the terms of the
Indenture and when the Notes have been issued and authenticated in accordance
with the terms of the Indenture and delivered against payment therefor in
accordance with the terms thereof, such Guarantees will be the legal, valid and
binding obligations of each of the Guarantors, enforceable against each of them
in accordance with their terms and entitled to the benefits of the Indenture.

      (h) The Exchange Notes have been duly authorized for issuance by the
Company, and, when issued, executed and authenticated in accordance with the
terms of the Exchange Offer and the Indenture, the Exchange Notes will be the
legal, valid and binding obligations of

                                   Annex II-1



the Company, enforceable against it in accordance with their terms and entitled
to the benefits of the Indenture.

      (i) The Guarantees of the Exchange Notes have been duly authorized by each
of the Guarantors and, when executed and delivered in accordance with the terms
of the Indenture and when the Exchange Notes have been executed, issued and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, such Guarantees will be the legal, valid and binding obligations of
each of the Guarantors, enforceable against each of them in accordance with
their terms and entitled to the benefits of the Indenture.

      (j) The execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Indenture and consummation of the
transactions contemplated by this Agreement, the Registration Rights Agreement,
the Indenture and the Offering Memorandum do not and will not result in a
violation of any law, rule or regulation of the United States of America or the
State of New York applicable to the Company and its Subsidiaries.

      (k) No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any judicial,
regulatory or other legal or governmental agency or body is required for the
execution, delivery and performance this Agreement, the Registration Rights
Agreement and the Indenture or consummation of the transactions contemplated by
this Agreement, the Registration Rights Agreement, the Indenture and the
Offering Memorandum except for (i) such as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Notes and the Guarantees of the Notes by the Initial Purchasers or regarding
the Exchange Notes and the Guarantees of the Exchange Notes (as to which such
counsel need express no opinion) and (ii) such as may be required under the Act
as regards the Exchange Notes and the Guarantees of the Exchange Notes.

      (l) The Company is not and, after giving effect to the offering and sale
of the Notes and the application of the proceeds thereof as described in the
Offering Memorandum, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.

      (m) The statements under the captions "Description of Notes" and "United
States Federal Income Tax Considerations" in the Offering Memorandum, insofar as
such statements constitute a summary of the legal matters or documents referred
to therein, present fairly in all material respects such legal matters or
documents in the context in which presented in the Offering Memorandum. The
Company has an authorized capitalization as set forth in Offering Memorandum.

      (n) Assuming the accuracy of the representations, warranties and covenants
of the Company and the Initial Purchasers contained herein, no registration of
the Notes or the Guarantees of the Notes under the Securities Act, and no
qualification of an indenture under the Trust Indenture Act with respect
thereto, is required in connection with the purchase of the Notes by the Initial
Purchasers or the initial resale of the Notes by the Initial Purchasers to
Qualified Institutional Buyers in the manner contemplated by this Agreement and
the Offering

                                   Annex II-1



Memorandum. Such counsel need express no opinion, however, as to when or under
what circumstances Notes initially sold by the Initial Purchasers may be
reoffered or resold.

      (o) The Notes are eligible for resale pursuant to Rule 144A and will not
be, at the Closing Date, of the same class as securities listed on a national
securities exchange registered under Section 6 of the Exchange Act or quoted in
a U.S. automated interdealer quotation system.

      (p) The Offering Memorandum contains the disclosure required by Rule 902
of the Securities Act. The Company is a "reporting issuer" as defined in Rule
902 under the Securities Act.

      (q) The Indenture complies as to form in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of the
Commission applicable to an indenture that is qualified thereunder.

      (r) The Incorporated Documents (other than the financial statements and
schedules and other financial data included or incorporated by reference
therein, as to which no opinion need be rendered) at the time such documents
were filed with the Commission, complied as to form in all material respects
with the Act or the Exchange Act, as applicable, and the Rules and Regulations.

      Our opinions in paragraphs (d), (e), (f), (g), (h) and (i) above also are
subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general principles of equity (whether considered in a
proceeding at law or in equity), and our opinion in paragraph (d) above is
additionally subject to limitations upon the rights of indemnification and
contribution that may be imposed by federal or state securities laws or
principles of public policy.

      In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of the Company and the
Guarantors, representatives of the independent auditors of the Company and the
Guarantors and the Initial Purchasers and their representatives at which the
contents of the Offering Memorandum and related matters were discussed and,
although it is not passing upon, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in the Offering
Memorandum and has not made any independent check or verification thereof,
during the course of such participation, no facts have come to its attention
that led it to believe that the Offering Memorandum, as of its date or the
Closing Date, contained or contains an untrue statement of a material fact or
omitted or omits to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except as to financial statements and other financial data included
or incorporated by reference therein or omitted therefrom, as to which no
opinion need be rendered).

                                   Annex II-1


                                                                        ANNEX II

                                  May __, 2005

BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
     As Initial Purchasers
c/o Banc of America Securities LLC
9 West 57th Street
New York, New York 10019

                         The Greenbrier Companies, Inc.

      We are counsel to The Greenbrier Companies, Inc. (the "Company"). We have
been asked to render this opinion with respect to certain matters specifically
set forth herein pertaining to the Settlement Agreement, dated as of April 20,
2005 (the "Settlement Agreement") and the Stock Purchase Agreement, dated as of
April 20, 2005 (the "Stock Purchase Agreement"), each of such agreements being
by and among (a) George L. Chelius and Eric Epperson, as Executors of the Will
and Estate of Alan James and as Trustees (for convenience, the "Executors"), (b)
the Company and (c) William A. Furman. This opinion is delivered to you in
connection with the Closing of transactions contemplated by that certain
Purchase Agreement, dated as of May ___, 2005 (the "Purchase Agreement") between
and among the Company and Banc of America Securities LLC and Bear, Stearns & Co.
Inc. as Initial Purchasers.

      We have not acted as primary counsel to the Company in connection with the
Purchase Agreement or the transactions contemplated by the Purchase Agreement
and we express no opinion with respect to the Purchase Agreement or the offer or
sale of Shares of the Company's Common Stock under or pursuant to the Purchase
Agreement. This opinion is subject to the assumptions, qualifications,
limitations and exceptions set forth in Exhibit A to this letter. Initially
capitalized terms used in this opinion but not otherwise defined herein have the
meanings set forth in the Purchase Agreement.

      We have examined and relied upon the originals, or copies certified or
otherwise identified to our satisfaction, of (a) the Purchase Agreement, (b) the
Settlement Agreement, (c) the Stock Purchase Agreement, (d) the letter agreement
dated as of April 20, 2005 ("Letter Agreement") among the Company, Bear, Stearns
& Co., Inc., William A. Furman and the Executors and (e) such corporate records,
documents, certificates and other agreements and instruments (including, without
limitation, both official and unofficial databases and records available and
maintained by public officials) as we have deemed necessary or appropriate to
enable us to render the opinions hereinafter expressed. References in this
opinion to the Settlement Agreement or the Stock Purchase Agreement shall be
deemed to refer to the Settlement Agreement or the Stock Purchase Agreement as
the same are modified or supplemented by the Letter Agreement.

                                   Annex II-1



      Based upon and subject to the foregoing, and the qualifications and
exclusions set forth herein, we are of the opinion that:

      (1) The Settlement Agreement has been validly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

      (2) The Stock Purchase Agreement has been validly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

      (3) The execution, delivery, and performance by the Company of the
Settlement Agreement and the Stock Purchase Agreement and consummation by the
Company of the transactions contemplated by the Settlement Agreement and the
Stock Purchase Agreement do not: (A) result in a breach of any of the terms and
provisions of, or constitute a default (or an event which with notice or lapse
of time, or both, would constitute a default) under, or result in the creation
or imposition of any Lien upon any property or assets of the Company or any of
its Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan
agreement or any other agreement, instrument, franchise, license or permit known
to us to which the Company or any of its Subsidiaries is a party or by which any
of the Company or any of its Subsidiaries or their respective properties or
assets may be bound; (B) violate or conflict with any provision of the
certificate of incorporation, by-laws or other organizational documents of the
Company or any of its Subsidiaries; or (C) to the best of our knowledge, any
judgment, decree, order, statute, rule or regulation of any court or any
judicial, regulatory or other legal or governmental agency or body that is
applicable to the Company, except, in the case of clauses (A) and (C), for
breaches or violations that, singly or in the aggregate, would not have a
Material Adverse Effect.

      (4) No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any judicial,
regulatory or other legal or governmental agency or body is required for the
execution, delivery and performance by the Company of the Settlement Agreement
and the Stock Purchase Agreement or consummation by the Company of the
transactions contemplated by the Settlement Agreement and the Stock Purchase
Agreement, except for such as may be required under state securities or Blue Sky
laws, in connection with the offer and sale of the Notes by the Initial
Purchasers, as to which matters we express no opinion.

      (5) The statements under the caption "Recent Developments - Settlement
with the Estate of Alan James" in the Offering Memorandum, insofar as such
statements constitute a summary of the legal matters or documents referred to
therein, are an accurate and fair

                                   Annex II-1



presentation with respect to such legal matters and documents in the context in
which made the Offering Memorandum.

      Our opinions are limited to the matters stated in this letter. No
additional opinion is implied or may be inferred beyond the matters expressly
stated in this letter. The opinions expressed herein are limited to the federal
law of the United States, the Applicable Law of the State of Oregon and the
General Corporation Law of the State of Delaware. "Applicable Law" means the
published judicial and administrative decisions and the published rules and
regulations of governmental agencies, of the State of Oregon, in each case which
are generally available (i.e., in terms of access and distribution following
publication or other release) in a format that makes legal research reasonably
feasible, but does not include the statutes, ordinances, administrative
decisions, rules or regulations of counties, towns, municipalities or political
subdivisions. Notwithstanding the terms of the Settlement Agreement, the Stock
Purchase Agreement and the related documents to the effect that any such
agreement or instrument reflects the entire understanding of the parties with
respect to the subject matters therein, courts may consider or entertain parol
evidence.

      Whenever our opinion is based on circumstances "to our knowledge" or by
any other similar phrase, or where it is noted that nothing has been brought to
our attention, it means that the opinion stated is based solely on the conscious
awareness of facts or other information by Kenneth D. Stephens or Sherrill A.
Corbett or on certificates of officers (after discussion of the contents thereof
with such officers) of the Company or certificates of others as to the existence
or non-existence of the factual matters upon which such opinion is predicated.
We have not undertaken any investigation to determine the accuracy of the
matters covered by any such statement and any limited inquiry undertaken by us
during the preparation of this opinion letter should not be regarded as such an
investigation. No inference as to our knowledge of any matters bearing on the
accuracy of the facts underlying any such statement should be drawn from the
fact of our representation of the Company or any Subsidiary.

            This letter sets forth our opinion as of the date it bears. We do
not assume any obligation to provide you with any subsequent opinion or advice
by reason of any fact of which we did not have actual knowledge at that time, by
reason of any change subsequent to that time in any law covered by any of our
opinions, or for any other reason, even though the changes may affect a legal
analysis or conclusion or an information confirmation in this opinion letter.

      This opinion is rendered for your benefit, and may be relied upon only by
you, and only in connection with the transactions contemplated by the Purchase
Agreement. Accordingly, neither this letter nor the opinions expressed in it are
to be relied upon by any other person or entity, or for any other purpose, or
used, circulated, quoted in whole or in part or otherwise referred to in any
document or (except as required by judicial or administrative process or by
other requirements of law) filed with any governmental or other administrative
agency or other person or by any other person or entity or for any other purpose
without in each instance our express, prior written consent.

                                   Annex II-1



                                 TONKON TORP LLP

                                   Annex II-1



                                    EXHIBIT A

A.    ASSUMPTIONS

      We have relied, without investigation, upon the following assumptions:

                1.       Each individual, other than the Company, signing the
                         Settlement Agreement, the Stock Purchase Agreement and
                         the related documents has sufficient legal capacity to
                         enter into and perform the transactions contemplated by
                         those agreements (the "Transactions") and to carry out
                         his or her role under those documents.

                2.       Each document submitted to us for review is accurate
                         and complete, each such document that is an original is
                         authentic, each such document that is a copy conforms
                         to an authentic original, and all signatures on each
                         such document are genuine.

                3.       The Executors have satisfied those legal requirements
                         that are applicable to them to the extent necessary to
                         make the Settlement Agreement, the Stock Purchase
                         Agreement and the related documents enforceable against
                         them.

                4.       Each party to the Settlement Agreement, the Stock
                         Purchase Agreement and the related documents, other
                         than the Company, has complied with all legal
                         requirements pertaining to its status as such status
                         relates to its rights to enforce the Settlement
                         Agreement, the Stock Purchase Agreement and the related
                         documents against the Company.

                5.       Each person that is a party to the Settlement
                         Agreement, the Stock Purchase Agreement and the related
                         documents, other than the Company, has the power,
                         authority and legal right to execute and deliver, and
                         to perform such person's obligations under, the
                         Settlement Agreement, the Stock Purchase Agreement and
                         such other documents to which such person is a party.

                6.       Each person that is a party to the Settlement
                         Agreement, the Stock Purchase Agreement and the related
                         documents, other than the Company, has duly authorized,
                         executed and delivered the Settlement Agreement, the
                         Stock Purchase Agreement and such other documents to
                         which such person is a party.

                                   Annex II-1



                7.       The Settlement Agreement, the Stock Purchase Agreement
                         and the related documents constitute legal, valid and
                         binding obligations of each party thereto, other than
                         the Company, enforceable against each such party in
                         accordance with their terms.

                8.       The parties to the Settlement Agreement and the Stock
                         Purchase Agreement have received the consideration to
                         be delivered to them at the Closing pursuant to the
                         terms of such agreements.

                9.       No action has been taken nor will be taken by any
                         party, other than the Company, before the Closing that
                         would give rise to a defense by any other party that
                         one or more provisions of the Settlement Agreement, the
                         Stock Purchase Agreement or the related documents are
                         unenforceable.

                10.      There has not been any mutual mistake of fact or
                         misunderstanding, fraud, duress or undue influence in
                         connection with the Settlement Agreement, the Stock
                         Purchase Agreement or the related documents.

                11.      The conduct of the parties to the Settlement Agreement,
                         the Stock Purchase Agreement and the related documents
                         has complied with any requirement of good faith, fair
                         dealing and conscionability.

                12.      There are no agreements or understandings among the
                         parties, written or oral, and there is no usage of
                         trade or course of prior dealing among the parties that
                         would, in either case, define, supplement or qualify
                         the terms of the Settlement Agreement, the Stock
                         Purchase Agreement or the related documents.

                13.      All conditions precedent to the effectiveness of the
                         Settlement Agreement, the Stock Purchase Agreement and
                         the related documents have been satisfied or waived.

                14.      The constitutionality or validity of a relevant
                         statute, rule, regulation, or agency action is not in
                         issue unless a reported decision in the State of
                         Delaware or Oregon has specifically addressed but not
                         resolved, or has established, its unconstitutionality
                         or invalidity.

                                   Annex II-1



                15.      All agreements and court orders, if any, affecting the
                         Company or any of its Subsidiaries would be enforced as
                         written.

B. EXCLUSIONS

      We express no opinion as to the legality, validity, binding effect, or
enforceability or unenforceability of provisions of the Settlement Agreement or
Stock Purchase Agreement which may:

1.    Purport to require waivers or amendments to be in writing or signed by all
      parties;

2.    Purport to provide for exclusive jurisdiction in any venue;

3.    Relate to severability of any material invalid provision, or

4.    Provide for exculpation or indemnification (to the extent exculpation or
      indemnification may be limited by public policy), or which may purport to
      exculpate or indemnify a party from the consequences of its own
      negligence, breach of fiduciary duty, gross negligence, recklessness,
      willful misconduct, or unlawful conduct).

                                   Annex II-1



                                                                       ANNEX III

                FORM OF OPINION OF GENERAL COUNSEL OF THE COMPANY

      (a) Each of the Company's Subsidiaries has been duly organized and is
validly existing and in good standing under the laws of its jurisdiction of
organization and has all necessary corporate power and authority to own, lease
and operate its property and to conduct its business as described in the
Offering Memorandum. Each of the Company and its Subsidiaries is duly qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the character or location of its properties (owned, leased
or licensed) or the nature or conduct of its business makes such qualification
necessary, except for those failures to be so qualified or in good standing
which would not (individually or when aggregated with other such instances) have
a material adverse effect on the business, condition (financial or otherwise),
results of operations, stockholders' equity, properties or prospects of the
Company and its subsidiaries taken as a whole (a "Material Adverse Effect").

      (b) Neither the Company nor any of its Subsidiaries is in violation of its
respective charter or by-laws and, to such counsel's knowledge, neither the
Company nor any of its Subsidiaries is in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or their respective property is bound, except for defaults that,
singly or in the aggregate, would not have a Material Adverse Effect.

      (c) Except as disclosed in the Offering Memorandum, to such counsel's
knowledge, neither the Company nor any of its Subsidiaries has violated any
environmental law, any provisions of the Employee Retirement Income Security Act
of 1974, as amended, or any provisions of the Foreign Corrupt Practices Act, or
the rules and regulations promulgated thereunder, except for such violations
which, singly or in the aggregate, would not have a Material Adverse Effect.

      (d) Each of the Company and its Subsidiaries has such authorizations of,
and has made all filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including, without limitation, under any applicable environmental
laws, as are necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to have any
such authorization or to make any such filing or notice would not, singly or in
the aggregate, have a Material Adverse Effect; each such authorization is valid
and in full force and effect and each of the Company and its Subsidiaries is in
compliance with all the terms and conditions thereof and with the rules and
regulations of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows or,
after notice or lapse of time or both, would allow, revocation, suspension or
termination of any such authorization or results or, after notice or lapse of
time or both, would result in any other impairment of the rights of the holder
of any such authorization; and such authorizations contain no restrictions that
are

                                   Annex III-1



burdensome to the Company or any of its Subsidiaries; except where such failure
to be valid and in full force and effect or to be in compliance, the occurrence
of any such event or the presence of any such restriction would not, singly or
in the aggregate, have a Material Adverse Effect.

      (e) Other than as set forth in the Offering Memorandum, there are no
judicial, regulatory or other legal or governmental proceedings pending to which
the Company or any of its Subsidiaries is a party or of which any property of
the Company or any of its Subsidiaries is the subject which, if determined
adversely to the Company or any of its Subsidiaries, would singly or in the
aggregate have a Material Adverse Effect; and, to such counsel's knowledge, no
such proceedings are threatened or contemplated.

      (f) The execution, delivery, and performance of this Agreement, the
Registration Rights Agreement and the Indenture and consummation of the
transactions contemplated by this Agreement, the Registration Rights Agreement,
the Indenture and the Offering Memorandum do not and will not (A) conflict with
or result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any Lien
upon property or assets of the Company or any of its Subsidiaries pursuant to,
any indenture, mortgage, deed of trust, loan agreement or any other material
agreement, instrument, franchise, license or permit to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or their respective properties or assets may be bound, or (B)
violate or conflict with any provision of the certificate of incorporation,
by-laws or other organizational documents of the Company or any of its
Subsidiaries, or (C) violate any judgment, decree, order, statute, rule or
regulation of any court or any judicial, regulatory or other legal or
governmental agency or body of the United States of America or the State of
Oregon applicable to the Company or any of its Subsidiaries.

      (g) All of the issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and are not subject to any preemptive or, to the best of such
counsel's knowledge, similar rights that entitle or will entitle any person to
acquire any capital stock from the Company upon issuance or sale thereof. All of
the issued shares of capital stock of each Subsidiary of the Company have been
duly authorized and validly issued and are fully paid and nonassessable and are
owned directly or indirectly by the Company, free and clear of all Liens.

      (h) The statements under the caption "Business - Legal Matters" in the
Offering Memorandum, insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, present fairly in
all material respects such legal matters, documents and proceedings in the
context in which presented in the Offering Memorandum.

                                   Annex III-1



                                                                    ANNEX III(A)

          FORM OF OPINION OF CANADIAN REGULATORY COUNSEL OF THE COMPANY

                                    [to come]

                                 Annex III(A)-1



                                                                        ANNEX IV

                  RESALE PURSUANT TO REGULATION S OR RULE 144A.

      Each Initial Purchaser understands that:

      Such Initial Purchaser agrees that it has not offered or sold and will not
offer or sell the Notes in the United States or to, or for the benefit or
account of, a U.S. Person (other than a distributor), in each case, as defined
in Rule 902 of Regulation S (i) as part of its distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the offering of
the Notes pursuant hereto and the Closing Date, other than in accordance with
Regulation S or another exemption from the registration requirements of the
Securities Act. Such Initial Purchaser agrees that, during such 40-day
restricted period, it will not cause any advertisement with respect to the Notes
(including any "tombstone" advertisement) to be published in any newspaper or
periodical or posted in any public place and will not issue any circular
relating to the Notes, except such advertisements as are permitted by and
include the statements required by Regulation S.

      Such Initial Purchaser agrees that, at or prior to confirmation of a sale
of Notes by it to any distributor, dealer or person receiving a selling
concession, fee or other remuneration during the 40-day restricted period
referred to in Rule 903 of Regulation S , it will send to such distributor,
dealer or person receiving a selling concession, fee or other remuneration a
confirmation or notice to substantially the following effect:

      "The Securities covered hereby have not been registered under the U.S.
      Securities Act of 1933, as amended (the "Securities Act"), and may not be
      offered and sold within the United States or to, or for the account or
      benefit of, U.S. persons (i) as part of your distribution at any time or
      (ii) otherwise until 40 days after the later of the date the Securities
      were first offered to persons other than distributors in reliance upon
      Regulation S and the Closing Date, except in either case in accordance
      with Regulation S under the Securities Act (or in accordance with Rule
      144A under the Securities Act or to accredited investors in transactions
      that are exempt from the registration requirements of the Securities Act),
      and in connection with any subsequent sale by you of the Securities
      covered hereby in reliance on Regulation S under the Securities Act during
      the period referred to above to any distributor, dealer or person
      receiving a selling concession, fee or other remuneration, you must
      deliver a notice to substantially the foregoing effect. Terms used above
      have the meanings assigned to them in Regulation S under the Securities
      Act."

EX-31.1

                                                  THE GREENBRIER COMPANIES, INC.

                                                                    EXHIBIT 31.1

      CERTIFICATIONS

      I, William A. Furman, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of The Greenbrier
      Companies, Inc. for the quarterly period ended May 31, 2005;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
      and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this quarterly report our
            conclusions about the effectiveness of the disclosure controls and
            procedures based on such evaluation; and

      (c)   Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

      Date: June 30, 2005

      /s/ William A. Furman

      William A. Furman, President and
      Chief Executive Officer

                                       27

EX-31.2

                                                  THE GREENBRIER COMPANIES, INC.

                                                                    EXHIBIT 31.2

                             CERTIFICATIONS (cont'd)

      I, Larry G. Brady, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of The Greenbrier
      Companies, Inc. for the quarterly period ended May 31, 2005;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
      and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this quarterly report our
            conclusions about the effectiveness of the disclosure controls and
            procedures based on such evaluation; and

      (c)   Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

      Date: June 30, 2005

      /s/ Larry G. Brady

      Larry G. Brady
      Senior Vice President and
      Chief Financial Officer

                                       28

EX-32.1

                                                  THE GREENBRIER COMPANIES, INC.

                                                                    EXHIBIT 32.1

                            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 quarterly report of The Greenbrier Companies, Inc.
(the "Company") on Form 10-Q for the quarterly period ended May 31, 2005 as
filed with the Securities and Exchange Commission on the date therein specified
(the "Report"), I, William A. Furman, President and Chief Executive 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: June 30, 2005

/s/ WILLIAM A. FURMAN
- -----------------------------
William A. Furman
President and Chief Executive Officer

                                       29

EX-32.2

                                                  THE GREENBRIER COMPANIES, INC.

                                                                    EXHIBIT 32.2

                            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 quarterly report of The Greenbrier Companies, Inc.
(the "Company") on Form 10-Q for the quarterly period ended May 31, 2005 as
filed with the Securities and Exchange Commission on the date therein specified
(the "Report"), I, Larry G. Brady, 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: June 30, 2005

/s/ Larry G. Brady
- --------------------------
Larry G. Brady
Senior Vice President and
Chief Financial Officer

                                       30