GREENBRIER COMPANIES INC (Form: 10-Q, Received: 06/29/2018 16:10:01)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

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

for the quarterly period ended May 31, 2018

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

for the transition period from to

Commission File No. 1-13146

THE GREENBRIER COMPANIES, INC.

(Exact name of registrant as specified in its charter)


Oregon				93-0816972
(State of Incorporation)				(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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares of the registrant’s common stock, without par value, outstanding on June 22, 2018 was 32,190,518 shares.

THE GREENBRIER COMPANIES, INC.

Forward-Looking Statements

From time to time, The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) or their representatives have made or may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements as to expectations, beliefs and strategies regarding the future. Such forward-looking statements may be included in, but not limited to, press releases, oral statements made with the approval of an authorized executive officer or in various filings made by us with the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Investors should not place undue reliance on forward-looking statements, which speak only as of the date they are made and are not guarantees of future performance. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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 and loan covenant flexibility for working capital, other business development activities, capital spending and leased railcars for syndication (sale of railcars with lease attached);

•

ability to renew, maintain or obtain sufficient credit facilities and financial guarantees on acceptable terms including loan covenants;

•

ability to utilize beneficial tax strategies;

•

ability to grow our businesses;

•

ability to obtain lease and sales contracts which provide adequate protection against attempted modifications or cancellations, changes in interest rates and increased costs of materials and components;

•

ability to obtain adequate insurance coverage at acceptable rates;

•

ability to convert backlog of railcar orders and obtain and execute lease syndication commitments;

•

ability to obtain adequate certification and licensing of products; and

•

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

The following factors, among others, could cause actual results or outcomes to differ materially from the forward-looking statements:

•

fluctuations in demand for newly manufactured railcars or marine barges and for wheels, repair services and parts;

•

delays in receipt of orders, risks that contracts may be canceled or modified during their term, not renewed, unenforceable or breached by the customer and that customers may not purchase the amount of products or services under the contracts as anticipated;

•

our ability to maintain sufficient availability of credit facilities and to maintain compliance with or to obtain appropriate amendments to covenants under various credit agreements;

•

domestic and international economic conditions including such matters as embargoes, quotas, tariffs, or modifications to existing trade agreements;

•

domestic and international political and security conditions in the United States (U.S.), Europe, Latin America, the Gulf Cooperation Council (GCC) and other areas including such matters as terrorism, war, civil disruption and crime;

•

the policies and priorities of the U.S. or other governments including those concerning international trade, infrastructure and corporate taxation;

•

sovereign risk related to international governments that includes, but is not limited to, governments stopping payments, repudiating their contracts, nationalizing private businesses and assets or altering foreign exchange regulations;

THE GREENBRIER COMPANIES, INC.

•

growth or reduction in the surface transportation industry, the enactment of policies favoring other types of surface transportation over rail transportation or the impact from technological advances;

•

our ability to maintain good relationships with our labor force, third party labor providers and collective bargaining units representing our direct and indirect labor force;

•

our ability to maintain good relationships with our customers and suppliers;

•

our ability to renew or replace expiring customer contracts on satisfactory terms;

•

our ability to obtain and execute suitable lease contracts for leased railcars for syndication;

•

steel and specialty component price fluctuations and availability, scrap surcharges, steel scrap prices and other commodity price fluctuations and availability and their impact on product demand and margin;

•

the delay or failure of acquired businesses or joint ventures, assets, start-up operations, or new products or services to compete successfully;

•

changes in product mix and the mix of revenue levels among reporting segments;

•

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

•

production difficulties and product delivery delays as a result of, among other matters, costs or inefficiencies associated with expansion, start-up, or changing of production lines or changes in production rates, equipment failures, changing technologies, transfer of production between facilities or non-performance of alliance partners, subcontractors or suppliers;

•

lower than anticipated lease renewal rates, earnings on utilization-based leases or residual values for owned or managed leased equipment;

•

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

•

physical damage, business interruption or product or service liability claims that exceed our insurance coverage;

•

commencement of and ultimate resolution or outcome of pending or future litigation and investigations;

•

natural disasters or severe or unusual weather patterns that may affect either us, our suppliers or our customers;

•

loss of business from, or a decline in the financial condition of, any of the principal customers that represent a significant portion of our total revenues;

•

competitive factors, including introduction of competitive products, new entrants into certain of our markets, price pressures, limited customer base, and competitiveness of our manufacturing facilities and products;

•

industry overcapacity and our manufacturing capacity utilization;

•

decreases or write-downs in carrying value of inventory, goodwill, intangibles or other assets due to impairment;

•

severance or other costs or charges associated with layoffs, shutdowns, or reducing the size and scope of operations;

•

changes in future maintenance or warranty requirements;

•

our ability to adjust to the cyclical nature of the industries in which we operate;

•

changes in interest rates and financial impacts from interest rates;

•

our ability and cost to maintain and renew operating permits;

•

actions or failures to act by various regulatory agencies including changing tank car or other rail car regulations;

•

potential environmental remediation obligations;

•

changes in commodity prices, including oil and gas;

•

risks associated with our intellectual property rights or those of third parties, including infringement, maintenance, protection, validity, enforcement and continued use of such rights;

•

expansion of warranty and product support terms beyond those which have traditionally prevailed in the rail supply industry;

•

availability of a trained work force at a reasonable cost and with reasonable terms of employment;

•

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

•

our failure to successfully integrate joint ventures or acquired businesses or complete previously announced transactions;

•

discovery of previously unknown liabilities associated with acquired businesses;

THE GREENBRIER COMPANIES, INC.

•

the failure of, or our delay in implementing and using, new software or other technologies;

•

the impact of cybersecurity risks and the costs of mitigating and responding to a data security breach;

•

our ability to replace maturing lease and management services revenue and earnings from equipment sold from our lease fleet with revenue and earnings from new commercial transactions, including new railcar leases, additions to the lease fleet and new management services contracts;

•

credit limitations upon our ability to maintain effective hedging programs;

•

financial impacts from currency fluctuations and currency hedging activities in our worldwide operations;

•

increased costs or other impacts on us or our customers due to changes in legislation, taxes, regulations or accounting pronouncements;

•

our ability to effectively execute our business and operating strategies if we become the target of shareholder activism; and

•

fraud, misconduct by employees and potential exposure to liabilities under the Foreign Corrupt Practices Act and other anti-corruption laws and regulations.

Any forward-looking statements should be considered in light of these factors. Words such as “anticipates,” “believes,” “forecast,” “potential,” “goal,” “contemplates,” “expects,” “intends,” “plans,” “projects,” “hopes,” “seeks,” “estimates,” “strategy,” “could,” “would,” “should,” “likely,” “will,” “may,” “can,” “designed to,” “future,” “foreseeable future” and similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. Many of the important factors that will determine these results and values are beyond our ability to control or predict. You are cautioned not to place undue reliance on any forward-looking statements, which reflect management’s opinions only as of the date hereof. Except as otherwise required by law, we do not assume any obligation to update any forward-looking statements.

All references to years refer to the fiscal years ended August 31 ^st unless otherwise noted.

THE GREENBRIER COMPANIES, INC.

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Financial Statements

Consolidated Balance Sheets

(In thousands, unaudited)


	May 31, 2018			August 31, 2017
Assets
Cash and cash equivalents	$	589,969		$	611,466
Restricted cash		9,204			8,892
Accounts receivable, net		322,328			279,964
Inventories		396,518			400,127
Leased railcars for syndication		158,194			91,272
Equipment on operating leases, net		302,074			315,941
Property, plant and equipment, net		424,035			428,021
Investment in unconsolidated affiliates		75,884			108,255
Intangibles and other assets, net		82,030			85,177
Goodwill		70,347			68,590

	$	2,430,583		$	2,397,705

Liabilities and Equity
Revolving notes	$	20,337		$	4,324
Accounts payable and accrued liabilities		447,827			415,061
Deferred income taxes		36,657			75,791
Deferred revenue		102,919			129,260
Notes payable, net		437,833			558,228

Commitments and contingencies (Note 15)

Contingently redeemable noncontrolling interest		31,135			36,148

Equity:
Greenbrier
Preferred stock - without par value; 25,000 shares authorized; none outstanding		—			—
Common stock - without par value; 50,000 shares authorized; 32,191 and 28,503 shares outstanding at May 31, 2018 and August 31, 2017		—			—
Additional paid-in capital		438,560			315,306
Retained earnings		808,202			709,103
Accumulated other comprehensive loss		(21,250	)		(6,279	)

Total equity – Greenbrier		1,225,512			1,018,130
Noncontrolling interest		128,363			160,763

Total equity		1,353,875			1,178,893

	$	2,430,583		$	2,397,705

The accompanying notes are an integral part of these financial statements

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Income

(In thousands, except per share amounts, unaudited)


	Three Months Ended May 31,						Nine Months Ended May 31,
	2018			2017			2018			2017
Revenue
Manufacturing	$	510,099		$	317,104		$	1,473,411		$	1,216,641
Wheels & Parts		94,515			85,231			261,236			237,580
Leasing & Services		36,773			36,826			95,611			103,536

		641,387			439,161			1,830,258			1,557,757
Cost of revenue
Manufacturing		427,875			245,228			1,237,890			948,436
Wheels & Parts		85,850			77,985			239,064			218,460
Leasing & Services		19,155			26,247			50,136			69,484

		532,880			349,460			1,527,090			1,236,380
Margin		108,507			89,701			303,168			321,377
Selling and administrative expense		51,793			42,810			149,130			123,518
Net gain on disposition of equipment		(14,825	)		(1,581	)		(39,813	)		(4,793	)

Earnings from operations		71,539			48,472			193,851			202,652
Other costs
Interest and foreign exchange		6,533			7,894			20,582			15,291

Earnings before income taxes and loss from unconsolidated affiliates		65,006			40,578			173,269			187,361
Income tax expense		(15,944	)		(8,656	)		(22,778	)		(53,900	)

Earnings before loss from unconsolidated affiliates		49,062			31,922			150,491			133,461
Loss from unconsolidated affiliates		(12,823	)		(681	)		(15,586	)		(5,253	)

Net earnings		36,239			31,241			134,905			128,208
Net (earnings) loss attributable to noncontrolling interest		(3,288	)		1,582			(14,059	)		(35,887	)

Net earnings attributable to Greenbrier	$	32,951		$	32,823		$	120,846		$	92,321

Basic earnings per common share	$	1.03		$	1.12		$	3.99		$	3.16
Diluted earnings per common share	$	1.01		$	1.03		$	3.75		$	2.91
Weighted average common shares:
Basic		32,034			29,348			30,250			29,192
Diluted		32,914			32,690			32,774			32,515
Dividends declared per common share	$	0.25		$	0.22		$	0.71		$	0.64

The accompanying notes are an integral part of these financial statements

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Comprehensive Income

(In thousands, unaudited)


	Three Months Ended May 31,					Nine Months Ended May 31,
	2018			2017		2018			2017
Net earnings	$	36,239		$	31,241	$	134,905		$	128,208
Other comprehensive income
Translation adjustment		(15,136	)		8,334		(14,163	)		5,624
Reclassification of derivative financial instruments recognized in net earnings ¹		59			871		(606	)		4,022
Unrealized gain (loss) on derivative financial instruments ²		(2,103	)		4,420		(274	)		2,232
Other (net of tax effect)		29			64		54			(786	)

		(17,151	)		13,689		(14,989	)		11,092

Comprehensive income		19,088			44,930		119,916			139,300
Comprehensive income attributable to noncontrolling interest		(3,266	)		1,582		(14,041	)		(35,887	)

Comprehensive income attributable to Greenbrier	$	15,822		$	46,512	$	105,875		$	103,413

¹	Net of tax effect of $0.01 million and $0.2 million for the three months ended May 31, 2018 and 2017 and $0.1 million and $1.2 million for the nine months ended May 31, 2018 and 2017.

²	Net of tax effect of $0.6 million and $1.1 million for the three months ended May 31, 2018 and 2017 and $0.1 million and $0.9 million for the nine months ended May 31, 2018 and 2017.

The accompanying notes are an integral part of these financial statements

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Equity

(In thousands, unaudited)


	Attributable to Greenbrier
	Common Stock Shares		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Attributable to Greenbrier			Attributable to Noncontrolling Interest			Total Equity			Contingently Redeemable Noncontrolling Interest
Balance September 1, 2017		28,503	$	315,306		$	709,103		$	(6,279	)	$	1,018,130		$	160,763		$	1,178,893		$	36,148
Net earnings		—		—			120,846			—			120,846			19,072			139,918			(5,013	)
Other comprehensive income, net		—		—			—			(14,971	)		(14,971	)		(18	)		(14,989	)		—
Noncontrolling interest adjustments		—		—			—			—			—			1,067			1,067			—
Joint venture partner distribution declared		—		—			—			—			—			(59,014	)		(59,014	)		—
Investment by joint venture partner		—		—			—			—			—			6,500			6,500			—
Noncontrolling interest acquired		—		—			—			—			—			(7	)		(7	)		—
Restricted stock awards (net of cancellations)		336		7,335			—			—			7,335			—			7,335			—
Unamortized restricted stock		—		(15,052	)		—			—			(15,052	)		—			(15,052	)		—
Restricted stock amortization		—		12,084			—			—			12,084			—			12,084			—
Cash dividends		—		—			(21,747	)		—			(21,747	)		—			(21,747	)		—
Conversion of 2018 Convertible Senior Notes		3,352		118,887			—			—			118,887			—			118,887			—

Balance May 31, 2018		32,191	$	438,560		$	808,202		$	(21,250	)	$	1,225,512		$	128,363		$	1,353,875		$	31,135


	Attributable to Greenbrier
	Common Stock Shares		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Attributable to Greenbrier			Attributable to Noncontrolling Interest			Total Equity
Balance September 1, 2016		28,205	$	282,886		$	618,178		$	(26,753	)	$	874,311		$	142,516		$	1,016,827
Net earnings		—		—			92,321			—			92,321			35,887			128,208
Other comprehensive income, net		—		—			—			11,092			11,092			—			11,092
Noncontrolling interest adjustments		—		—			—			—			—			1,203			1,203
Joint venture partner distribution declared		—		—			—			—			—			(26,127	)		(26,127	)
Restricted stock awards (net of cancellations)		298		5,567			—			—			5,567			—			5,567
Unamortized restricted stock		—		(10,775	)		—			—			(10,775	)		—			(10,775	)
Restricted stock amortization		—		14,645			—			—			14,645			—			14,645
Tax deficiency from restricted stock awards		—		(2,396	)		—			—			(2,396	)		—			(2,396	)
Cash dividends		—		—			(18,691	)		—			(18,691	)		—			(18,691	)
2024 Convertible Senior Notes – equity component, net of tax		—		20,818			—			—			20,818			—			20,818
2024 Convertible Senior Notes issuance costs – equity component, net of tax		—		(671	)		—			—			(671	)		—			(671	)

Balance May 31, 2017	$	28,503	$	310,074		$	691,808		$	(15,661	)	$	986,221		$	153,479		$	1,139,700

The accompanying notes are an integral part of these financial statements

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Cash Flows

(In thousands, unaudited)


	Nine Months Ended May 31,
	2018			2017
Cash flows from operating activities
Net earnings	$	134,905		$	128,208
Adjustments to reconcile net earnings to net cash provided by operating activities:
Deferred income taxes		(38,825	)		16,815
Depreciation and amortization		55,161			46,616
Net gain on disposition of equipment		(39,813	)		(4,793	)
Accretion of debt discount		3,109			1,329
Stock based compensation expense		20,311			19,007
Noncontrolling interest adjustments		1,067			1,203
Other		1,345			1,017
(Increase) decrease in assets:
Accounts receivable, net		(24,980	)		(27,109	)
Inventories		(4,270	)		(47,209	)
Leased railcars for syndication		(69,994	)		(16,122	)
Other		30,549			8,419
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities		34,898			(35,800	)
Deferred revenue		(23,837	)		(13,650	)

Net cash provided by operating activities		79,626			77,931

Cash flows from investing activities
Proceeds from sales of assets		129,828			20,344
Capital expenditures		(118,656	)		(53,848	)
Decrease in restricted cash		(312	)		15,526
Investment in and advances to unconsolidated affiliates		(21,455	)		(34,068	)
Cash distribution from unconsolidated affiliates		3,941			550

Net cash used in investing activities		(6,654	)		(51,496	)

Cash flows from financing activities
Net change in revolving notes with maturities of 90 days or less		16,013			—
Proceeds from issuance of notes payable		13,749			275,000
Repayments of notes payable		(19,274	)		(5,469	)
Debt issuance costs		—			(9,082	)
Dividends		(21,866	)		(18,619	)
Cash distribution to joint venture partner		(69,413	)		(27,267	)
Investment by joint venture partner		6,500			—
Tax payments for net share settlement of restricted stock		(7,716	)		(5,208	)
Excess tax deficiency from restricted stock awards		—			(2,396	)

Net cash provided by (used in) financing activities		(82,007	)		206,959

Effect of exchange rate changes		(12,462	)		9,340
Increase (decrease) in cash and cash equivalents		(21,497	)		242,734
Cash and cash equivalents
Beginning of period		611,466			222,679

End of period	$	589,969		$	465,413

Cash paid during the period for
Interest	$	13,080		$	8,500
Income taxes, net	$	62,219		$	40,587
Non-cash activity
Conversion of 2018 Senior Convertible Notes	$	118,887		$	—
Transfer from Leased railcars for syndication and Inventories to Equipment on operating leases, net	$	5,541		$	8,597
Capital expenditures accrued in Accounts payable and accrued liabilities	$	1,868		$	4,301
Change in Accounts payable and accrued liabilities associated with dividends declared	$	119		$	(72	)
Change in Accounts payable and accrued liabilities associated with cash distributions to joint venture partner	$	29		$	1,140

The accompanying notes are an integral part of these financial statements

THE GREENBRIER COMPANIES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Interim Financial Statements

The Condensed Consolidated Financial Statements of The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) as of May 31, 2018 and for the three and nine months ended May 31, 2018 and 2017 have been prepared to reflect all adjustments (consisting of normal recurring accruals) that, in the opinion of management, are necessary for a fair presentation of the financial position, operating results and cash flows for the periods indicated. The results of operations for the three and nine months ended May 31, 2018 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2018.

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 unaudited financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company’s 2017 Annual Report on Form 10-K.

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

Initial Adoption of Accounting Policies – In the first quarter of 2018, the Company adopted Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). This changes how companies account for certain aspects of share-based payments to employees. Excess tax benefits or deficiencies related to vested awards which were previously recognized in stockholders’ equity are now recognized in the income statement when awards vest. For the nine months ended May 31, 2018, the impact of adopting this new guidance was immaterial. Prior to adopting the updated standard, excess tax benefits were reported as financing activities and are now reported as operating activities in the statement of cash flows. In addition, cash paid by an employer when directly withholding shares for tax withholding purposes were reported as operating activities and are now classified as financing activities.

Prospective Accounting Changes – In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09), providing a common revenue recognition model under U.S. GAAP. Under ASU 2014-09, an entity recognizes revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. It also requires additional disclosures to sufficiently describe the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard may be adopted using either a full retrospective or a modified retrospective approach. The FASB issued a one year deferral and the new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company plans to adopt ASU 2014-09 effective September 1, 2018 using the modified retrospective method. Under this method, the new standard will be applied only to the most current period presented in the financial statements and the cumulative effect of initially applying the standard will result in an adjustment to the opening balance of retained earnings as of the adoption date. The Company continues to evaluate the requirements of the standard and its impact on the Company’s consolidated financial statements and disclosures. The Company currently expects revenue recognition policies to remain substantially unchanged as a result of adopting ASU 2014-09, although this could change based on the Company’s continued evaluation.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (ASU 2016-02). The new guidance supersedes existing guidance on accounting for leases in Topic 840 and is intended to increase the transparency and comparability of accounting for lease transactions. ASU 2016-02 requires most leases to be recognized on the balance sheet. Lessees will need to recognize a right-of-use asset and a lease liability for virtually all leases. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Lessor accounting remains similar to the current model, but updated to align

THE GREENBRIER COMPANIES, INC.

with certain changes to the lessee model and the new revenue recognition standard. The ASU will require both quantitative and qualitative disclosures regarding key information about leasing arrangements. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. The Company plans to adopt this guidance beginning September 1, 2019. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.

In December 2016, the FASB issued Accounting Standards Update 2016-18, Restricted Cash (ASU 2016-18). This update requires additional disclosure and that the Statement of Cash Flow explain the change during the period in the total cash, cash equivalents and amounts generally described as restricted cash. Therefore, amounts generally described as restricted cash should be included with cash & cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Statement of Cash Flows. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 with early adoption permitted. The Company plans to adopt this guidance beginning September 1, 2018.

In August 2017, the FASB issued Accounting Standards Update 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). This update improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance. The guidance expands the ability to hedge non-financial and financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, as well as eases certain hedge effectiveness assessment requirements. The new guidance is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance beginning September 1, 2019. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.

Share Repurchase Program – The Board of Directors has authorized the Company to repurchase in aggregate up to $225 million of the Company’s common stock. The program may be modified, suspended or discontinued at any time without prior notice and currently has an expiration date of March 31, 2019. Under the share repurchase program, shares of common stock may be purchased on the open market or through privately negotiated transactions from time-to-time. The timing and amount of purchases will be based upon market conditions, securities law limitations and other factors. The share repurchase program does not obligate the Company to acquire any specific number of shares in any period.

The Company did not repurchase any shares during the three and nine months ended May 31, 2018. As of May 31, 2018, the Company had cumulatively repurchased 3,206,226 shares for approximately $137.0 million since October 2013 and had $88.0 million available under the share repurchase program.

THE GREENBRIER COMPANIES, INC.

Note 2 – Acquisitions

On June 1, 2017, Greenbrier and Astra Holding GmbH (Astra) contributed their European operations to a newly formed company, Greenbrier-Astra Rail, a Europe-based freight railcar manufacturing, engineering and repair business. As consideration for an approximate 75% controlling interest, Greenbrier agreed to pay Astra €30 million at closing and €30 million 12 months after closing, which was paid on June 1, 2018, and issue an approximate 25% noncontrolling interest in the new company. The total net assets acquired of $115.8 million includes $38.3 million representing the fair value of the noncontrolling interest at the acquisition date.

Astra also received a put option to sell its entire noncontrolling interest to Greenbrier at an exercise price equal to the higher of fair value or a defined EBITDA multiple as measured on the exercise date. The option is exercisable 30 days prior to and up until June 1, 2022. Due to Astra’s redemption right under the put option, the noncontrolling interest has been classified as a Contingently redeemable noncontrolling interest in the mezzanine section of the Consolidated Balance Sheets. The carrying value of the noncontrolling interest cannot be less than the maximum redemption amount, which is the amount Greenbrier will settle the put option for if exercised. Adjustments to reconcile the carrying value to the maximum redemption amount are recorded to retained earnings. There were no such adjustments during the nine months ended May 31, 2018.

For the nine months ended May 31, 2018, the European operations contributed by Astra generated revenues of $105.6 million and an immaterial loss from operations, which are reported in the Company’s consolidated financial statements as part of the Manufacturing segment. The impact of the acquisition was not material to the Company’s consolidated results of operations, therefore pro forma financial information has not been included.

The purchase price of the net assets acquired from Astra is allocated as follows:


(in thousands)
Cash and cash equivalents	$	6,562
Accounts receivable		10,984
Inventories		30,454
Property, plant and equipment		75,296
Intangibles and other assets		17,300
Goodwill		25,746

Total assets acquired		166,342
Accounts payable and accrued liabilities		17,879
Deferred income taxes		7,292
Deferred revenue		964
Notes payable		24,382

Total liabilities assumed		50,517

Net assets acquired	$	115,825

Minor adjustments were made to the purchase price allocation during the nine months ended May 31, 2018.

THE GREENBRIER COMPANIES, INC.

Note 3 – Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market. Work-in-process includes material, labor and overhead. The following table summarizes the Company’s inventory balance:


(In thousands)	May 31, 2018			August 31, 2017
Manufacturing supplies and raw materials	$	242,824		$	222,080
Work-in-process		94,878			86,794
Finished goods		63,702			95,389
Excess and obsolete adjustment		(4,886	)		(4,136	)

	$	396,518		$	400,127

Note 4 – Intangibles and Other Assets, net

Intangible assets that are determined to have finite lives are amortized over their useful lives. Intangible assets with indefinite useful lives are not amortized and are periodically evaluated for impairment.

The following table summarizes the Company’s identifiable intangible and other assets balance:


(In thousands)	May 31, 2018			August 31, 2017
Intangible assets subject to amortization:
Customer relationships	$	64,521		$	64,521
Accumulated amortization		(42,695	)		(40,153	)
Other intangibles		16,299			20,207
Accumulated amortization		(6,123	)		(4,866	)

		32,002			39,709
Intangible assets not subject to amortization		4,120			912
Prepaid and other assets		15,100			16,914
Nonqualified savings plan investments		25,156			20,974
Revolving notes issuance costs, net		2,002			2,623
Assets held for sale		3,650			4,045

Total Intangible and other assets, net	$	82,030		$	85,177

Amortization expense for the three and nine months ended May 31, 2018 was $1.4 million and $4.2 million and for the three and nine months ended May 31, 2017 was $0.9 million and $3.5 million. Amortization expense for the years ending August 31, 2018, 2019, 2020, 2021 and 2022 is expected to be $5.8 million, $5.4 million, $5.7 million, $5.4 million and $4.0 million.

THE GREENBRIER COMPANIES, INC.

Note 5 – Revolving Notes

Senior secured credit facilities, consisting of three components, aggregated to $628.4 million as of May 31, 2018.

As of May 31, 2018, a $550.0 million revolving line of credit, maturing October 2020, secured by substantially all the Company’s assets in the U.S. not otherwise pledged as security for term loans, was available to provide working capital and interim financing of equipment, principally for the U.S. and Mexican operations. Advances under this facility bear interest at LIBOR plus 1.75% or Prime plus 0.75% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.

As of May 31, 2018, lines of credit totaling $28.4 million secured by certain of the Company’s European assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2% to WIBOR plus 1.3% and Euro Interbank Offered Rate (EURIBOR) plus 1.1%, were available for working capital needs of the European manufacturing operation. European credit facilities are continually being renewed. Currently, these European credit facilities have maturities that range from December 2018 through June 2019.

As of May 31, 2018, the Company’s Mexican railcar manufacturing joint venture had two lines of credit totaling $50.0 million. The first line of credit provides up to $30.0 million and is fully guaranteed by the Company and its joint venture partner. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw against this facility through January 2019. The second line of credit provides up to $20.0 million, of which the Company and its joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through July 2019.

As of May 31, 2018, outstanding commitments under the senior secured credit facilities consisted of $72.2 million in letters of credit under the North American credit facility and $20.3 million outstanding under the European credit facilities.

As of August 31, 2017, outstanding commitments under the senior secured credit facilities consisted of $77.6 million in letters of credit under the North American credit facility and $4.3 million outstanding under the European credit facilities.

THE GREENBRIER COMPANIES, INC.

Note 6 – Accounts Payable and Accrued Liabilities


(In thousands)	May 31, 2018		August 31, 2017
Trade payables	$	204,658	$	180,592
Other accrued liabilities		110,380		111,316
Accrued payroll and related liabilities		85,735		84,749
Accrued warranty		27,246		20,737
Accrued maintenance		13,635		17,667
Income taxes payable		6,173		—

	$	447,827	$	415,061

Note 7 – Warranty Accruals

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

Warranty accrual activity:


(In thousands)	Three Months Ended May 31,						Nine Months Ended May 31,
(In thousands)	2018			2017			2018			2017
Balance at beginning of period	$	26,977		$	14,582		$	20,737		$	12,159
Charged to cost of revenue, net		3,183			1,574			10,782			5,219
Payments		(1,855	)		(377	)		(3,695	)		(1,509	)
Currency translation effect		(1,059	)		443			(578	)		353

Balance at end of period	$	27,246		$	16,222		$	27,246		$	16,222

Note 8 – Notes Payable

The Company’s 3.5% convertible senior notes due 2018 with a conversion price of $35.47 matured on April 1, 2018 with a balance of $119.1 million prior to conversion. The conversion of these notes resulted in the issuance of an additional 3.4 million shares of the Company’s common stock.

THE GREENBRIER COMPANIES, INC.

Note 9 – Accumulated Other Comprehensive Loss

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


(In thousands)	Unrealized Gain (loss) on Derivative Financial Instruments			Foreign Currency Translation Adjustment			Other			Accumulated Other Comprehensive Loss
Balance, August 31, 2017	$	181		$	(5,366	)	$	(1,094	)	$	(6,279	)
Other comprehensive loss before reclassifications		(274	)		(14,145	)		54			(14,365	)
Amounts reclassified from Accumulated other comprehensive loss		(606	)		—			—			(606	)

Balance, May 31, 2018	$	(699	)	$	(19,511	)	$	(1,040	)	$	(21,250	)

The amounts reclassified out of Accumulated other comprehensive loss into the Consolidated Statements of Income, with presentation location, were as follows:


(In thousands)	Three Months Ended May 31,						Financial Statement Location
(In thousands)	2018			2017			Financial Statement Location
(Gain) loss on derivative financial instruments:
Foreign exchange contracts	$	71		$	862		Revenue and cost of revenue
Interest rate swap contracts		39			245		Interest and foreign exchange

		110			1,107		Total before tax
		(51	)		(236	)	Income tax expense (benefit)

	$	59		$	871		Net of tax


(In thousands)	Nine Months Ended May 31,						Financial Statement Location
(In thousands)	2018			2017			Financial Statement Location
(Gain) loss on derivative financial instruments:
Foreign exchange contracts	$	(986	)	$	4,304		Revenue and cost of revenue
Interest rate swap contracts		312			871		Interest and foreign exchange

		(674	)		5,175		Total before tax
		68			(1,153	)	Income tax expense (benefit)

	$	(606	)	$	4,022		Net of tax

THE GREENBRIER COMPANIES, INC.

Note 10 – Earnings Per Share

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


(In thousands)	Three Months Ended May 31,				Nine Months Ended May 31,
(In thousands)	2018		2017		2018		2017
Weighted average basic common shares outstanding ⁽¹⁾		32,034		29,348		30,250		29,192
Dilutive effect of 2018 Convertible notes ⁽²⁾		655		3,305		2,435		3,286
Dilutive effect of 2024 Convertible notes ⁽³⁾		—		—		—		—
Dilutive effect of restricted stock units ⁽⁴⁾		225		37		89		37

Weighted average diluted common shares outstanding		32,914		32,690		32,774		32,515

(1)

Restricted stock grants and restricted stock units that are considered participating securities, including some grants subject to certain performance criteria, are included in weighted average basic common shares outstanding when the Company is in a net earnings position.

(2)

The dilutive effect of the 2018 Convertible notes was included as they were considered dilutive under the “if converted” method as further discussed below. The 2018 Convertible notes matured on April 1, 2018.

(3)

The 2024 Convertible notes were issued in February 2017. The dilutive effect of the 2024 Convertible notes was excluded for the three and nine months ended May 31, 2018 and 2017 as the average stock price was less than the applicable conversion price and therefore was considered anti-dilutive.

(4)

Restricted stock units that are not considered participating securities and restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved, are included in weighted average diluted common shares outstanding when the Company is in a net earnings position.

Diluted EPS is calculated using the more dilutive of two approaches. The first approach includes the dilutive effect, using the treasury stock method, associated with shares underlying the 2024 Convertible notes, restricted stock units that are not considered participating securities and performance based restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved. The second approach supplements the first by including the “if converted” effect of the 2018 Convertible notes during the periods in which they were outstanding. Under the “if converted” method, debt issuance and interest costs, both net of tax, associated with the convertible notes are added back to net earnings and the share count is increased by the shares underlying the convertible notes. The 2024 Convertible notes are included in the calculation of both approaches using the treasury stock method when the average stock price is greater than the applicable conversion price.


	Three Months Ended May 31,				Nine Months Ended May 31,
	2018		2017		2018		2017
Net earnings attributable to Greenbrier	$	32,951	$	32,823	$	120,846	$	92,321
Add back:
Interest and debt issuance costs on the 2018 Convertible notes, net of tax		297		733		2,031		2,199

Earnings before interest and debt issuance costs on convertible notes	$	33,248	$	33,556	$	122,877	$	94,520

Weighted average diluted common shares outstanding		32,914		32,690		32,774		32,515
Diluted earnings per share ⁽¹⁾	$	1.01	$	1.03	$	3.75	$	2.91

(1)

Diluted earnings per share was calculated as follows:

Earnings before interest and debt issuance costs (net of tax) on convertible notes

Weighted average diluted common shares outstanding

THE GREENBRIER COMPANIES, INC.

Note 11 – Stock Based Compensation

The value of stock based compensation awards is amortized as compensation expense from the grant date through the earlier of the vesting period or the recipient’s eligible retirement date. Awards are expensed upon grant when the recipient’s eligible retirement date precedes the grant date.

Stock based compensation expense was $7.7 million and $20.3 million for the three and nine months ended May 31, 2018, respectively and $8.2 million and $19.0 million for the three and nine months ended May 31, 2017, respectively. Compensation expense is recorded in Selling and administrative expense and Cost of revenue on the Consolidated Statements of Income.

Note 12 – 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 used to reduce the impact of changes in interest rates on certain debt. The Company’s foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, and therefore the effective portion of unrealized gains and losses is recorded in accumulated other comprehensive income or loss.

At May 31, 2018 exchange rates, forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros; the purchase of Mexican Pesos and the sale of U.S. Dollars; and for the purchase of U.S. Dollars and the sale of Saudi Riyals aggregated to $148.4 million. The fair value of the contracts is included on the Consolidated Balance Sheets as Accounts payable and accrued liabilities when there is a loss, or as Accounts receivable, net when there is a gain. As the contracts mature at various dates through December 2019, any such gain or loss remaining will be recognized in manufacturing revenue or cost of revenue along with the related transactions. In the event that the underlying transaction does not occur or does not occur in the period designated at the inception of the hedge, the amount classified in accumulated other comprehensive loss would be reclassified to the results of operations in Interest and foreign exchange at the time of occurrence. At May 31, 2018 exchange rates, approximately $1.3 million would be reclassified to revenue or cost of revenue in the next 12 months.

At May 31, 2018, an interest rate swap agreement maturing in March 2020 had a notional amount of $86.0 million. The fair value of the contract is included in Accounts payable and accrued liabilities on the Consolidated Balance Sheets. As interest expense on the underlying debt is recognized, amounts corresponding to the interest rate swap are reclassified from Accumulated other comprehensive loss and charged or credited to interest expense. At May 31, 2018 interest rates, approximately $0.1 million would be reclassified to interest expense in the next 12 months.

Fair Values of Derivative Instruments


	Asset Derivatives					Liability Derivatives
		May 31, 2018		August 31, 2017			May 31, 2018		August 31, 2017
(In thousands)	Balance sheet location	Fair Value		Fair Value		Balance sheet location	Fair Value		Fair Value
Derivatives designated as hedging instruments
Foreign forward exchange contracts	Accounts receivable, net	$	493	$	2,341	Accounts payable and accrued liabilities	$	1,220	$	1,761
Interest rate swap contracts	Accounts receivable, net		648		—	Accounts payable and accrued liabilities		1		1,125

		$	1,141	$	2,341		$	1,221	$	2,886


Derivatives not designated as hedging instruments
Foreign forward exchange contracts	Accounts receivable, net	$	25	$	1,473	Accounts payable and accrued liabilities	$	207	$	—

THE GREENBRIER COMPANIES, INC.

The Effect of Derivative Instruments on the Statements of Income


Derivatives in cash flow hedging relationships	Location of gain (loss) recognized in income on derivatives	Gain (loss) recognized in income on derivatives nine months ended May 31,
		2018			2017
Foreign forward exchange contract	Interest and foreign exchange	$	1,081		$	2,494
Interest rate swap contracts	Interest and foreign exchange		(1	)		24

		$	1,080		$	2,518


Derivatives in cash flow hedging relationships	Gain (loss) recognized in OCI on derivatives (effective portion) nine months ended May 31,					Location of gain (loss) reclassified from accumulated OCI into income	Gain (loss) reclassified from accumulated OCI into income (effective portion) nine months ended May 31,						Location of gain (loss) on derivative (ineffective portion and amount excluded from effectiveness testing)	Gain (loss) recognized on derivative (ineffective portion and amount excluded from effectiveness testing) nine months ended May 31,
	2018			2017			2018			2017				2018		2017
Foreign forward exchange contracts	$	(1,063	)	$	1,888	Revenue	$	1,262		$	(4,130	)	Revenue	$	472	$	(3,216	)
Foreign forward exchange contracts		(566	)		166	Cost of revenue		(276	)		(174	)	Cost of revenue		353		205
Interest rate swap contracts		1,485			1,248	Interest and foreign exchange		(312	)		(871	)	Interest and foreign exchange		—		—

	$	(144	)	$	3,302		$	674		$	(5,175	)		$	825	$	(3,011	)

Note 13 – Segment Information

Greenbrier operates in four reportable segments: Manufacturing; Wheels & Parts; Leasing & Services; and GBW Joint Venture.

The accounting policies of the segments are described in the summary of significant accounting policies in the Consolidated Financial Statements contained in the Company’s 2017 Annual Report on Form 10-K. Performance is evaluated based on Earnings from operations. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. The Company does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes. Intersegment sales and transfers are valued as if the sales or transfers were to third parties. Related revenue and margin are eliminated in consolidation and therefore are not included in consolidated results in the Company’s Consolidated Financial Statements.

The information in the following table is derived directly from the segments’ internal financial reports used for corporate management purposes. The results of operations for the GBW Joint Venture are not reflected in the tables below as the investment is accounted for under the equity method of accounting.

THE GREENBRIER COMPANIES, INC.

For the three months ended May 31, 2018:


	Revenue								Earnings (loss) from operations
(In thousands)	External		Intersegment			Total			External			Intersegment			Total
Manufacturing	$	510,099	$	53,501		$	563,600		$	62,435		$	6,215		$	68,650
Wheels & Parts		94,515		10,879			105,394			5,546			686			6,232
Leasing & Services		36,773		3,886			40,659			26,704			3,380			30,084
Eliminations		—		(68,266	)		(68,266	)		—			(10,281	)		(10,281	)
Corporate		—		—			—			(23,146	)		—			(23,146	)

	$	641,387	$	—		$	641,387		$	71,539		$	—		$	71,539


For the nine months ended May 31, 2018:

	Revenue								Earnings (loss) from operations
(In thousands)	External		Intersegment			Total			External			Intersegment			Total
Manufacturing	$	1,473,411	$	84,253		$	1,557,664		$	178,589		$	13,816		$	192,405
Wheels & Parts		261,236		27,563			288,799			13,083			2,214			15,297
Leasing & Services		95,611		9,855			105,466			71,008			8,546			79,554
Eliminations		—		(121,671	)		(121,671	)		—			(24,576	)		(24,576	)
Corporate		—		—			—			(68,829	)		—			(68,829	)

	$	1,830,258	$	—		$	1,830,258		$	193,851		$	—		$	193,851


For the three months ended May 31, 2017:

	Revenue								Earnings (loss) from operations
(In thousands)	External		Intersegment			Total			External			Intersegment			Total
Manufacturing	$	317,104	$	19,291		$	336,395		$	57,901		$	1,022		$	58,923
Wheels & Parts		85,231		8,959			94,190			4,239			839			5,078
Leasing & Services		36,826		595			37,421			7,084			427			7,511
Eliminations		—		(28,845	)		(28,845	)		—			(2,288	)		(2,288	)
Corporate		—		—			—			(20,752	)		—			(20,752	)

	$	439,161	$	—		$	439,161		$	48,472		$	—		$	48,472


For the nine months ended May 31, 2017:

	Revenue								Earnings (loss) from operations
(In thousands)	External		Intersegment			Total			External			Intersegment			Total
Manufacturing	$	1,216,641	$	19,291		$	1,235,932		$	226,611		$	1,022		$	227,633
Wheels & Parts		237,580		23,393			260,973			12,702			1,962			14,664
Leasing & Services		103,536		8,040			111,576			24,363			7,602			31,965
Eliminations		—		(50,724	)		(50,724	)		—			(10,586	)		(10,586	)
Corporate		—		—			—			(61,024	)		—			(61,024	)

	$	1,557,757	$	—		$	1,557,757		$	202,652		$	—		$	202,652


	Total assets
	May 31,		August 31,
(In thousands)	2018		2017
Manufacturing	$	924,869	$	914,450
Wheels & Parts		243,641		236,315
Leasing & Services		578,259		535,323
Unallocated		683,814		711,617

	$	2,430,583	$	2,397,705

THE GREENBRIER COMPANIES, INC.

Reconciliation of Earnings from operations to Earnings before income tax and loss from unconsolidated affiliates:


	Three Months Ended May 31,				Nine Months Ended May 31,
(In thousands)	2018		2017		2018		2017
Earnings from operations	$	71,539	$	48,472	$	193,851	$	202,652
Interest and foreign exchange		6,533		7,894		20,582		15,291

Earnings before income tax and loss from unconsolidated affiliates	$	65,006	$	40,578	$	173,269	$	187,361

The Company has a 50% ownership interest in the GBW Joint Venture and accounts for its interest under the equity method of accounting. The Company’s 50% share of the results of operations are included in Earnings (loss) from unconsolidated affiliates in the Consolidated Statement of Income and its investment is included in Investments in unconsolidated affiliates in the Consolidated Balance Sheet. The GBW Joint Venture is Greenbrier’s fourth reportable segment. Information included in the tables below represent totals for GBW Railcar Services LLC (GBW) rather than Greenbrier’s 50% share, as this is how performance and resource allocation is evaluated.

During the third quarter of 2018, GBW recorded a pre-tax goodwill impairment loss of $26.4 million which reduced the goodwill balance to $15.1 million. The goodwill impairment was included in GBW’s loss from operations for the three and nine months ended May 31, 2018.


	Three Months Ended May 31,						Nine Months Ended May 31,
(In thousands)	2018			2017			2018			2017
Revenue	$	67,248		$	62,674		$	187,933		$	197,176
Loss from operations	$	(29,544	)	$	(5,525	)	$	(40,748	)	$	(16,988	)

	Total Assets
	May 31, 2018			August 31, 2017
GBW ⁽¹⁾	$	177,764		$	206,009

⁽¹⁾	Includes goodwill and intangible assets of $50.4 million and $78.8 million as of May 31, 2018 and August 31, 2017.

Note 14 – Income Taxes

The enactment of the Tax Cuts and Jobs Act (Tax Act) on December 22, 2017 significantly changed U.S. federal income tax law. The changes with the largest effects on the Company were the reduction of the statutory federal corporate tax rate from 35% to 21% effective January 1, 2018 and the imposition of a transition tax on foreign earnings not previously subject to U.S. taxation. As a result of the Company’s fiscal year, the Company’s statutory federal corporate rate is a blended rate of 25.7% in 2018, which will be reduced to 21% in 2019 and thereafter.

Deferred income taxes were remeasured as a result of the new statutory rate. This resulted in a tax benefit of $34.3 million that was recognized during the second quarter of 2018. No adjustments were made during the third quarter of 2018.

The Tax Act requires the Company to accrue a transition tax in its 2018 taxable income on foreign earnings not previously subject to U.S. taxation. The transition tax resulted in a tax expense of $11.5 million that was recognized during the second quarter of 2018. No adjustments were made during the third quarter of 2018. The Company intends to pay this transition tax over eight years as permitted by the Tax Act. Notwithstanding this deemed inclusion in taxable income, any actual repatriation of these foreign earnings would be accompanied by foreign withholding taxes. The Company does not intend to repatriate these foreign earnings and continues to assert that its foreign earnings are indefinitely reinvested.

The Tax Act also imposed a tax on global intangible low-taxed income (GILTI tax) for taxable years beginning after December 31, 2017, which is applicable to the Company beginning in 2019.

THE GREENBRIER COMPANIES, INC.

Staff Accounting Bulletin 118, issued by the SEC on the date of the Tax Act, allows registrants to record provisional amounts related to the Tax Act during a measurement period that will end at the earlier of one year from the date of the enactment of the Tax Act or whenever the registrant has obtained and analyzed the information necessary to finalize its accounting. The amounts that were recorded during the second quarter of 2018 for the remeasurement of deferred income taxes and for the transition tax were provisional amounts. Both were recorded as discrete items of tax expense or benefit. These amounts may be revised in subsequent quarters as further information is obtained and analyzed. As of May 31, 2018 no adjustments have been made to these provisional amounts.

The table below reconciles the effects of the Tax Act discussed above on the effective tax rate for the nine months ended May 31, 2018:


Effective tax rate before the Tax Act	31.9	%
Benefit from reduction in statutory federal corporate tax rate from 35% to 25.7%	(5.5	)

Effective tax rate before discrete items	26.4
Discrete benefit from revaluation of deferred income taxes	(19.9	)
Discrete expense from transition tax	6.6

Effective tax rate	13.1	%

Note 15 – Commitments and Contingencies

The Company’s Portland, Oregon manufacturing facility is located adjacent to the Willamette River. In December 2000, the U.S. Environmental Protection Agency (EPA) classified portions of the Willamette River bed known as the Portland Harbor, including the portion fronting the Company’s manufacturing facility, as a federal “National Priority List” or “Superfund” site due to sediment contamination (the Portland Harbor Site). The Company and more than 140 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. Ten private and public entities, including the Company (the Lower Willamette Group or LWG), signed an Administrative Order on Consent (AOC) to perform a remedial investigation/feasibility study (RI/FS) of the Portland Harbor Site under EPA oversight, and several additional entities have not signed such consent, but nevertheless contributed money to the effort. The EPA-mandated RI/FS was produced by the LWG and cost over $110 million during a 17-year period. The Company bore a percentage of the total costs incurred by the LWG in connection with the investigation. The Company’s aggregate expenditure during the 17-year period was not material. Some or all of any such outlay may be recoverable from other responsible parties. The LWG requested on October 18, 2017 that the AOC be terminated since the EPA issued its Record of Decision (ROD) for the Portland Harbor Site on January 6, 2017. On October 26, 2017, the EPA project manager approved that request.

Separate from the process described above, which focused on the type of remediation to be performed at the Portland Harbor Site and the schedule for such remediation, 83 parties, including the State of Oregon and the federal government, entered into a non-judicial mediation process to try to allocate costs associated with remediation of the Portland Harbor site. Approximately 110 additional parties signed tolling agreements related to such allocations. On April 23, 2009, the Company and the other AOC signatories filed suit against 69 other parties due to a possible limitations period for some such claims; Arkema Inc. et al v. A & C Foundry Products, Inc. et al , U.S. District Court, District of Oregon, Case #3:09-cv-453-PK. All but 12 of these parties elected to sign tolling agreements and be dismissed without prejudice, and the case has been stayed by the court until January 16, 2020. The allocation process is continuing in parallel with the process to define the remediation steps.

The EPA’s January 6, 2017 ROD identifies a clean-up remedy that the EPA estimates will take 13 years of active remediation, followed by 30 years of monitoring with an estimated undiscounted cost of $1.7 billion. The EPA typically expects its cost estimates to be accurate within a range of -30% to +50%, but this ROD states that changes in costs are likely to occur as a result of new data it wants to collect over a 2-year period prior to final remedy design. The ROD identifies 13 Sediment Decision Units. One of the units, RM9W, includes the nearshore area of the river sediments offshore of the Company’s Portland, Oregon manufacturing facility as well as upstream and downstream of the facility. It also includes a portion of the Company’s riverbank. The ROD does not break down total remediation

THE GREENBRIER COMPANIES, INC.

costs by Sediment Decision Unit. The EPA’s ROD concluded that more data was needed to better define clean-up scope and cost. On December 8, 2017, the EPA announced that Portland Harbor is one of 21 Superfund sites targeted for greater attention. On December 19, 2017, the EPA announced that it had entered a new AOC with a group of four potentially responsible parties to conduct additional sampling during 2018 and 2019 to provide more certainty about clean-up costs and aid the mediation process to allocate those costs. The parties to the mediation, including the Company, have agreed to help fund the additional sampling.

The ROD does not address responsibility for the costs of clean-up, nor does it allocate such costs among the potentially responsible parties. Responsibility for funding and implementing the EPA’s selected cleanup remedy will be determined at an unspecified later date. Based on the investigation to date, the Company believes that it did not contribute in any material way to contamination in the river sediments or the damage of natural resources in the Portland Harbor Site and that the damage in the area of the Portland Harbor Site adjacent to its property precedes its ownership of the Portland, Oregon manufacturing facility. Because these environmental investigations are still underway, including the collection of new pre-remedial design sampling data by EPA, sufficient information is currently not available to determine the Company’s liability, if any, for the cost of any required remediation or restoration of the Portland Harbor Site or to estimate a range of potential loss. Based on the results of the pending investigations and future assessments of natural resource damages, the Company may be required to incur costs associated with additional phases of investigation or remedial action, and may be liable for damages to natural resources. In addition, the Company may be required to perform periodic maintenance dredging in order to continue to launch vessels from its launch ways in Portland, Oregon, on the Willamette River, and the river’s classification as a Superfund site could result in some limitations on future dredging and launch activities. Any of these matters could adversely affect the Company’s business and Consolidated Financial Statements, or the value of its Portland property.

On January 30, 2017 the Confederated Tribes and Bands of Yakama Nation sued 33 parties including the Company as well as the United States and the State of Oregon for costs it incurred in assessing alleged natural resource damages to the Columbia River from contaminants deposited in Portland Harbor. Confederated Tribes and Bands of the Yakama Nation v. Air Liquide America Corp., et al., United States Court for the District of Oregon Case No. 3i17-CV-00164-SB. The Company, along with many of the other defendants, has moved to dismiss the case. That motion is pending. The complaint does not specify the amount of damages the Plaintiff will seek.

The Company has entered into a Voluntary Cleanup Agreement with the Oregon Department of Environmental Quality (DEQ) 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 into the environment. The Company has also signed an Order on Consent with the DEQ to finalize the investigation of potential onsite sources of contamination that may have a release pathway to the Willamette River. Interim precautionary measures are also required in the order and the Company is discussing with the DEQ potential remedial actions which may be required. The Company’s aggregate expenditure has not been material, however the Company could incur significant expenses for remediation. Some or all of any such outlay may be recoverable from other responsible parties.

In the quarter ended November 30, 2016, the Company received an adverse judgment of approximately $15 million, which was subsequently reduced to approximately $10 million, on one matter related to commercial litigation in a foreign jurisdiction. The Company has settled the litigation for less than the judgment.

From time to time, Greenbrier is involved as a defendant in litigation in the ordinary course of business, the outcomes of which cannot be predicted with certainty. While the ultimate outcome of such legal proceedings cannot be determined at this time, the Company believes that the resolution of pending litigation will not have a material adverse effect on the Company’s Consolidated Financial Statements.

As of May 31, 2018, the Company had outstanding letters of credit aggregating $72.2 million associated with performance guarantees, facility leases and workers compensation insurance.

As of May 31, 2018, the Company had a $45.0 million note receivable balance from GBW which is included on the Consolidated Balance Sheet in Accounts receivable, net. The Company may make additional capital contributions or loans to GBW, an unconsolidated 50/50 joint venture, in the future.

THE GREENBRIER COMPANIES, INC.

As of May 31, 2018, the Company had a $10.0 million note receivable from Amsted-Maxion Cruzeiro, its unconsolidated Brazilian castings and components manufacturer and a $7.9 million note receivable balance from Greenbrier-Maxion, its unconsolidated Brazilian railcar manufacturer. These note receivables are included on the Consolidated Balance Sheet in Accounts receivable, net. In the future, the Company may make loans to or provide guarantees for Amsted-Maxion Cruzeiro or Greenbrier-Maxion.

Note 16 – Fair Value Measures

Certain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value, for this disclosure, is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:


Level 1 -		observable inputs such as unadjusted quoted prices in active markets for identical instruments;

Level 2 -		inputs, other than the quoted market prices in active markets for similar instruments, which are observable, either directly or indirectly; and

Level 3 -		unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value on a recurring basis as of May 31, 2018 were:


(In thousands)	Total		Level 1		Level 2 ⁽¹⁾		Level 3
Assets:
Derivative financial instruments	$	1,166	$	—	$	1,166	$	—
Nonqualified savings plan investments		25,156		25,156		—		—
Cash equivalents		106,056		106,056		—		—

	$	132,378	$	131,212	$	1,166	$	—

Liabilities:
Derivative financial instruments	$	1,428	$	—	$	1,428	$	—

(1)	Level 2 assets and liabilities include derivative financial instruments that are valued based on observable inputs. See Note 11 Derivative Instruments for further discussion.

Assets and liabilities measured at fair value on a recurring basis as of August 31, 2017 were:


(In thousands)	Total		Level 1		Level 2		Level 3
Assets:
Derivative financial instruments	$	3,814	$	—	$	3,814	$	—
Nonqualified savings plan investments		20,974		20,974		—		—
Cash equivalents		105,337		105,337		—		—

	$	130,125	$	126,311	$	3,814	$	—

Liabilities:
Derivative financial instruments	$	2,886	$	—	$	2,886	$	—

THE GREENBRIER COMPANIES, INC.

Note 17 – Related Party Transactions

In June 2017, the Company purchased a 40% interest in the common equity of an entity that buys and sells railcar assets that are leased to third parties. The railcars sold to this leasing warehouse are principally built by Greenbrier. The Company accounts for this leasing warehouse investment under the equity method of accounting. As of May 31, 2018, the carrying amount of the investment was $6.8 million which is classified in Investment in unconsolidated affiliates in the Consolidated Balance Sheet. Upon sale of railcars to this entity from Greenbrier, 60% of the related revenue and margin is recognized and 40% is deferred until the railcars are ultimately sold by the entity. During the nine months ended May 31, 2018, the Company recognized $16 million in revenue associated with railcars sold into the leasing warehouse and an additional $41 million associated with railcars sold out of the leasing warehouse. The Company also provides administrative and remarketing services to this entity and earns management fees for these services which were immaterial for the nine months ended May 31, 2018.

THE GREENBRIER COMPANIES, INC.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

We operate in four reportable segments: Manufacturing; Wheels & Parts; Leasing & Services; and GBW Joint Venture. Our segments are operationally integrated. The Manufacturing segment, which currently operates from facilities in the U.S., Mexico, Poland and Romania, produces double-stack intermodal railcars, tank cars, conventional railcars, automotive railcar products and marine vessels. The Wheels & Parts segment performs wheel and axle servicing, as well as production of a variety of parts for the railroad industry in North America. The Leasing & Services segment owns approximately 7,900 railcars (6,100 railcars held as equipment on operating leases, 1,700 held as leased railcars for syndication and 100 held as finished goods inventory) and provides management services for approximately 356,000 railcars for railroads, shippers, carriers, institutional investors and other leasing and transportation companies in North America as of May 31, 2018. The GBW Joint Venture segment provides repair services across North America, including facilities certified by the AAR. The results of GBW’s operations are included as part of Earnings (loss) from unconsolidated affiliates as we account for our interest under the equity method of accounting. Through other unconsolidated affiliates we produce rail and industrial castings, tank heads and other components and have an ownership stake in a railcar manufacturer in Brazil and a leasing warehouse.

Our total manufacturing backlog of railcar units as of May 31, 2018 was approximately 24,200 units with an estimated value of $2.35 billion, of which 20,500 units are for direct sales and 3,700 units are for lease to third parties. Approximately 1% of backlog units and the estimated value as of May 31, 2018 was associated with our Brazilian manufacturing operations which is accounted for under the equity method. Backlog units for lease may be syndicated to third parties or held in our own fleet depending on a variety of factors. Multi-year supply agreements are a part of rail industry practice. A portion of the orders included in backlog reflects an assumed product mix. Under terms of the orders, the exact mix and pricing will be determined in the future, which may impact the dollar amount of backlog. Marine backlog as of May 31, 2018 was $12 million.

Our backlog of railcar units and marine vessels is not necessarily indicative of future results of operations. Certain orders in backlog are subject to customary documentation and completion of terms. Customers may attempt to cancel or modify orders in backlog. Historically, little variation has been experienced between the quantity ordered and the quantity actually delivered, though the timing of deliveries may be modified from time to time. We cannot guarantee that our reported backlog will convert to revenue in any particular period, if at all.

THE GREENBRIER COMPANIES, INC.

Three Months Ended May 31, 2018 Compared to Three Months Ended May 31, 2017

Overview

Revenue, cost of revenue, margin and operating profit presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.


	Three Months Ended May 31,
(In thousands)	2018			2017
Revenue:
Manufacturing	$	510,099		$	317,104
Wheels & Parts		94,515			85,231
Leasing & Services		36,773			36,826

		641,387			439,161
Cost of revenue:
Manufacturing		427,875			245,228
Wheels & Parts		85,850			77,985
Leasing & Services		19,155			26,247

		532,880			349,460
Margin:
Manufacturing		82,224			71,876
Wheels & Parts		8,665			7,246
Leasing & Services		17,618			10,579

		108,507			89,701
Selling and administrative		51,793			42,810
Net gain on disposition of equipment		(14,825	)		(1,581	)

Earnings from operations		71,539			48,472
Interest and foreign exchange		6,533			7,894

Earnings before income taxes and loss from unconsolidated affiliates		65,006			40,578
Income tax expense		(15,944	)		(8,656	)

Earnings before loss from unconsolidated affiliates		49,062			31,922
Loss from unconsolidated affiliates		(12,823	)		(681	)

Net earnings		36,239			31,241
Net (earnings) loss attributable to noncontrolling interest		(3,288	)		1,582

Net earnings attributable to Greenbrier	$	32,951		$	32,823

Diluted earnings per common share	$	1.01		$	1.03

Performance for our segments is evaluated based on operating profit. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. Management does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes.


	Three Months Ended May 31,
(In thousands)	2018			2017
Operating profit (loss):
Manufacturing	$	62,435		$	57,901
Wheels & Parts		5,546			4,239
Leasing & Services		26,704			7,084
Corporate		(23,146	)		(20,752	)

	$	71,539		$	48,472

THE GREENBRIER COMPANIES, INC.

Consolidated Results


(In thousands)	Three Months Ended May 31,						Increase (Decrease)			% Change
(In thousands)	2018			2017			Increase (Decrease)			% Change
Revenue	$	641,387		$	439,161		$	202,226			46.0%
Cost of revenue	$	532,880		$	349,460		$	183,420			52.5%
Margin (%)		16.9	%		20.4	%		(3.5	%)		*
Net earnings attributable to Greenbrier	$	32,951		$	32,823		$	128			0.4%

*	Not meaningful

Through our integrated business model, we provide a broad range of custom products and services in each of our segments, which have various average selling prices and margins. The demand for and mix of products and services delivered changes from period to period, which causes fluctuations in our results of operations.

The 46.0% increase in revenue for the three months ended May 31, 2018 as compared to the three months ended May 31, 2017 was primarily due to a 60.9% increase in Manufacturing revenue. The increase in Manufacturing revenue was primarily due to a 96.2% increase in deliveries and a change in product mix. The increase was also attributed to a 10.9% increase in Wheels & Parts revenue as a result of higher wheel set and component volumes due to an increase in demand and an increase in scrap metal pricing.

The 52.5% increase in cost of revenue for the three months ended May 31, 2018 as compared to the three months ended May 31, 2017 was primarily due to a 74.5% increase in Manufacturing cost of revenue. The increase in Manufacturing cost of revenue was primarily due to a 96.2% increase in the volume of railcar deliveries and a change in product mix. The increase was also attributed to a 10.1% increase in Wheels & Parts cost of revenue, primarily due to higher wheel set and component costs associated with increased volumes. The overall increase in cost of revenue was partially offset by a 27.0% decrease in Leasing & Services cost of revenue primarily due to lower maintenance costs, a decline in the volume of railcars sold that we purchased from third parties, lower transportation costs and fewer railcars on operating leases as we rebalance our lease portfolio.

Margin as a percentage of revenue was 16.9% and 20.4% for the three months ended May 31, 2018 and 2017, respectively. The overall margin as a percentage of revenue was negatively impacted by a decrease in Manufacturing margin to 16.1% from 22.7% primarily attributed to a change in product mix. This was partially offset by an increase in Leasing & Services margin to 47.9% from 28.7%. Leasing & Services margin for the three months ended May 31, 2018 benefited from fewer sales of railcars that we purchased from third parties which have lower margin percentages, higher management services margin from lower maintenance costs, a higher average volume of rent-producing leased railcars for syndication and lower transportation costs.

The $0.1 million increase in net earnings for the three months ended May 31, 2018 as compared to the three months ended May 31, 2017 was primarily attributable to an increase in margin dollars from an increase in the volume of railcar deliveries and higher Net gain on disposition of equipment. These were partially offset by an increase in Loss from unconsolidated affiliates.

THE GREENBRIER COMPANIES, INC.

Manufacturing Segment


(In thousands)	Three Months Ended May 31,						Increase (Decrease)			% Change
(In thousands)	2018			2017			Increase (Decrease)			% Change
Revenue	$	510,099		$	317,104		$	192,995			60.9	%
Cost of revenue	$	427,875		$	245,228		$	182,647			74.5	%
Margin (%)		16.1	%		22.7	%		(6.6	%)		*
Operating profit ($)	$	62,435		$	57,901		$	4,534			7.8	%
Operating profit (%)		12.2	%		18.3	%		(6.1	%)		*
Deliveries		5,100			2,600			2,500			96.2	%

*	Not meaningful

As of June 1, 2017, the Manufacturing segment included the results of Greenbrier-Astra Rail which is consolidated for financial reporting purposes.

Manufacturing revenue increased $193.0 million or 60.9% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The increase in revenue was primarily attributed to a 96.2% increase in deliveries and a change in product mix.

Manufacturing cost of revenue increased $182.6 million or 74.5% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The increase in cost of revenue was primarily attributed to a 96.2% increase in the volume of railcar deliveries and a change in product mix.

Manufacturing margin as a percentage of revenue decreased 6.6% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The decrease was primarily attributed to a change in product mix.

Manufacturing operating profit increased $4.5 million or 7.8% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The increase was primarily attributed to higher margin dollars due to an increase in the volume of railcar deliveries.

THE GREENBRIER COMPANIES, INC.

Wheels & Parts Segment


(In thousands)	Three Months Ended May 31,						Increase (Decrease)			% Change
(In thousands)	2018			2017			Increase (Decrease)			% Change
Revenue	$	94,515		$	85,231		$	9,284			10.9	%
Cost of revenue	$	85,850		$	77,985		$	7,865			10.1	%
Margin (%)		9.2	%		8.5	%		0.7	%		*
Operating profit ($)	$	5,546		$	4,239		$	1,307			30.8	%
Operating profit (%)		5.9	%		5.0	%		0.9	%		*

*	Not meaningful

Wheels & Parts revenue increased $9.3 million or 10.9% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The increase was primarily as a result of higher wheel set and component volumes due to an increase in demand and an increase in scrap metal pricing. These were partially offset by a decrease in parts volume.

Wheels & Parts cost of revenue increased $7.9 million or 10.1% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The increase was primarily attributed to higher wheel set and component costs associated with increased volumes. This was partially offset by a decrease in parts volume.

Wheels & Parts margin as a percentage of revenue increased 0.7% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The increase was primarily attributed to efficiencies from operating at higher wheel set and component volumes and an increase in scrap metal pricing. This was partially offset by a less favorable parts product mix.

Wheels & Parts operating profit increased $1.3 million or 30.8% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The increase was primarily attributed to higher margins due to an increase in wheelset and component volumes and an increase in efficiencies.

THE GREENBRIER COMPANIES, INC.

Leasing & Services Segment


(In thousands)	Three Months Ended May 31,						Increase (Decrease)			% Change
(In thousands)	2018			2017			Increase (Decrease)			% Change
Revenue	$	36,773		$	36,826		$	(53	)		(0.1	%)
Cost of revenue	$	19,155		$	26,247		$	(7,092	)		(27.0	%)
Margin (%)		47.9	%		28.7	%		19.2	%		*
Operating profit ($)	$	26,704		$	7,084		$	19,620			277.0	%
Operating profit (%)		72.6	%		19.2	%		53.4	%		*

*	Not meaningful

The Leasing & Services segment primarily generates revenue from leasing railcars from its lease fleet and providing various management services. We also earn revenue from rent-producing leased railcars for syndication, which are held short term and classified as Leased railcars for syndication on our Consolidated Balance Sheet. From time to time, railcars are purchased from third parties with the intent to resell them. The gross proceeds from the sale of these railcars are recorded in revenue and the cost of purchasing these railcars are recorded in cost of revenue.

Leasing & Services revenue decreased $0.1 million or 0.1% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The decrease was primarily attributed to a decrease in the sale of railcars which we had purchased from third parties with the intent to resell them and a decline in leasing revenue due to fewer railcars on operating leases as we rebalance our lease portfolio. This was partially offset by higher management services revenue from new service agreements and a higher average volume of rent-producing leased railcars for syndication.

Leasing & Services cost of revenue decreased $7.1 million or 27.0% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The decrease was primarily due to lower maintenance costs, a decline in the volume of railcars sold that we purchased from third parties, lower transportation costs and fewer railcars on operating leases as we rebalance our lease portfolio.

Leasing & Services margin as a percentage of revenue increased 19.2% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. Margin for the three months ended May 31, 2018 benefited from fewer sales of railcars that we purchased from third parties which have lower margin percentages, higher management services margin from lower maintenance costs, a higher average volume of rent-producing leased railcars for syndication and lower transportation costs.

Leasing & Services operating profit increased $19.6 million or 277.0% for the three months ended May 31, 2018 compared to the three months ended May 31, 2017. The increase was primarily attributed to a $14.1 million increase in net gain on disposition of equipment and a $7.0 million increase in margin. The increase in net gain on disposition of equipment for the three months ended May 31, 2018 was related to higher volumes of equipment sales as we rebalance our lease portfolio.

The percentage of owned units on lease was 90.4% at May 31, 2018 compared to 93.6% at May 31, 2017.

THE GREENBRIER COMPANIES, INC.

GBW Joint Venture Segment

To reflect our 50% share of GBW’s net results, we recorded losses of $10.6 million and $1.6 million for the three months ended May 31, 2018 and 2017, respectively, in Earnings (loss) from unconsolidated affiliates. The increase in the losses at GBW primarily related to a pre-tax goodwill impairment loss of $26.4 million that GBW recorded during the three months ended May 31, 2018. As we account for GBW under the equity method of accounting, our 50% share of the non-cash goodwill impairment loss recognized by GBW was $9.5 million after-tax and included as part of Loss from unconsolidated affiliates on our Consolidated Statement of Income.

Selling and Administrative Expense


(In thousands)	Three Months Ended May 31,				Increase (Decrease)		% Change
(In thousands)	2018		2017		Increase (Decrease)		% Change
Selling and administrative expense	$	51,793	$	42,810	$	8,983		21.0	%

Selling and administrative expense was $51.8 million or 8.1% of revenue for the three months ended May 31, 2018 compared to $42.8 million or 9.7% of revenue for the prior comparable period. The $9.0 million increase was primarily attributed to $3.8 million in professional fees, consulting and related costs primarily associated with strategic business development and IT initiatives, $3.1 million from the addition of Astra Rail’s selling and administrative costs and $1.5 million in employee costs.

Net Gain on Disposition of Equipment

Net gain on disposition of equipment was $14.8 million for the three months ended May 31, 2018 compared to $1.6 million for the prior comparable period.

Net gain on disposition of equipment includes the sale of assets from our lease fleet (Equipment on operating leases, net) that are periodically sold in the normal course of business in order to take advantage of market conditions and to manage risk and liquidity and disposition of property, plant and equipment. The net gain on disposition of equipment for the three months ended May 31, 2018 primarily relates to higher volumes of equipment sales as we rebalance our lease portfolio.

Other Costs

Interest and foreign exchange expense was composed of the following:


	Three Months Ended May 31,					Increase (Decrease)
(In thousands)	2018			2017		Increase (Decrease)
Interest and foreign exchange:
Interest and other expense	$	7,392		$	7,030	$	362
Foreign exchange (gain) loss		(859	)		864		(1,723	)

	$	6,533		$	7,894	$	(1,361	)

The $1.4 million decrease in interest and foreign exchange expense from the prior comparable period was primarily attributed to a $0.9 million foreign exchange gain in the current year compared to a $0.9 million foreign exchange loss in the prior comparable period. The $1.7 million change in foreign exchange (gain) loss was primarily attributed to the change in the Mexican Peso relative to the U.S. Dollar. This was partially offset by a $0.4 million increase in interest expense due to additional interest expense as a result of the addition of Astra Rail.

THE GREENBRIER COMPANIES, INC.

Income Tax

The effective tax rate for the three months ended May 31, 2018 was 24.5% compared to 21.3% for the three months ended May 31, 2017. The tax rate for the three months ended May 31, 2017 benefited from the impact of discrete items and the year to date true-up of the estimated annual effective tax rate resulting in a cumulative adjustment which reduced tax expense during that period.

The tax rate for the three months ended May 31, 2018 was impacted from the reduction in the statutory rate from 35% to 21% due to the enactment of the Tax Act on December 22, 2017. As a result of our fiscal year end, our statutory rate is 25.7% for 2018. See Note 14 Income Taxes for further discussion of the impact of the Tax Act.

Our tax rate also fluctuates period-to-period due to changes in the projected mix of foreign and domestic pre-tax earnings and due to discrete tax items booked within the interim period. It can also fluctuate with changes in the proportion of projected pre-tax earnings attributable to our Mexican railcar manufacturing joint venture because the joint venture is predominantly treated as a partnership for tax purposes and, as a result, the partnership’s entire pre-tax earnings are included in Earnings before income taxes and earnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.

Loss From Unconsolidated Affiliates

Loss from unconsolidated affiliates primarily includes our share of after-tax results from our GBW joint venture, our Brazil operations which include a castings joint venture and a railcar manufacturing joint venture, our leasing warehouse investment, our North American castings joint venture and our tank head joint venture.

Loss from unconsolidated affiliates was $12.8 million for the three months ended May 31, 2018 compared to $0.7 million for the three months ended May 31, 2017. The $12.1 million increase in loss from unconsolidated affiliates was primarily attributed to a non-cash goodwill impairment that GBW recognized during the current quarter, of which our 50% share was $9.5 million after-tax, and losses at our Brazil operations.

Noncontrolling Interest

Net earnings attributable to noncontrolling interest was $3.3 million for the three months ended May 31, 2018 compared to a net loss attributable to noncontrolling interest of $1.6 million in the prior comparable period. These amounts primarily represent our Mexican partner’s share of the results of operations of our Mexican railcar manufacturing joint venture, adjusted for intercompany sales. The three months ended May 31, 2018 also included our European partner’s share of the results of Greenbrier-Astra Rail. The increase of $4.9 million from the prior year is primarily a result of an increase in earnings due to higher volumes of railcar deliveries at our Mexican railcar manufacturing joint venture.

THE GREENBRIER COMPANIES, INC.

Nine Months Ended May 31, 2018 Compared to Nine Months Ended May 31, 2017

Overview

Revenue, cost of revenue, margin and operating profit presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.


	Nine Months Ended May 31,
(In thousands)	2018			2017
Revenue:
Manufacturing	$	1,473,411		$	1,216,641
Wheels & Parts		261,236			237,580
Leasing & Services		95,611			103,536

		1,830,258			1,557,757
Cost of revenue:
Manufacturing		1,237,890			948,436
Wheels & Parts		239,064			218,460
Leasing & Services		50,136			69,484

		1,527,090			1,236,380
Margin:
Manufacturing		235,521			268,205
Wheels & Parts		22,172			19,120
Leasing & Services		45,475			34,052

		303,168			321,377
Selling and administrative		149,130			123,518
Net gain on disposition of equipment		(39,813	)		(4,793	)

Earnings from operations		193,851			202,652
Interest and foreign exchange		20,582			15,291

Earnings before income taxes and loss from unconsolidated affiliates		173,269			187,361
Income tax expense		(22,778	)		(53,900	)

Earnings before loss from unconsolidated affiliates		150,491			133,461
Loss from unconsolidated affiliates		(15,586	)		(5,253	)

Net earnings		134,905			128,208
Net earnings attributable to noncontrolling interest		(14,059	)		(35,887	)

Net earnings attributable to Greenbrier	$	120,846		$	92,321

Diluted earnings per common share	$	3.75		$	2.91


(In thousands)	Nine Months Ended May 31,
(In thousands)	2018			2017
Operating profit (loss):
Manufacturing	$	178,589		$	226,611
Wheels & Parts		13,083			12,702
Leasing & Services		71,008			24,363
Corporate		(68,829	)		(61,024	)

	$	193,851		$	202,652

THE GREENBRIER COMPANIES, INC.

Consolidated Results


	Nine Months Ended May 31,						Increase (Decrease)			% Change
(In thousands)	2018			2017			Increase (Decrease)			% Change
Revenue	$	1,830,258		$	1,557,757		$	272,501			17.5	%
Cost of revenue	$	1,527,090		$	1,236,380		$	290,710			23.5	%
Margin (%)		16.6	%		20.6	%		(4.0	%)		*
Net earnings attributable to Greenbrier	$	120,846		$	92,321		$	28,525			30.9	%

*	Not meaningful

The 17.5% increase in revenue for the nine months ended May 31, 2018 as compared to the nine months ended May 31, 2017 was primarily due to a 21.1% increase in Manufacturing revenue. The increase in Manufacturing revenue was primarily due to a 27.6% increase in deliveries and a change in product mix. The increase was also attributed to a 10.0% increase in Wheels & Parts revenue as a result of higher wheel set and component volumes due to an increase in demand and an increase in scrap metal pricing. The overall increase in revenue was partially offset by a 7.7% decrease in Leasing & Services revenue primarily attributed to a decrease in the sale of railcars which we had purchased from third parties with the intent to resell them and a decline in leasing revenue due to fewer railcars on operating leases as we rebalance our lease portfolio.

The 23.5% increase in cost of revenue for the nine months ended May 31, 2018 as compared to the nine months ended May 31, 2017 was due to a 30.5% increase in Manufacturing cost of revenue. The increase in Manufacturing cost of revenue was primarily due to a 27.6% increase in the volume of railcar deliveries and a change in product mix. The increase was also attributed to a 9.4% increase in Wheels & Parts cost of revenue, primarily due to higher wheel set and component costs associated with increased volumes. The overall increase in cost of revenue was partially offset by a 27.8% decrease in Leasing & Services cost of revenue primarily due to a decline in the volume of railcars sold that we purchased from third parties, lower maintenance and transportation costs and fewer railcars on operating leases as we rebalance our lease portfolio.

Margin as a percentage of revenue was 16.6% and 20.6% for the nine months ended May 31, 2018 and 2017, respectively. The overall margin as a percentage of revenue was negatively impacted by a decrease in Manufacturing margin to 16.0% from 22.0% primarily attributed to a change in product mix. This was partially offset by an increase in Leasing & Services margin to 47.6% from 32.9%. Leasing & Services margin for the nine months ended May 31, 2018 benefited from fewer sales of railcars that we purchased from third parties which have lower margin percentages, higher management services margin from lower maintenance costs, a higher average volume of rent-producing leased railcars for syndication and lower transportation costs.

The $28.5 million increase in net earnings for the nine months ended May 31, 2018 as compared to the nine months ended May 31 28, 2017 was primarily attributable to a reduction in the tax rate due to the Tax Act and higher Net gain on disposition of equipment. See Note 14 Income Taxes for further discussion of the impact of the Tax Act.

THE GREENBRIER COMPANIES, INC.

Manufacturing Segment


	Nine Months Ended May 31,						Increase (Decrease)			% Change
(In thousands)	2018			2017			Increase (Decrease)			% Change
Revenue	$	1,473,411		$	1,216,641		$	256,770			21.1	%
Cost of revenue	$	1,237,890		$	948,436		$	289,454			30.5	%
Margin (%)		16.0	%		22.0	%		(6.0	%)		*
Operating profit ($)	$	178,589		$	226,611		$	(48,022	)		(21.2	%)
Operating profit (%)		12.1	%		18.6	%		(6.5	%)		*
Deliveries		13,400			10,500			2,900			27.6	%

*	Not meaningful

As of June 1, 2017, the Manufacturing segment included the results of Greenbrier-Astra Rail which is consolidated for financial reporting purposes.

Manufacturing revenue increased $256.8 million or 21.1% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The increase in revenue was primarily attributed to a 27.6% increase in deliveries and a change in product mix.

Manufacturing cost of revenue increased $289.5 million or 30.5% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The increase in cost of revenue was primarily attributed to a 27.6% increase in the volume of railcar deliveries and a change in product mix.

Manufacturing margin as a percentage of revenue decreased 6.0% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The decrease was primarily attributed to a change in product mix.

Manufacturing operating profit decreased $48.0 million or 21.2% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The decrease was primarily attributed to a lower margin percentage from a change in product mix and increased costs associated with expanded international operations. This was partially offset by an increase in the volume of railcar deliveries.

THE GREENBRIER COMPANIES, INC.

Wheels & Parts Segment


(In thousands)	Nine Months Ended May 31,						Increase (Decrease)			% Change
(In thousands)	2018			2017			Increase (Decrease)			% Change
Revenue	$	261,236		$	237,580		$	23,656			10.0	%
Cost of revenue	$	239,064		$	218,460		$	20,604			9.4	%
Margin (%)		8.5	%		8.0	%		0.5	%		*
Operating profit ($)	$	13,083		$	12,702		$	381			3.0	%
Operating profit (%)		5.0	%		5.3	%		(0.3	%)		*

*	Not meaningful

Wheels & Parts revenue increased $23.7 million or 10.0% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The increase was primarily as a result of higher wheel set and component volumes due to an increase in demand and an increase in scrap metal pricing. These were partially offset by a decrease in parts volume.

Wheels & Parts cost of revenue increased $20.6 million or 9.4% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The increase was primarily attributed to higher wheel set and component costs associated with increased volumes. This was partially offset by a decrease in parts volume.

Wheels & Parts margin as a percentage of revenue increased 0.5% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The increase was primarily attributed to efficiencies from operating at higher wheel set and component volumes and an increase in scrap metal pricing. This was partially offset by a less favorable parts product mix.

Wheels & Parts operating profit increased $0.4 million or 3.0% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The increase was primarily attributed to higher margins due to an increase in wheelset and component volumes and an increase in efficiencies. This was partially offset by higher employee related costs.

THE GREENBRIER COMPANIES, INC.

Leasing & Services Segment


(In thousands)	Nine Months Ended May 31,						Increase (Decrease)			% Change
(In thousands)	2018			2017			Increase (Decrease)			% Change
Revenue	$	95,611		$	103,536		$	(7,925	)		(7.7	%)
Cost of revenue	$	50,136		$	69,484		$	(19,348	)		(27.8	%)
Margin (%)		47.6	%		32.9	%		14.7	%		*
Operating profit ($)	$	71,008		$	24,363		$	46,645			191.5	%
Operating profit (%)		74.3	%		23.5	%		50.8	%		*

*	Not meaningful

Leasing & Services revenue decreased $7.9 million or 7.7% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The decrease was primarily attributed to a decrease in the sale of railcars which we had purchased from third parties with the intent to resell them and a decline in leasing revenue due to fewer railcars on operating leases as we rebalance our lease portfolio. This was partially offset by higher management services revenue from new service agreements and a higher average volume of rent-producing leased railcars for syndication.

Leasing & Services cost of revenue decreased $19.3 million or 27.8% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The decrease was primarily due to a decline in the volume of railcars sold that we purchased from third parties, lower maintenance and transportation costs and fewer railcars on operating leases as we rebalance our lease portfolio.

Leasing & Services margin as a percentage of revenue increased 14.7% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. Margin for the nine months ended May 31, 2018 benefited from fewer sales of railcars that we purchased from third parties which have lower margin percentages, higher management services margin from lower maintenance costs, a higher average volume of rent-producing leased railcars for syndication and lower transportation costs.

Leasing & Services operating profit increased $46.6 million or 191.5% for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017. The increase was primarily attributed to a $37.1 million increase in net gain on disposition of equipment and an $11.4 million increase in margin. The net gain on disposition of equipment for the nine months ended May 31, 2018 relates to higher volumes of equipment sales as we rebalance our lease portfolio.

THE GREENBRIER COMPANIES, INC.

GBW Joint Venture Segment

To reflect our 50% share of GBW’s net results, we recorded losses of $14.1 million and $5.0 million for the nine months ended May 31, 2018 and 2017, respectively, in Loss from unconsolidated affiliates. The increase in the losses at GBW primarily related to a pre-tax goodwill impairment loss of $26.4 million that GBW recorded during the nine months ended May 31, 2018. As we account for GBW under the equity method of accounting, our 50% share of the non-cash goodwill impairment loss recognized by GBW was $9.5 million after-tax and included as part of Loss from unconsolidated affiliates on our Consolidated Statement of Income.

Selling and Administrative Expense


(In thousands)	Nine Months Ended May 31,				Increase (Decrease)		% Change
(In thousands)	2018		2017		Increase (Decrease)		% Change
Selling and administrative expense	$	149,130	$	123,518	$	25,612		20.7	%

Selling and administrative expense was $149.1 million or 8.1% of revenue for the nine months ended May 31, 2018 compared to $123.5 million or 7.9% of revenue for the prior comparable period. The $25.6 million increase was primarily attributed to a $9.3 million increase in professional fees, consulting and related costs associated with strategic business development, litigation and IT initiatives, $8.4 million from the addition of Astra Rail’s selling and administrative costs and a $4.6 million increase in employee costs.

Net Gain on Disposition of Equipment

Net gain on disposition of equipment was $39.8 million for the nine months ended May 31, 2018 compared to $4.8 million for the prior comparable period.

Net gain on disposition of equipment includes the sale of assets from our lease fleet (Equipment on operating leases, net) that are periodically sold in the normal course of business in order to take advantage of market conditions and to manage risk and liquidity and disposition of property, plant and equipment. The net gain on disposition of equipment for the nine months ended May 31, 2018 primarily relates to higher volumes of equipment sales as we rebalance our lease portfolio.

Other Costs

Interest and foreign exchange expense was composed of the following:


(In thousands)	Nine Months Ended May 31,						Increase (Decrease)
(In thousands)	2018			2017			Increase (Decrease)
Interest and foreign exchange:
Interest and other expense	$	23,252		$	15,669		$	7,583
Foreign exchange gain		(2,670	)		(378	)		(2,292	)

	$	20,582		$	15,291		$	5,291

The $5.3 million increase in interest and foreign exchange expense from the prior comparable period was primarily attributed to interest expense associated with the $275 million convertible senior notes due 2024 issued in February 2017 and additional interest expense due to the addition of Astra Rail. This was partially offset by a $2.3 million higher foreign exchange gain in the current year which was primarily attributed to the change in the Mexican Peso relative to the U.S. Dollar.

THE GREENBRIER COMPANIES, INC.

Income Tax

The effective tax rate for the nine months ended May 31, 2018 was 13.1% compared to 28.8% for the nine months ended May 31, 2017. The change in the tax rate was primarily due to the enactment of the Tax Act on December 22, 2017. The Tax Act made significant changes to the U.S. federal income tax laws, including, but not limited to, a reduction of the corporate tax rate from 35% to 21% and a transition tax on foreign earnings not previously subject to U.S. taxation. As a result of our fiscal year end, our statutory rate is 25.7% for 2018. See Note 14 Income Taxes for further discussion of the impact of the Tax Act.

Loss From Unconsolidated Affiliates

Loss from unconsolidated affiliates was $15.6 million for the nine months ended May 31, 2018 compared to $5.3 million for the nine months ended May 31, 2017. The $10.3 million increase in loss from unconsolidated affiliates was primarily attributed to a non-cash goodwill impairment that GBW recognized during the current year, of which our 50% share was $9.5 million after-tax, and losses at our Brazil operations.

Noncontrolling Interest

Net earnings attributable to noncontrolling interest was $14.1 million for the nine months ended May 31, 2018 compared to $35.9 million in the prior comparable period. These amounts primarily represent our Mexican partner’s share of the results of operations of our Mexican railcar manufacturing joint venture, adjusted for intercompany sales. The nine months ended May 31, 2018 also included our European partner’s share of the results of Greenbrier-Astra Rail. The decrease of $21.8 million from the prior year is primarily a result of a decrease in earnings due to lower margins at our Mexican railcar manufacturing joint venture.

THE GREENBRIER COMPANIES, INC.

Liquidity and Capital Resources


	Nine Months Ended May 31,
(In thousands)	2018			2017
Net cash provided by operating activities	$	79,626		$	77,931
Net cash used in investing activities		(6,654	)		(51,496	)
Net cash provided by (used in) financing activities		(82,007	)		206,959
Effect of exchange rate changes		(12,462	)		9,340

Net increase (decrease) in cash and cash equivalents	$	(21,497	)	$	242,734

We have been financed through cash generated from operations and borrowings. At May 31, 2018, cash and cash equivalents were $590.0 million, a decrease of $21.5 million from $611.5 million at August 31, 2017.

The change in cash provided by operating activities for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017 was primarily due to a net change in working capital, a change in cash flows associated with leased railcars for syndication, an increase in net gain on disposition of equipment and a change in deferred income taxes as a result of the Tax Act.

Cash used in investing activities primarily related to capital expenditures net of proceeds from the sale of assets. The change in cash used in investing activities for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017 was primarily attributable to higher proceeds from the sale of assets partially offset by an increase in capital expenditures.

Capital expenditures totaled $118.7 million and $53.8 million for the nine months ended May 31, 2018 and 2017, respectively. Manufacturing capital expenditures were approximately $34.1 million and $26.7 million for the nine months ended May 31, 2018 and 2017, respectively. Capital expenditures for Manufacturing are expected to be approximately $65 million in 2018 and primarily relate to enhancements of our existing manufacturing facilities. Wheels & Parts capital expenditures were approximately $1.6 million and $2.5 million for the nine months ended May 31, 2018 and 2017, respectively. Capital expenditures for Wheels & Parts are expected to be approximately $5 million in 2018 for maintenance and enhancements of our existing facilities. Leasing & Services and corporate capital expenditures were approximately $83.0 million and $24.6 million for the nine months ended May 31, 2018 and 2017, respectively. Leasing & Services and corporate capital expenditures for 2018 are expected to be approximately $115 million. Proceeds from sales of leased railcar equipment are expected to be $150 million for 2018. The asset additions and dispositions for Leasing & Services in 2018 primarily relate to higher volumes of equipment purchases and sales as we rebalance our lease portfolio. Assets from our lease fleet are periodically sold in the normal course of business in order to take advantage of market conditions and to manage risk and liquidity.

Proceeds from the sale of assets, which primarily related to sales of railcars from our lease fleet within Leasing & Services, were approximately $129.8 million and $20.3 million for the nine months ended May 31, 2018 and 2017, respectively. Proceeds from the sale of assets for the nine months ended May 31, 2017 included approximately $7.7 million of equipment sold pursuant to sale leaseback transactions. The gain resulting from the sale leaseback transactions was deferred and is being recognized over the lease term in Net gain on disposition of equipment.

The change in cash provided by (used in) financing activities for the nine months ended May 31, 2018 compared to the nine months ended May 31, 2017 was primarily attributed to a decrease in the proceeds of debt, net of repayments and a change in the net activities with joint venture partners.

A quarterly dividend of $0.25 per share was declared on June 28, 2018.

THE GREENBRIER COMPANIES, INC.

The Board of Directors has authorized our company to repurchase in aggregate up to $225 million of our common stock. We did not repurchase any shares during the nine months ended May 31, 2018. As of May 31, 2018, we had cumulatively repurchased 3,206,226 shares for approximately $137.0 million since October 2013 and had $88.0 million available under the share repurchase program with an expiration date of March 31, 2019.

Our 3.5% convertible senior notes due 2018 matured on April 1, 2018. The conversion of these notes resulted in the issuance of an additional 3.4 million shares of our common stock. These additional shares have historically been included in the calculation of diluted earnings per share.

Senior secured credit facilities, consisting of three components, aggregated to $628.4 million as of May 31, 2018. We had an aggregate of $396.0 million available to draw down under committed credit facilities as of May 31, 2018. This amount consists of $337.9 million available on the North American credit facility, $8.1 million on the European credit facilities and $50.0 million on the Mexican railcar manufacturing joint venture credit facilities.

As of May 31, 2018, a $550.0 million revolving line of credit, maturing October 2020, secured by substantially all our assets in the U.S. not otherwise pledged as security for term loans, was available to provide working capital and interim financing of equipment, principally for the U.S. and Mexican operations. Advances under this facility bear interest at LIBOR plus 1.75% or Prime plus 0.75% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.

As of May 31, 2018, lines of credit totaling $28.4 million secured by certain of our European assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2% to WIBOR plus 1.3% and Euro Interbank Offered Rate (EURIBOR) plus 1.1%, were available for working capital needs of the European manufacturing operation. European credit facilities are continually being renewed. Currently these European credit facilities have maturities that range from December 2018 through June 2019.

As of May 31, 2018, our Mexican railcar manufacturing joint venture had two lines of credit totaling $50.0 million. The first line of credit provides up to $30.0 million and is fully guaranteed by us and our joint venture partner. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw against this facility through January 2019. The second line of credit provides up to $20.0 million, of which we and our joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through July 2019.

The revolving and operating lines of credit, along with notes payable, contain covenants with respect to us and our various subsidiaries, the most restrictive of which, among other things, limit our ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into capital leases; create liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including but not limited to loans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of substantially all our assets; and enter into new lines of business. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interest plus rent) coverage. As of May 31, 2018, we were in compliance with all such restrictive covenants.

From time to time, we may seek to repurchase or otherwise retire or exchange securities, including outstanding notes, borrowings and equity securities, and take other steps to reduce our debt or otherwise improve our balance sheet. These actions may include open market repurchases, unsolicited or solicited privately negotiated transactions or other retirements, repurchases or exchanges. Such retirements, repurchases or exchanges, if any, will depend on a number of factors, including, but not limited to, prevailing market conditions, trading levels of our debt, our liquidity requirements and contractual restrictions, if applicable. The amounts involved in any such transactions may, individually or in the aggregate, be material and may involve all or a portion of a particular series of notes or other indebtedness which may reduce the float and impact the trading market of notes or other indebtedness which remain outstanding.

THE GREENBRIER COMPANIES, INC.

As of May 31, 2018, we had a $45.0 million note receivable balance from GBW which is included on the Consolidated Balance Sheet in Accounts receivable, net. We may make additional capital contributions or loans to GBW, an unconsolidated 50/50 joint venture, in the future.

As of May 31, 2018, we had a $10.0 million note receivable from Amsted-Maxion Cruzeiro, our unconsolidated Brazilian castings and components manufacturer and a $7.9 million note receivable balance from Greenbrier-Maxion, our unconsolidated Brazilian railcar manufacturer. These note receivables are included on the Consolidated Balance Sheet in Accounts receivable, net. In the future, we may make loans to or provide guarantees for Amsted-Maxion Cruzeiro or Greenbrier-Maxion.

We expect existing funds and cash generated from operations, together with proceeds from financing activities including borrowings under existing credit facilities and long-term financings, to be sufficient to fund expected debt repayments, working capital needs, planned capital expenditures, additional investments in our unconsolidated affiliates and dividends during the next twelve months.

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.

THE GREENBRIER COMPANIES, INC.

Critical Accounting Policies and Estimates

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

Income taxes - For financial reporting purposes, income tax expense is estimated based on amounts anticipated to be reported on tax return filings. Those anticipated amounts may change from when the financial statements are prepared to when the tax returns are filed. Further, because tax filings are subject to review by taxing authorities, there is risk that a position taken in preparation of a tax return may be challenged by a taxing authority. If a challenge is successful, differences in tax expense or between current and deferred tax items may arise in future periods. Any material effect of such differences would be reflected in the financial statements when management considers the effect more likely than not of occurring and the amount reasonably estimable. Valuation allowances reduce deferred tax assets to amounts more likely than not that will be realized based on information available when the financial statements are prepared. This information may include estimates of future income and other assumptions that are inherently uncertain.

Maintenance obligations - We are responsible for maintenance on a portion of the managed and owned lease fleet under the terms of maintenance obligations defined in the underlying lease or management 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 required over the lease term. As we cannot predict with certainty the prices, timing and volume of maintenance needed in the future on railcars under long-term leases, this estimate is uncertain and could be materially different from maintenance requirements. The liability is periodically reviewed and updated based on maintenance trends and known future repair or refurbishment requirements. These adjustments could be material due to the inherent uncertainty in predicting future maintenance requirements.

Warranty accruals - Warranty costs to cover a defined warranty period are estimated and charged to operations. The estimated warranty cost is based on historical warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historical information for similar product types. These estimates are inherently uncertain as they are based on historical data for existing products and judgment for new products. If warranty claims are made in the current period for issues that have not historically been the subject of warranty claims and were not taken into consideration in establishing the accrual or if claims for issues already considered in establishing the accrual exceed expectations, warranty expense may exceed the accrual for that particular product. Conversely, there is the possibility that claims may be lower than estimates. The warranty accrual is periodically reviewed and updated based on warranty trends. However, as we cannot predict future claims, the potential exists for the difference in any one reporting period to be material.

Environmental costs - At times we may be involved in various proceedings related to environmental matters. We estimate future costs for known environmental remediation requirements and accrue for them when it is probable that we have incurred a liability and the related costs can be reasonably estimated based on currently available information. If further developments in or resolution of an environmental matter result in facts and circumstances that are significantly different than the assumptions used to develop these reserves, the accrual for environmental remediation could be materially understated or overstated. Adjustments to these liabilities are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues or when expenditures for which reserves are established are made. Due to the uncertain nature of environmental matters, there can be no assurance that we will not become involved in future litigation or other proceedings or, if we were found to be responsible or liable in any litigation or proceeding, that such costs would not be material to us.

THE GREENBRIER COMPANIES, INC.

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

Railcars are generally manufactured, repaired or refurbished and wheels and parts produced under firm orders from third parties. Revenue is recognized when these products or services are completed, accepted by an unaffiliated customer and contractual contingencies removed. Certain leases are operated under car hire arrangements whereby revenue is earned based on utilization, car hire rates and terms specified in the lease agreement. Car hire revenue is reported from a third party source two months in arrears; however, such revenue is accrued in the month earned based on estimates of use from historical activity and is adjusted to actual when reported to us. These estimates are inherently uncertain as they involve judgment as to the estimated use of each railcar. Adjustments to actual have historically not been significant. Revenue from the construction of marine barges is either recognized on the percentage of completion method during the construction period or on the completed contract method based on the terms of the contract. Under the percentage of completion method, judgment is used to determine a definitive threshold against which progress towards completion can be measured to determine timing of revenue recognition. Under the percentage of completion method, revenue is recognized based on the progress toward contract completion measured by actual costs incurred to date in relation to the estimate of total expected costs. Under the completed contract method, revenue is not recognized until the project has been fully completed.

We will periodically sell railcars with leases attached to financial investors. Revenue and cost of revenue associated with railcars that the Company has manufactured are recognized in Manufacturing once sold. Revenue and cost of revenue associated with railcars which were obtained from a third party with the intent to resell them which are subsequently sold are recognized in Leasing & Services. In addition we will often perform management or maintenance services at market rates for these railcars. Pursuant to the guidance in Accounting Standards Codification (ASC) 840-20-40, we evaluate the terms of any remarketing agreements and any contractual provisions that represent retained risk and the level of retained risk based on those provisions. We determine whether the level of retained risk exceeds 10% of the individual fair value of the railcars with leases attached that are delivered. If retained risk exceeded 10%, the transaction would not be recognized as a sale until such time as the retained risk declined to 10% or less. For any contracts with multiple elements (i.e. railcars, maintenance, management services, etc.) we allocate revenue among the deliverables primarily based upon objective and reliable evidence of the fair value of each element in the arrangement. If objective and reliable evidence of fair value of any element is not available, we will use the element’s estimated selling price for purposes of allocating the total arrangement consideration among the elements.

Impairment of long-lived assets - When changes in circumstances indicate the carrying amount of certain long-lived assets may not be recoverable, the assets are evaluated for impairment. If the forecast of undiscounted future cash flows are less than the carrying amount of the assets, an impairment charge to reduce the carrying value of the assets to fair value would be recognized in the current period. These estimates are based on the best information available at the time of the impairment and could be materially different if circumstances change. If the forecast of undiscounted future cash flows exceeds the carrying amount of the assets it would indicate that the assets were not impaired.

Goodwill and acquired intangible assets - We periodically acquire businesses in purchase transactions in which the allocation of the purchase price may result in the recognition of goodwill and other intangible assets. The determination of the value of such intangible assets requires management to make estimates and assumptions. These estimates affect the amount of future period amortization and possible impairment charges.

Goodwill and indefinite-lived intangible assets are tested for impairment annually during the third quarter. Goodwill and indefinite-lived intangible assets are also tested more frequently if changes in circumstances or the occurrence of events indicates that a potential impairment exists. When changes in circumstances, such as a decline in the market price of our common stock, changes in demand or in the numerous variables associated with the judgments, assumptions and estimates made in assessing the appropriate valuation of goodwill indicate the carrying amount of certain indefinite lived assets may not be recoverable, the assets are evaluated for impairment. Among other things, our assumptions used in the valuation of goodwill include growth of revenue and margins, market multiples, discount rates and increased cash flows over time. If actual operating results were to differ from these assumptions, it may result in an impairment of our goodwill.

THE GREENBRIER COMPANIES, INC.

The provisions of ASC 350, Intangibles - Goodwill and Other , require that we perform an annual impairment test on goodwill. We compare the fair value of each reporting unit with its carrying value. We determine the fair value of our reporting units based on a weighting of income and market approaches. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. Under the market approach, we estimate the fair value based on observed market multiples for comparable businesses. An impairment loss is recorded to the extent that the reporting unit’s carrying amount exceeds the reporting unit’s fair value. An impairment loss cannot exceed the total amount of goodwill allocated to the reporting unit. Our goodwill balance was $70.3 million as of May 31, 2018 of which $43.3 million related to our Wheels & Parts segment and $27.0 million related to our Manufacturing segment. We performed our annual goodwill impairment test during the third quarter of 2018 and we concluded that goodwill was not impaired.

GBW, an unconsolidated 50/50 joint venture, also separately tests its goodwill and indefinite-lived intangible assets for impairment consistent with the methodology described above. During the third quarter of 2018, GBW performed its annual impairment test and GBW recorded a pre-tax impairment loss of $26.4 million as sales and profitability trends continue to decline. As we account for GBW under the equity method of accounting, our 50% share of the non-cash goodwill impairment loss recognized by GBW was $9.5 million after-tax and included as part of Loss from unconsolidated affiliates on our Consolidated Statement of Income. As of May 31, 2018, GBW had a remaining goodwill balance of $15.1 million.

THE GREENBRIER COMPANIES, INC.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

We have global operations that conduct business in their local currencies as well as other currencies. To mitigate the exposure to transactions denominated in currencies other than the functional currency of each entity, we enter into foreign currency forward exchange contracts to protect revenue or margin on a portion of forecast foreign currency sales and expenses. At May 31, 2018 exchange rates, forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros; the purchase of Mexican Pesos and the sale of U.S. Dollars; and for the purchase of U.S. Dollars and the sale of Saudi Riyals aggregated to $148.4 million. 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.

In addition to exposure to transaction gains or losses, we are also exposed to foreign currency exchange risk related to the net asset position of our foreign subsidiaries where the functional currency is not U.S. Dollars. At May 31, 2018, net assets of foreign subsidiaries aggregated to $183.0 million and a 10% strengthening of the U.S. Dollar relative to the foreign currencies would result in a decrease in equity of $18.3 million, or 1.4% of Total equity - Greenbrier. This calculation assumes that each exchange rate would change in the same adverse direction relative to the U.S. Dollar.

Interest Rate Risk

We have managed a portion of our variable rate debt with interest rate swap agreements, effectively converting $86.0 million of variable rate debt to fixed rate debt. As a result, we are exposed to interest rate risk relating to our revolving debt and a portion of term debt, which are at variable rates. At May 31, 2018, 74% of our outstanding debt had fixed rates and 26% had variable rates. At May 31, 2018, a uniform 10% increase in variable interest rates would have resulted in approximately $0.4 million of additional annual interest expense.

THE GREENBRIER COMPANIES, INC.

Item 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended May 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

THE GREENBRIER COMPANIES, INC.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

There is hereby incorporated by reference the information disclosed in Note 15 to Consolidated Financial Statements, Part I of this quarterly report.

Item 1A.

Risk Factors

This Form 10-Q should be read in conjunction with the risk factors and information disclosed in our Annual Report on Form 10-K for the year ended August 31, 2017. There have been no material changes in the risk factors described in our Annual Report on Form 10-K for the year ended August 31, 2017.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Since October 2013, the Board of Directors has authorized the Company to repurchase in aggregate up to $225 million of the Company’s common stock. The program may be modified, suspended or discontinued at any time without prior notice and currently has an expiration date of March 31, 2019. Under the share repurchase program, shares of common stock may be purchased on the open market or through privately negotiated transactions from time-to-time. The timing and amount of purchases will be based upon market conditions, securities law limitations and other factors. The share repurchase program does not obligate the Company to acquire any specific number of shares in any period.

There were no shares repurchased under the share repurchase program during the three months ended May 31, 2018.


Period	Total Number of Shares Purchased		Average Price Paid Per Share (Including Commissions)		Total Number of Shares Purchased as Part of Publically Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
March 1, 2018 – March 31, 2018		—		—		—	$	87,989,491
April 1, 2018 – April 30, 2018		—		—		—	$	87,989,491
May 1, 2018 – May 31, 2018		—		—		—	$	87,989,491

		—				—

THE GREENBRIER COMPANIES, INC.

Item 6.

Exhibits

(a) List of Exhibits:



10.1		Form of Amendment No. 2 to Form of Amended and Restated Employment Agreement between the Registrant and certain of its executive officers.

10.2		Form of Agreement Concerning Indemnification and Related Matters (Officers) between Registrant and certain of its officers.

10.3		Form of Restricted Stock Unit Award Agreement.

10.4		The Greenbrier Companies, Inc. Amended and Restated Non-Qualified Deferred Compensation Plan Basic Plan Document.

10.5		The Greenbrier Companies, Inc. Amended and Restated Non-Qualified Deferred Compensation Plan Adoption Agreement.

10.6		Amendment No. 1 dated June 15, 2018 to the Updated Rabbi Trust Agreement dated October 1, 2012 related to The Greenbrier Companies, Inc. Non-Qualified Deferred Compensation Plan.

10.7		Amendment No. 1 dated June 15, 2018 to the Updated Rabbi Trust Agreement dated October 1, 2012 related to The Greenbrier Companies, Inc. Non-Qualified Deferred Compensation Plan for Directors.

31.1		Certification pursuant to Rule 13a – 14 (a).

31.2		Certification pursuant to Rule 13a – 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.

101		The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended May 31, 2018 formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to Condensed Consolidated Financial Statements.

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 29, 2018	By:	/s/ Lorie L. Tekorius
		Lorie L. Tekorius
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

Date: June 29, 2018	By:	/s/ Adrian J. Downes
		Adrian J. Downes
		Senior Vice President and
		Chief Accounting Officer
		(Principal Accounting Officer)

Exhibit 10.1

SECOND AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Second Amendment dated _______________ amends the terms of the Amended and Restated Employment Agreement (the “Agreement”) dated as of _______________, as first amended effective ___________, by and between The Greenbrier Companies, Inc. (the “Company”) and _______________ (“Executive”).

For good and valuable consideration, receipt of which is hereby acknowledged, Company and Executive hereby agree as follows:

The last sentence of Section 7.2 of the Agreement is deleted, and replaced by the following:

“Cause” shall mean any of the following: (1) the conviction of the Executive (including a plea or nolo contendere) of a felony or gross misdemeanor under federal or state law in the US or under the laws of any country where the Company has operations, which is materially and demonstrably injurious to the Company or which impairs the Executive’s ability to perform substantially the Executive’s duties; or (2) Executive knowingly engaging in an act or omission that materially violates a Company policy or other applicable written standard of conduct or performance, or is a material breach of fiduciary duty to the Company or any of its affiliates; or (3) Executive refusing to abide by a reasonable and lawful directive following written notice and reasonable opportunity to do so.


THE GREENBRIER COMPANIES, INC.		EXECUTIVE

By:		By:

Title:		Name:

Exhibit 10.2

THE GREENBRIER COMPANIES, INC.

AGREEMENT CONCERNING INDEMNIFICATION AND RELATED MATTERS

(Officers)

This Agreement is made as of , by and between THE GREENBRIER COMPANIES, INC., an Oregon corporation (the “Corporation”), and _________________ (the “Officer”), an officer of the Corporation.

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

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

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

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

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

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

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

WHEREAS, such rights of indemnification may be extended to officers, directors, employees or representatives of subsidiary or affiliated entities; and

WHEREAS, the Corporation and the Officer desire to articulate clearly in contractual form their respective rights and obligations with regard to the Officer’s service on behalf of the Corporation as an officer and with regard to claims for loss, liability, expense or damage which, directly or indirectly, may arise out of or relate to such service.

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

1.	Agreement to Serve.

The Officer shall serve as an officer of the Corporation or one or more of its subsidiaries or affiliates for so long as the Officer is duly elected or until the Officer tenders a resignation in writing. This Agreement creates no obligation on either party to continue the service of the Officer for a particular term or any term.

2.	Definitions.

As used in this Agreement:

(a)

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

(b)

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

(c)

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

(d)

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

(e)

For purposes of this Agreement, the meaning of the phrase “to the fullest extent permitted by law” shall include, but not be limited to:

(i)

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

(ii)

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

3.	Limitation of Liability

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

(i)

any breach of the Officer’s duty of loyalty to such entities, shareholders or enterprises;

(ii)

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

(iii)

any transaction from which the Officer derived an improper personal benefit;

(iv)

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

(v)

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

(b)

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

(i)

punitive, exemplary or consequential damages;

(ii)

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

(iii)

fees of attorneys, accountants, expert witnesses or professional consultants; or

(iv)

civil fines or penalties of any kind or nature whatsoever.

4.	Indemnity in Third Party Proceedings.

The Corporation shall indemnify the Officer in accordance with the provisions of this Section 4 if the Officer was or is a party to, or is threatened to be made a party to, any Proceeding (other than a Proceeding by or in the right of the Corporation or one or more of its subsidiaries or affiliates to procure a judgment in its favor), against all Expenses, judgments, fines and amounts paid in settlement, actually and reasonably incurred by the Officer in connection with such Proceeding if the Officer acted in good faith and in a manner the Officer reasonably believed was in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, the Officer, in addition, had no reasonable cause to believe that the Officer’s conduct was unlawful. However, the Officer shall not be entitled to indemnification under this Section 4 in connection with any Proceeding charging improper personal benefit to the Officer in which the Officer is adjudged liable on the basis that personal benefit was improperly received by the Officer unless and only to the extent that the court conducting such Proceeding, or any other court of competent jurisdiction, determines upon application that, despite the adjudication of liability, the Officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances.

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

The Corporation shall indemnify the Officer in accordance with the provisions of this Section 5 if the Officer was or is a party to, or is threatened to be made a party to, any Proceeding by or in the right of the Corporation or one or more of its subsidiaries or affiliates to procure a judgment in its favor, against all Expenses actually and reasonably incurred by the Officer in connection with the defense or settlement of such Proceeding if the Officer acted in

good faith and in a manner the Officer reasonably believed was in or not opposed to the best interests of the Corporation. However, the Officer shall not be entitled to indemnification under this Section 5 in connection with any Proceeding in which the Officer has been adjudged liable to the Corporation unless and only to the extent that the court conducting such Proceeding, or any other court of competent jurisdiction, determines upon application that, despite the adjudication of liability, the Officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances.

6.	Indemnification of Expenses of Successful Party.

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

7.	Additional Indemnification.

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

8.	Exclusions.

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

(a)

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

(b)

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

(c)

in connection with any Proceeding (or part of any Proceeding) initiated by the Officer, or any Proceeding by the Officer against the Corporation or one or more of its subsidiaries or affiliates or their respective directors, managers, officers, employees or other persons entitled to be indemnified by the Corporation or such entity, unless:

(i)

the Corporation or such entity is expressly required by law to make the indemnification;

(ii)

the Proceeding was authorized by the Board of Directors, governing board or manager of the Corporation or such entity; or

(iii)

the Officer initiated the Proceeding pursuant to Section 12 of this Agreement and the Officer is successful in whole or in part in such Proceeding; or

(d)

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

(e)

in connection with any proceeding or claims against the Officer in respect of a breach or enforcement of the provisions of the Officer’s employment, non-compete, non-disclosure or non-solicitation agreements, or separation, consulting or similar agreements, as applicable, the Officer may be a party to with the Corporation, or any subsidiary or controlled affiliate of the Corporation. For purposes of this section “controlled affiliate” means any corporation, limited liability company, partnership, joint venture, trust or other enterprise that is directly or indirectly controlled by the Corporation. For purposes of this definition, the term “control” means the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of an enterprise, whether through the ownership of voting securities, through other voting rights, by contract or otherwise.

9.	Advances of Expenses.

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

(a)

furnishes the Corporation a written affirmation of the Officer’s good faith belief that the Officer is entitled to be indemnified under this Agreement; and

(b)

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

Advances pursuant to this Section 9 shall be made no later than 10 days after receipt by the Corporation of the affirmation and undertaking described in Sections 9(a) and 9(b) above, and shall be made without regard to the Officer’s ability to repay the amount advanced and without regard to the Officer’s ultimate entitlement to indemnification under this Agreement.

The Corporation may establish a trust, escrow account or other secured funding source for the payment of advances made and to be made pursuant to this Section 9 or of other liability incurred by the Officer in connection with any Proceeding.

10.	Nonexclusivity and Continuity of Rights.

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

11.	Procedure Upon Application for Indemnification.

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

(a)

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

(b)

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

(c)

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

(d)

by the shareholders of the Corporation.

12.	Enforcement.

The Officer may enforce any right to indemnification, advances or exculpation provided by this Agreement in any court of competent jurisdiction in compliance with Section 23 if:

(a)

the Corporation denies the claim for indemnification or advances, in whole or in part; or

(b)

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

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

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

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

ii)

the Officer is not entitled to exculpation under Section 3 of this Agreement.

13.	Notification and Defense of Claim.

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

(a)

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

(b)

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

(c)

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

(d)

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

14.	Partial Indemnification.

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

15.	Interpretation and Scope of Agreement.

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

16.	Severability.

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

17.	Subrogation.

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

18.

Notices.

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

(a)

If to the Officer, to the address indicated on the signature page of this Agreement.

(b)

If to the Corporation, to

The Greenbrier Companies, Inc.

One Centerpointe Drive, Suite 200

Lake Oswego, Oregon 97035 USA

Attention: Chief Executive Officer

With a copy to:

General Counsel

The Greenbrier Companies, Inc.

One Centerpointe Drive, Suite 200

Lake Oswego, Oregon 97035 USA

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

19.	Counterparts.

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

20.	Applicable Law.

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

21.	Successors and Assigns.

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

22.	Attorney Fees.

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

23.	Jurisdiction and Venue .

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

24.	Entire Agreement .

This Agreement expresses the entire understanding of the parties hereto with respect to the subject matter hereof and it supersedes and replaces any and all former or contemporaneous agreements, understandings, representations or warranties relating to such subject matter and contains all of the terms, conditions, understandings, representations, warranties, and promises of the parties hereto in connection therewith.

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


CORPORATION:
THE GREENBRIER COMPANIES, INC.		OFFICER:

By:
	Martin R. Baker	(name)
Title:	Senior Vice President and General Counsel

Exhibit 10.3

THE GREENBRIER COMPANIES, INC.

2017 AMENDED AND RESTATED STOCK INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to Article 10 of the 2017 Amended and Restated Stock Incentive Plan (the “ Plan ”) of The Greenbrier Companies, Inc., an Oregon corporation (the “ Company ”), on _________, 2018 (the “ Grant Date ”) the Compensation Committee of the Board of Directors of the Company (the “ Committee ”) authorized and granted to ____________ (the “ Recipient ”) an award of restricted stock units (“ RSUs ”) with respect to the Company’s common stock (“ Common Stock ”), subject to the terms and conditions of this agreement between the Company and the Recipient (this “ Agreement ”). By accepting this award, the Recipient agrees to all of the terms and conditions of this Agreement. Capitalized terms not otherwise defined in this Agreement shall have the meanings as defined in the Plan.

1.	Award and Terms of Restricted Stock Units.

(a) Number of RSUs Awarded. The Company awards to the Recipient ______________ RSUs (the “ Award ”), subject to (i) the restrictions, terms and conditions set forth in this Agreement and the Plan and (ii) the Recipient’s execution and delivery of an Employee Confidentiality and Innovation Assignment Agreement in the form provided by the Company; provided, however, if the Recipient has previously executed an Employee Confidentiality and Innovation Assignment Agreement, the Recipient hereby ratifies and confirms such agreement.

(b) Rights under Restricted Stock Units . An RSU obligates the Company to issue to the Recipient one share of Common Stock for each vested RSU upon vesting in accordance with this Agreement; provided that if the Recipient is a participant in the Deferred Compensation Plan, the Recipient may elect to defer receipt of the shares otherwise issuable upon vesting, pursuant to the terms of the Deferred Compensation Plan.

2.	Vesting and Forfeiture of RSUs.

(a) Vesting Generally. The RSUs awarded under this Agreement shall initially be 100% unvested and subject to forfeiture. One-half of the RSUs, covering _____ shares of Common Stock, will vest in equal installments over a period of three years (the “ Time-Based RSUs ”) and one-half of the RSUs, covering ____ shares of Common Stock, will vest, in whole or in part, on the Vesting Date based upon achievement of performance criteria during the Measurement Period, as described in subsection 2(c) (the “ Performance -Based RSUs ”). To the extent that any partial vesting would result in the issuance of fractional shares, such shares shall be rounded up to the nearest whole number of shares.

(b) Vesting of Time-Based RSUs. The Time-Based RSUs shall vest in equal annual installments over a period of three years, on the first, second and third anniversaries of the Grant Date, provided the Recipient remains in Service with the Company, subject to subsections 2(b)(i) and (ii):

(i) Termination of Service Due to Death, Disability or Retirement. If the Recipient’s Service terminates due to death, Disability or Retirement, any unvested Time-Based RSUs shall immediately become fully vested. If Recipient is or becomes eligible for Retirement prior to the date any Time-Based RSUs would otherwise vest, the Time-Based RSUs will no longer be subject to a substantial risk of forfeiture for tax purposes, and will be deemed a “deferral of compensation” as defined under Internal Revenue Code §409A (“ § 409A ”).

(ii) Change of Control. In the event of a Change of Control, acceleration of vesting of Time-Based Shares shall be governed by the terms of the individual agreement between the Company and the Recipient, if any.

(c) Vesting of Performance-Based RSUs. Subject to subsections 2(c)(iv)-(vi), within 90 days of the end of the Measurement Period, the Committee shall determine the extent to which the Performance-Based RSUs have vested based upon achievement of the performance goals set forth in this subsection 2(c). Up to 30% of the Performance-Based RSUs shall vest based upon achievement of Adjusted EBITDA goals (the “ Adjusted EBITDA Performance RSUs ”), up to 30% of the Performance-Based RSUs shall vest based upon achievement of Relative EBITDA Growth goals (the “ Relative EBITDA Growth Performance RSUs ”), and up to 40% of the Performance-Based RSUs shall vest based upon achievement of Return on Invested Capital (“ ROIC ”) goals (the “ ROIC Performance RSUs ”) during the Measurement Period, as set forth in subsections 2(c)(i)-(iii):

(i) Adjusted EBITDA Performance RSUs.

(1) 100% of the Adjusted EBITDA Performance RSUs (30% of the total number of Performance-Based RSUs) will vest on the Vesting Date if the Company’s Adjusted EBITDA equals the Adjusted EBITDA Target (Goal) Level.

(2) 50% of the Adjusted EBITDA Performance RSUs (15% of the total number of Performance-Based RSUs) will vest on the Vesting Date if the Company’s Adjusted EBITDA equals the Adjusted EBITDA Threshold Level.

(3) If the Company’s Adjusted EBITDA is greater than the Threshold Level but less than the Target (Goal) Level, vesting of the Adjusted EBITDA Performance RSUs will be interpolated between 50% and 100%.

(4) If the Company’s Adjusted EBITDA is less than the Threshold Level, no Adjusted EBITDA Performance RSUs will vest.

(ii) Relative EBITDA Growth Performance RSUs.

(1) 100% of the Relative EBITDA Growth Performance RSUs (30% of the total number of Performance-Based RSUs) will vest on the Vesting Date if the Company achieves its Relative EBITDA Growth Target (Goal) Level.


		Restricted Stock Unit Agreement
		Page 2

(2) 50% of the Relative EBITDA Growth Performance RSUs (15% of the total number of Performance-Based RSUs) will vest on the Vesting Date if the Company achieves its Relative EBITDA Growth Threshold Level.

(3) If the Company’s Relative EBITDA Growth performance is greater than the Threshold Level but less than the Target (Goal) Level, vesting of the Relative EBITDA Growth Performance RSUs will be interpolated between 50% and 100%.

(4) If the Company’s Relative EBITDA Growth performance is less than the Threshold Level, no Relative EBITDA Growth Performance RSUs will vest.

(iii) ROIC Performance RSUs.

(1) 100% of the ROIC Performance RSUs (40% of the total number of Performance-Based RSUs) will vest on the Vesting Date if the Company achieves its ROIC Target (Goal) Level.

(2) 50% of the ROIC Performance RSUs (20% of the total number of Performance-Based RSUs) will vest on the Vesting Date if the Company achieves its ROIC Threshold Level.

(3) If the Company’s ROIC performance is greater than the Threshold Level but less than the Target (Goal) Level, vesting of the ROIC Performance RSUs will be interpolated between 50% and 100%.

(4) If the Company’s ROIC performance is less than the Threshold Level, no ROIC Performance RSUs will vest.

(iv) Termination of Service due to Death or Disability. If the Recipient’s Service terminates prior to the end of the Measurement Period due to death or Disability, any unvested Performance-Based RSUs shall immediately become fully vested.

(v) Retirement. If the Recipient’s Service terminates prior to the end of the Measurement Period due to Retirement, the Recipient’s Performance-Based RSUs will be subject to partial forfeiture, with the number of forfeited and retained Performance-Based RSUs to be determined as follows:

(1) The Recipient will retain Performance-Based RSUs equal to the number of Performance-Based RSUs awarded hereunder, multiplied by a fraction, the numerator of which is the number of full and partial months in the Measurement Period during which Recipient remained in Service with the Company and the denominator of which is 36. The retained Performance-Based RSUs will continue to be subject to the vesting and other terms and conditions of this Agreement, including but not limited to the accrual of Dividend Equivalents under subsection 5(a)(ii)(1).

(2) The remainder of the Performance-Based RSUs will be forfeited, and the Recipient will have no right to receive Common Stock or Dividend Equivalents with respect to such RSUs.


		Restricted Stock Unit Agreement
		Page 3

(vi) Change of Control. In the event of a Change of Control prior to the end of the Measurement Period, the Performance-Based RSUs shall be governed by the following:

(1) Conversion of Performance-Based RSUs into Time-Vested RSUs. As of the effective date of the Change of Control, all Performance-Based RSUs shall automatically convert into and become time-vested RSUs (the “ Converted RSUs ”), which shall vest in full on August 31, 2020, provided the Recipient remains employed by the Company through that date.

(2) Award of Additional Shares for Performance Above Target (Goal) Levels. The Committee shall evaluate the Company’s financial performance from September 1, 2017 until the date immediately preceding the effective date of the Change of Control, and shall determine whether the Company was performing above the Target (Goal) Level of performance on its Adjusted EBITDA, Relative EBITDA Growth and/or ROIC goals as of such date. If the Committee determines that the Company was performing above the Target (Goal) Level on any of its Adjusted EBITDA, Relative EBITDA Growth and/or ROIC goals as of the date of the Change of Control, the Committee shall determine the number of additional shares above 100% of the number of Performance-Based RSUs awarded (the “ Maximum Shares ”) that the Participant would have been entitled to receive pursuant to subsection 2(d)(i), (ii) and/or (iii) if the Company had performed during the entire Measurement Period at the level achieved through the date of the Change of Control. The Recipient shall be entitled to receive a grant of additional shares equal to the number of Maximum Shares. The Maximum Shares shall be time-vested shares and shall vest in full on August 31, 2020, provided the Recipient remains employed by the Company.

(d) Issuance of Additional Shares upon Achievement in Excess of Target (Goal) . Subject to a determination by the Committee that the Company has achieved greater than its Adjusted EBITDA Target (Goal) Level, Relative EBITDA Growth Target (Goal) Level and/or ROIC Target (Goal) Level during the Measurement Period, the Performance-Based RSUs will be settled for a number of shares in excess of 100% of the number of Performance-Based RSUs awarded pursuant to this Agreement, as described in subsections 2(d)(i)-(iii):

(i) If the Company achieves its Adjusted EBITDA Maximum Level during the Measurement Period, the Adjusted EBITDA Performance RSUs will be settled for 200% of the number of shares underlying the Adjusted EBITDA Performance RSUs. If the Company’s Adjusted EBITDA during the Measurement Period exceeds the Adjusted EBITDA Target (Goal) Level but is below the Adjusted EBITDA Maximum Level, the number of shares for which the Adjusted EBITDA Performance RSUs will be settled will be interpolated between 100% and 200% of the number of shares underlying the Adjusted EBITDA Performance RSUs at the Target (Goal) Level, based on the level of Adjusted EBITDA performance achieved.

(ii) If the Company achieves its Relative EBITDA Growth Maximum Level during the Measurement Period, the Relative EBITDA Growth Performance RSUs will be settled for 200% of the number of shares underlying the Relative EBITDA Growth


		Restricted Stock Unit Agreement
		Page 4

Performance RSUs. If the Company’s Relative EBITDA Growth performance during the Measurement Period exceeds the Relative EBITDA Growth Target (Goal) Level but is below the Relative EBITDA Growth Maximum Level, the number of shares for which the Relative EBITDA Growth Performance RSUs will be settled will be interpolated between 100% and 200% of the number of shares underlying the Relative EBITDA Growth Performance RSUs at the Target (Goal) Level, based on the level of Relative EBITDA Growth performance achieved.

(iii) If the Company achieves its ROIC Maximum Level during the Measurement Period, the ROIC Performance RSUs will be settled for 200% of the number of shares underlying the ROIC Performance RSUs. If the Company’s ROIC during the Measurement Period exceeds the ROIC Target (Goal) Level but is below the ROIC Maximum Level, the number of shares for which the ROIC Performance RSUs will be settled will be interpolated between 100% and 200% of the number of shares underlying the ROIC Performance RSUs at the Target (Goal) level, based on the level of ROIC performance achieved.

(e) Forfeiture of RSUs on Termination of Service. Except as expressly provided in this Agreement, or except to the extent that there exists a separate individual agreement between the Recipient and the Company, the terms of which provide otherwise, if the Recipient ceases to be an employee of the Company or any Parent or Subsidiary for any reason, the Recipient shall immediately forfeit all outstanding but unvested RSUs awarded pursuant to this Agreement and the Recipient shall have no right to receive the related Common Stock.

(f) Forfeiture of RSUs if Shares are Unavailable Under the Plan. If, on any Vesting Date, after the settlement of all RSUs awarded in 2017 or prior years that vested on or before such Vesting Date, the number of shares of Common Stock that remain available under the Plan is insufficient to settle 100% of the RSUs awarded by the Company on the Grant Date that vest on such Vesting Date (“ Vesting 2018 RSUs ”), then the remaining shares shall be allocated among the holders of Vesting 2018 RSUs in proportion to the number of Vesting 2018 RSUs held by each. Any Vesting 2018 RSUs held by the Recipient that are not settled in shares as a result of this subsection 2(f) shall be forfeited, and the Recipient shall have no right to receive the related Common Stock.

3.	Delivery Date for the Shares Underlying the RSUs.

(a) As soon as practicable following the Vesting Date for any RSUs (or, if applicable, the distribution date specified in subsection 3(b)), the Company will issue the Recipient the Common Stock underlying the then vested RSUs in the form of uncertificated shares in book entry form. The shares of Common Stock will be issued in the Recipient’s name or, in the event of the Recipient’s death, in the name of either (i) the beneficiary designated by the Recipient on a form supplied by the Company or (ii) if the Recipient has not designated a beneficiary, the person or persons establishing rights of ownership by will or under the laws of descent and distribution. Notwithstanding the foregoing, if the Recipient has elected, pursuant to the Deferred Compensation Plan, to defer receipt of any of the shares otherwise issuable upon the vesting of RSUs, then as soon as practicable after the applicable Vesting Date, the Company shall issue such shares to the Deferred Compensation Plan, in the form of uncertificated shares in book entry form, for crediting to the Recipient’s account.


		Restricted Stock Unit Agreement
		Page 5

(b) To the extent that any Time-Based RSUs and Dividend Equivalents constitute a “deferral of compensation” within the meaning of Treas. Reg. §1.409A-1(b) and become payable as a result of Recipient’s termination of employment, such payment shall be made as soon as practicable after the Recipient’s “separation from service” within the meaning of Treas. Reg. §1.409A-1(h), and in all events by the last day of the calendar year in which the separation from service occurs or, if later, the 15th day of the third calendar month following the date of the separation from service. In no event will Recipient designate the date of payment. The foregoing notwithstanding, in the event that Recipient is determined to be a “specified employee” within the meaning of Treas. Reg. § 1.409A-1(i), then to the extent any payment under this Agreement payable upon a separation from service constitutes a “deferral of compensation” within the meaning of §409A, such payment shall not be made and such benefit shall not be provided until the earlier of (A) the first business day occurring after the date that is six months after Recipient’s separation of service as that term is defined in Treas. Reg. §1.409A-1(h), and (B) Recipient’s death.

4.	Income and Payroll Taxes.

(a) Taxes and Tax Withholding. The Recipient acknowledges and agrees that no election under Section 83(b) of the Internal Revenue Code can or will be made with respect to the RSUs. Subject to subsection 4(e), the Recipient acknowledges that, if no deferral election pursuant to the Deferred Compensation Plan has been made with respect to receipt of the shares of Common Stock underlying the RSUs, then on each date that shares of Common Stock underlying the RSUs vest (the “ Payment Date ”), the Value (as defined below) of the vested shares will be treated as ordinary compensation for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amounts, the Company shall withhold from the shares of Common Stock otherwise issuable the number of shares having a Value equal to the minimum statutory withholding amount. For purposes of this Section 4, the “ Value ” of a share shall be equal to the closing market price for the Common Stock on the last trading day preceding the Payment Date.

(b) Payment of FICA Upon Vesting of RSUs Subject to Deferral Election. Subject to subsection 4(e), the Recipient acknowledges that FICA payroll taxes become due upon the vesting of RSUs, even if a deferral election under the Deferred Compensation Plan has been made with respect to receipt of the shares underlying the RSUs. FICA taxes that become due upon vesting of RSUs that are subject to a deferral election may not be paid by share withholding. Recipient agrees to pay to the Company in cash or cash equivalents, on or before each Vesting Date, the amount of FICA taxes due and owing as a result of vesting of the RSUs. If Recipient does not make such payment timely, the Company will deduct FICA taxes from other wages payable in cash to Recipient.

(c) Payment of FICA on Time-Based RSUs Held by Retirement-Eligible Recipients. Subject to subsection 4(e), the Recipient acknowledges that FICA payroll taxes become due with respect to Time-Based RSUs upon Recipient being or becoming eligible for


		Restricted Stock Unit Agreement
		Page 6

Retirement, even if Recipient does not terminate employment. FICA taxes that become due as a result of Recipient being or becoming eligible for Retirement may not be paid by share withholding. Recipient agrees to pay to the Company in cash or cash equivalents the amount of FICA taxes due and owing. If Recipient does not make such payment timely, the Company will deduct FICA taxes from other wages payable in cash to Recipient.

(d) Payment of FICA on Dividend Equivalents. Subject to subsection 4(e), the Recipient acknowledges that FICA payroll taxes become due upon the date that a Dividend Equivalent vests. FICA taxes on Dividend Equivalents may not be paid by share withholding. Recipient agrees to pay to the Company in cash or cash equivalents the amount of FICA taxes due and owing. If Recipient does not make such payment timely, the Company will deduct FICA taxes from other wages payable in cash to Recipient.

(e) Non-U.S. Taxation. If the Recipient is subject to the tax laws of a non-U.S. jurisdiction, payments under this Agreement will be subject to taxation and withholding in accordance with applicable law.

5.	Other Rights and Restrictions.

(a) Cash Dividends and Dividend Equivalents.

(i) Cash Dividends on Issued Shares. The Recipient will be entitled to receive any cash dividends declared on the Common Stock underlying the RSUs after the RSUs have vested and the Common Stock has been issued to the Recipient. Cash dividends payable on Common Stock that has been deferred under the Deferred Compensation Plan shall be credited as earnings on and paid to the Recipient’s Deferred Compensation Plan account.

(ii) Dividend Equivalents.

(1) Accrual. Provided the Recipient is employed by the Company or a Parent or Subsidiary on the record date for a dividend declared on Common Stock, the Company shall accrue an amount in cash equal to the dividend that would have been paid on the Common Stock underlying the Recipient’s unvested and outstanding RSUs if such Common Stock had been issued and outstanding on the record date (each, a “ Dividend Equivalent ”). Dividend Equivalents shall accrue on all unvested and outstanding RSUs held by the Recipient on a record date, notwithstanding the fact that RSUs are subject to net settlement under subsection 4(a). Dividend Equivalents shall initially be unvested and shall vest in accordance with subsection 5(a)(ii)(2).

(2) Vesting; Payment or Deferral. Dividend Equivalents that accrue on an outstanding RSU shall vest upon the vesting of the underlying RSU, and are subject to required withholding taxes. Dividend Equivalents shall be paid as soon as practicable after the Vesting Date for the underlying RSU and in all events by the last day of the calendar year in which the Vesting Date occurs or, if later, the 15th day of the third calendar month following the Vesting Date. In no event will Recipient designate the date of payment. If the Recipient has elected to defer the Common Stock underlying RSUs under the Deferred Compensation Plan, all accrued and vested Dividend Equivalents


		Restricted Stock Unit Agreement
		Page 7

shall also be deferred under the Deferred Compensation Plan and shall be transferred to the Deferred Compensation Plan as soon as practicable following the Vesting Date for the underlying RSUs. No interest shall be paid by the Company on accrued Dividend Equivalents.

(iii) Application of Payment Timing Rules. Dividend Equivalents that are “deferred compensation” as described in subsection 2(b)(i) shall be subject to the payment timing rules set forth in subsection 3(b).

(b) Adjustments. The number of shares of Common Stock issuable with respect to each RSU is subject to adjustment as determined by the Committee as to the number and kind of shares of stock deliverable in the event of any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off or other change in the corporate structure affecting the Common Stock generally.

(c) No Voting Rights. The Recipient shall have no rights as a shareholder with respect to the RSUs or the Common Stock underlying the RSUs until the underlying Common Stock is issued to the Recipient.

(d) Certain Transactions. To the extent not otherwise governed by the Change of Control provisions of this Agreement or any other individual agreement between the Company and the Recipient, in the event of dissolution of the Company or a merger, consolidation or plan of exchange affecting the Company, the Committee may, in its sole discretion and to the extent possible under the structure of the applicable transaction, select one or a combination of the following alternatives for treating this award of RSUs:

(i) The RSUs shall remain in effect in accordance with the terms of this Agreement; or

(ii) The RSUs shall be converted into restricted stock units or restricted stock of one or more of the corporations that are the surviving or acquiring corporations in the applicable transaction. The amount and type of converted restricted stock units or restricted stock shall be determined by the Company, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation(s) to be held by holders of shares of the Company following the applicable transaction.

The foregoing notwithstanding, Time-Based RSUs that are “deferred compensation” subject to §409A shall be treated in accordance with the requirements of §409A, including without limitation the prohibition on subsequent deferrals.

(e) Restrictions on Transfer . The Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs subject to this Agreement. The Recipient may designate beneficiaries to receive the shares of Common Stock underlying the RSUs subject to this Agreement if the Recipient dies before delivery of the shares of Common Stock by so indicating on a form supplied by the Company. If the Recipient fails to designate a beneficiary, such Common Stock will be delivered to the person or persons establishing rights of ownership by will or under the laws of descent and distribution.


		Restricted Stock Unit Agreement
		Page 8

(f) Not a Contract of Employment. Nothing in the Plan or this Agreement shall confer upon Recipient any right to be continued in the employment of the Company or any Parent or Subsidiary, or to interfere in any way with the right of the Company or any Parent or Subsidiary by whom Recipient is employed to terminate Recipient’s employment at any time or for any reason, with or without cause, or to decrease Recipient’s compensation or benefits, subject to the Recipient’s rights under any applicable individual employment agreement.

6.	Definitions.

Initially capitalized terms not otherwise defined herein shall have the meanings as defined in the Plan.

(a) ” Adjusted EBITDA ” shall mean the Company’s net earnings before interest and foreign exchange, income tax expense, depreciation and amortization during the Measurement Period; and excluding significant non-cash charges such as goodwill impairment, to the extent consistent with other public reporting, as adjusted for Extraordinary Items by the Committee in its sole discretion.

(b) ” Adjusted EBITDA Maximum Level ” shall mean cumulative Adjusted EBITDA during the Measurement Period of $__________________.

(c) ” Adjusted EBITDA Target (Goal) Level ” shall mean cumulative Adjusted EBITDA during the Measurement Period of $__________________.

(d) ” Adjusted EBITDA Threshold Level ” shall mean cumulative Adjusted EBITDA during the Measurement Period of $__________________.

(e) ” Agreement ” shall mean this Restricted Stock Unit Agreement.

(f) ” Deferred Compensation Plan ” shall mean The Greenbrier Companies, Inc. Nonqualified Deferred Compensation Plan.

(g) ” Extraordinary Items ” shall mean extraordinary, unusual and/or non-recurring items, including but not limited to (i) restructuring or restructuring-related charges, (ii) gains or losses on the disposition of a business or major asset, (iii) the effect of changes in tax laws and other laws, accounting principles, or provisions affecting reported results, (iv) resolution and/or settlement of litigation and other legal proceedings, (v) extraordinary, nonrecurring items as described in Accounting Principles Board Opinion No. 30 or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year, (vi) the effect of a merger or acquisition, or (vii) foreign exchange gains and losses.

(h) ” Measurement Period ” shall mean the 36-month period beginning September 1, 2017 and ending August 31, 2020.

(i) ” Peer Group Companies ” shall mean the group of peer companies designated by the Committee for use in determining the vesting of Relative EBITDA Growth Performance RSUs awarded by the Company on the Grant Date.


		Restricted Stock Unit Agreement
		Page 9

(j) ” Recipient ” shall mean the individual named in the first paragraph of this Agreement.

(k) ” Relative EBITDA Growth ” shall mean the Company’s cumulative EBITDA during the Measurement Period divided by the Company’s EBITDA for the 12-month period immediately preceding the Measurement Period, multiplied by three. The result is then compared to the same metric for the Peer Group Companies over the Measurement Period. “ EBITDA ” is defined as net earnings before interest and foreign exchange, income tax expense, depreciation and amortization.

(l) ” Relative EBITDA Growth Maximum Level ” shall mean that the Company’s performance for the Measurement Period relative to the Peer Group Companies, measured by Relative EBITDA Growth, is at the _______ percentile.

(m) ” Relative EBITDA Growth Target (Goal) Level ” shall mean that the Company’s performance for the Measurement Period relative to the Peer Group Companies, measured by Relative EBITDA Growth, is at the _______ percentile.

(n) ” Relative EBITDA Growth Threshold Level ” shall mean that the Company’s performance for the Measurement Period relative to the Peer Group Companies, measured by Relative EBITDA Growth, is at the _______ percentile.

(o) ” Retirement ” shall mean the termination of the Recipient’s Service within the Company or its subsidiaries as an employee either (i) on or after attainment of age 65, or (ii) prior to age 65, with the permission of the Chief Executive Officer of the Company.

(p) ” Return on Invested Capital ” or “ ROIC ” shall mean average annual NOPAT for the Measurement Period divided by the Average Invested Capital for the four annual periods beginning from the last day of the prior fiscal year through the last day of the Measurement Period. “ NOPAT ” shall mean earnings from operations plus earnings (loss) from unconsolidated affiliates less cash paid during the period for income taxes. “ Average Invested Capital ” shall mean the average balance of revolving notes plus notes payable plus total equity less cash in excess of $_______ million. Each of the metrics in this definition shall be adjusted for special and non-recurring items listed in the Company’s Umbrella Performance Based Plan for Executive Officers in the discretion of the Committee.

(q) ” ROIC Maximum Level ” shall mean ROIC of _______%.

(r) ” ROIC Target (Goal) Level ” shall mean ROIC of _______%.

(s) ” ROIC Threshold Level ” shall mean ROIC of _______%.

(t) ” Vesting Date ” shall mean: (i) with respect to Time-Based RSUs, the date that the RSUs vest in accordance with subsection 2(b); and (ii) with respect Performance-Based RSUs, the date that the Committee makes an affirmative determination that the vesting criteria applicable to Performance-Based RSUs, as set forth in subsection 2(c)(i), (ii) or (iii), have or have not been met.


		Restricted Stock Unit Agreement
		Page 10

7.	Miscellaneous.

(a) Entire Agreement; Amendment. This Agreement, the Plan and the Company’s Umbrella Performance-Based Plan for Executive Officers, to the extent applicable, constitute the entire agreement of the parties with regard to the subjects hereof. The Committee may amend the terms of this Agreement, but no such amendment shall impair the rights of the Recipient without his or her consent.

(b) Interpretation of the Plan and the Agreement. The Committee shall have the sole authority to interpret the provisions of this Agreement and the Plan and all determinations by it shall be final and conclusive. With respect to awards made to executive officers of the Company, the Committee shall interpret and administer this Agreement in accordance with the terms of the Company’s Umbrella Performance-Based Plan for Executive Officers.

(c) Electronic Delivery. The Recipient consents to the electronic delivery of notices and any prospectus and any other documents relating to this Award in lieu of mailing or other form of delivery.

(d) Rights and Benefits . The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon the Recipient’s heirs, executors, administrators, successors and assigns.

(e) Further Action. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

(f) Governing Law. This Agreement and the Plan will be interpreted under the laws of the state of Oregon, exclusive of choice of law rules.


RECIPIENT:		THE GREENBRIER COMPANIES, INC.:


		By:


		Restricted Stock Unit Agreement
		Page 11

Exhibit 10.4

THE GREENBRIER COMPANIES, INC.

NONQUALIFIED DEFERRED COMPENSATION PLAN

2018 AMENDMENT AND RESTATEMENT

NONQUALIFIED

DEFERRED COMPENSATION PLAN

BASIC PLAN DOCUMENT

(Including Code §409A provisions)

Nonqualified Deferred Compensation Prototype Plan

NONQUALIFIED

DEFERRED COMPENSATION PLAN

BASIC PLAN DOCUMENT

By execution of the Adoption Agreement associated with this Basic Plan Document, the Employer establishes this Nonqualified Deferred Compensation Plan (“Plan”) for the benefit of certain Employees and Contractors the Employer designates in its Adoption Agreement. The primary purpose of the Plan is to provide additional compensation to Participants upon termination of employment or service with the Employer. The Employer will pay benefits under the Plan only in accordance with the terms and conditions set forth in the Plan.

PREAMBLE

ERISA/Code Plan Type . The Employer in its Adoption Agreement will specify whether it establishes the Plan as a nonqualified deferred compensation plan or as an ineligible Code §457(f) plan. A nonqualified deferred compensation plan is an unfunded plan that may be: (i) an “excess benefit plan” under ERISA §3(36); (ii) a plan maintained “primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” (“top-hat plan”) under ERISA §§201(2), 301(a)(3) and 401(a)(1); (iii) a plan only for Contractors and exempt from Title I of ERISA; or (iv) a church plan under Code §414(e) and ERISA §3(33) and maintained by a church or church-controlled organization under Code §3121(w)(3). A top-hat plan includes a supplemental executive retirement plan (“SERP”). A tax-exempt Code §457(f) plan may include a church plan under Code §414(e) and ERISA §3(33) but which is not sponsored by a church or church-controlled organization under Code §3121(w)(3).

409A Plan Type . The Employer in its Adoption Agreement will specify whether it establishes the Plan as an Account Balance Plan or as a Separation Pay Plan.

Possible Nonuniformity . The Employer in its Adoption Agreement will specify such Plan terms as will apply to all Participants uniformly or as may apply to a given Participant. Except where the Plan or Applicable Guidance require uniformity in order to comply with Code §409A, the Employer need not provide the same Plan benefits or apply the same Plan terms and conditions to all Participants, even as to Participants who are of similar pay, title and other status with the Employer. The elections the Employer makes in its Adoption Agreement apply uniformly to all Participants, except to the extent the Employer adopts inconsistent provisions with respect to one or more Participants in a separate attachment designated as “Exhibit A” and attached to the Adoption Agreement. The Employer may create a separate Exhibit A for one or more Participants, specifying such terms and conditions as are applicable to a given Participant. The Employer, in Exhibit A, may modify any Plan provision or any Adoption Agreement election as to one or more Participants.

I. DEFINITIONS

1.01 “Account” means the account the Employer establishes under the Plan for each Participant and, as applicable, means a Participant’s Elective Deferral Account, Nonelective Contribution Account or Matching Contribution Account.

1.02 “Account Balance Plan” means an Elective Deferral Account Balance Plan or an Employer Contribution Account Balance Plan, or a combination of both, as the Employer elects in its Adoption Agreement.

(A) Elective Deferral Account Balance Plan . An Elective Deferral Account Balance Plan is a plan comprised of an Elective Deferral Account as described under Treas. Reg. §1.409A-1(c)(2)(i)(A).

(B) Employer Contribution Account Balance Plan . An Employer Contribution Account Balance Plan is a plan comprised of Employer Nonelective Contribution Accounts, Matching Contribution Accounts, or both, as described under Treas. Reg. §1.409A-1(c)(2)(i)(B).

1.03 “Accrued Benefit” means the total dollar amount credited to a Participant’s Account.


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1.04 “Adoption Agreement” means the document the Employer executes to establish the Plan and includes all Exhibits and other documents referenced therein.

1.05 “Aggregated Plans” means this Plan and any other like-type plan of the Employer in which a given Participant participates and as to which the Plan (see Sections 2.02(B)(2) and 6.03(B)) or Treas. Reg. §1.409A-1(c)(2) requires the aggregation of all such nonqualified deferred compensation in applying Code §409A. For this purpose, the following rules apply:

(A) Participants in Separate Plans . The plan for a Participant is treated as a separate plan from the plan for any other Participant, even though such plans may be incorporated into a single written plan in this Plan and covering all Participants.

(B) Plan Types . The following plans under clauses (i), (ii) and (iii) are not “like-type plans” and are treated as separate from each other: (i) all Elective Deferral Account Balance Plans (including for aggregation purposes only, Separation Pay Plans based on Voluntary Separation from Service); (ii) all Employer Contribution Account Balance Plans (including for aggregation purposes only, Separation Pay Plans based on Voluntary Separation from Service); and (iii) all Separation Pay Plans based on Involuntary Separation from Service or under a Window Program.

(C) Dual Status . If a Participant in two like-type plans participates in one plan as an Employee and in the other as a Contractor, the plans are not Aggregated Plans. If an Employee also serves on the Employer’s board of directors (or in a similar capacity with regard to a non-corporate entity) and participates in like-type plans but participates in one plan as an Employee and in the other as a director (or similar capacity with regard to a non-corporate entity) [a “director plan”], the plans are not Aggregated Plans provided that the director plan is substantially similar to a plan the maintains for non-employee directors. If the director plan is not substantially similar, for purposes of aggregation, the director plan is treated as a plan for Employees. Director plans and plans for Contractors are subject to aggregation under this Section 1.05.

1.06 “Applicable Guidance” means as the context requires Code §§83, 409A and 457, Treas. Reg. §1.83, Treas. Reg. §§1.409A-1 through -6, Treas. Reg. §1.457-11, or other written Treasury or IRS guidance regarding or affecting Code §§83, 409A or 457(f), including, as applicable, any Code §409A guidance in effect prior to January 1, 2009.

1.07 “Base Salary” means a Participant’s Compensation consisting only of regular salary and excluding any other Compensation.

1.08 “Basic Plan Document” means this Nonqualified Deferred Compensation Plan document.

1.09 “Beneficiary” means the person or persons entitled to receive Plan benefits in the event of a Participant’s death.

1.10 “Bonus” means a Participant’s Compensation consisting only of bonus and excluding any other Compensation. A Bonus also may be Performance-Based Compensation under Section 1.37.

1.11 “Change in Control” means, as to an Employer which is a corporation, a change: (i) in the ownership of the Employer (acquisition by one or more persons acting as a group of more than 50% of the total voting power or fair market value of the Employer); (ii) in the effective control of the Employer (acquisition or acquisition during a 12-month period ending on the date of the latest acquisition, by one or more persons acting as a group of 30% or more of the total voting power of the Employer or replacement of a majority of the members of the board of directors of the Employer [described below, but including only the entity for which no other corporation is a majority shareholder] during any 12-month period by directors not endorsed by a majority of the board before the appointment or election); or (iii) in the ownership of a substantial portion of the assets of the Employer (acquisition or acquisition during a 12-month period ending on the date of the latest acquisition, by one or more persons [other than related persons described in Treas. Reg. §1.409A-3(i)(5)(vii)(B)] acting as a group of assets with a total gross fair market value of 40% or more of the total gross fair market value of all assets of the Employer immediately before such acquisition or acquisitions), each within the meaning of Treas. Reg. §1.409A-3(i)(5) or in Applicable Guidance. For this purpose, the Employer includes the Employer, the corporation which is liable for the payment of the Deferred Compensation, a


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majority shareholder (more than 50% of total fair market value and voting power) of the foregoing or a corporation in a chain of corporations in which each is a majority owner of another corporation in the chain, ending in the Employer or in the corporation that is liable for payment of the Deferred Compensation, all in accordance with Treas. Reg. §1.409A-3(i)(5)(ii). An event constituting a Change in Control must be objectively determinable and any certification thereof by the Employer or its agents may not subject to the discretion of such person. For purposes of applying this Section 1.11, stock ownership is determined in accordance with Code §318(a) as modified under Treas. Reg. §1.409A-3(i)(5)(iii). The Employer in its Adoption Agreement will elect whether a Change in Control includes any or all the events described in clauses (i), (ii) or (iii) and also may elect to increase the percentage change required under any such event to constitute a Change in Control. Pending the issuance of Applicable Guidance as to the application of the Change in Control provisions to partnerships (or other non-corporate entities), if the Employer elects in its Adoption Agreement to permit Change in Control as a payment event, the Employer will apply clauses (i) and (iii) and clause (ii) as it relates to a change in the composition of the board of directors by analogy in accordance with Treas. Reg. §1.409A, Preamble, III.G and Notice 2007-86.

1.12 “Change in the Employer’s Financial Health” means an adverse change in the Employer’s financial condition as described in Applicable Guidance.

1.13 “Code” means the Internal Revenue Code of 1986, as amended.

1.14 “Commissions” means Compensation or portions of Compensation consisting of Sales Commissions or of Investment Commissions. See Section 2.02(B)(5).

(A) Sales Commissions . Sales Commissions means Compensation or portions of Compensation a Participant earns if: (i) a substantial portion of Participant’s services to the Employer consists of the direct sale of a product or a service to a customer that is not related or treated as related to the Employer or to the Participant (under Treas. Reg. §§1.409A-1(f)(2)(ii) and (iv)); (ii) the Compensation the Employer pays to the Participant consists either of a portion of the purchase price for the product or service or of an amount substantially all of which is calculated by reference to volume of sales; and (iii) payment is either contingent upon the Employer receiving payment from an unrelated customer (as described in clause (i) above) for the product or services or, if consistently applied as to all similarly situated service providers, is contingent upon the closing of a sales transaction and such other requirements as the Employer may specify before the closing of the sales transaction.

(B) Investment Commissions . Investment Commissions means Compensation or portions of Compensation a Participant earns if: (i) a substantial portion of the Participant’s services to the Employer to which the Compensation relates consists of sales of financial products or other direct customer services to a customer that is not related or treated as related to the Employer or to the Participant (under Treas. Reg. §§1.409A-1(f)(2)(ii) and (iv)) as to customer assets or customer asset accounts; (ii) the customer retains the right to terminate the relationship and to move or liquidate the assets or asset accounts without undue delay (but subject to a reasonable notice period); (iii) the Compensation is based on a portion of the value of the overall assets or asset account balance, substantially all of the Compensation is calculated by reference to the increase in value of the overall assets of account balance, or both; and (iv) the value of the overall assets or account balance and Investment Commissions are determined at least annually.

(C) Related Customer Commissions . This Section 1.14 also applies to Sales Commissions and to Investment Commissions involving a related customer provided: (i) the Employer as to unrelated customers makes substantial sales or provides substantial services giving rise to Commissions; and (ii) the sales, service and Commission arrangements with the related customer are bona fide, arise from the Employer’s ordinary course of business and are substantially the same, in terms and in practice, as those terms and practices that apply to unrelated customers to which substantial sales are made or substantial services are rendered.

1.15 “Compensation”

(A) Employees . Compensation means as to an Employee, gross W-2 compensation. “W-2 Compensation” means wages for Federal income tax withholding purposes, as defined under Code §3401(a), plus all other payments to an Employee in the course of the Employer’s trade or business, for which the Employer must furnish the Employee a written statement under Code §§6041, 6051 and 6052, disregarding any rules limiting the remuneration included as wages under this definition based on the nature or location of


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the employment or service performed. “Gross W-2 compensation” means W-2 compensation plus all amounts excludible from a Participant’s gross income under Code §§125,132(f)(4), 402(e)(3), 402(h)(2), 403(b), and 408(p), contributed by the Employer, at the Participant’s election, to a cafeteria plan, a qualified transportation fringe benefit plan, a 401(k) arrangement, a SEP, a tax sheltered annuity, or a SIMPLE plan.

(B) Contractors . Compensation as to a Contractor means all payments by the Employer to the Contractor for services during a Taxable Year.

(C) Modifications . The Employer in its Adoption Agreement will elect whether to modify the definition of Compensation. The Employer may modify the definition of Compensation or may specify a different definition of Compensation either as to Employees, as to Contractors or both.

1.16 “Contractor” means a person or entity providing services to the Employer (not as an Employee) as described in Treas. Reg. §1.409A-1(f)(1) and which for any Taxable Year of the Contractor that the Contractor is on the cash receipts and disbursements method of accounting for Federal income tax purposes. A person serving on a board of directors is a Contractor as to Compensation for such service without regard to whether the person is an Employee for other purposes. A Contractor is not subject to this Plan or to Code §409A if in the Taxable Year in which the Legally Binding Right to Compensation arises: (i) the Contractor is actively engaged in the trade or business of performing services other than as an Employee or as a director (or similar position as to a non-corporate Employer); (ii) the Contractor provides significant services to the Employer and to at least one other unrelated service recipient, where the Contractor, the Employer and the other service recipient(s) are all unrelated to each other within the meaning of Treas. Reg. §§1.409A-1(f)(2)(i)(B) and (C) as applicable; and (iii) the services are not “management services” within the meaning of Treas. Reg. §1.409A-1(f)(2)(iv). For purposes of clause (ii), “significant services” means as described in Treas. Reg. §1.409A-1(f)(2)(iii). This Plan and Code §409A also do not apply to certain other “related” Contractor services as described in Treas. Reg. §1.409A-1(f)(2)(v).

1.17 “Disability” except as the Plan otherwise provides means a condition of a Participant who by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months: (i) is unable to engage in any substantial gainful activity; or (ii) is receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering Employees. The Employer in its Adoption Agreement will elect whether Disability includes all impairments constituting Disability under this Section 1.17, or only certain specified Disabilities which satisfy the foregoing definition. The Employer will determine whether a Participant has incurred a Disability based on its own good faith determination and may require a Participant to submit to reasonable physical and mental examinations for this purpose. A Participant will be deemed to have incurred a Disability if: (i) the Social Security Administration or Railroad Retirement Board determines that the Participant is totally disabled; or (ii) the applicable insurance company providing disability insurance to the Participant under an Employer sponsored disability program determines that a Participant is disabled under the insurance contract definition of disability, provided such definition complies with the definition in this Section 1.17.

1.18. “Deferred Compensation” means the Participant’s Account Balance attributable to Elective Deferrals and Employer Contributions and includes Earnings on such amounts except where the Plan otherwise provides. “Compensation Deferred” is Compensation that the Participant or the Employer has deferred under this Plan. Compensation is Deferred Compensation if: (i) under the terms of the Plan and the relevant facts and circumstances, the Participant has a Legally Binding Right to Compensation during a Taxable Year that the Participant has not actually or constructively received and included in gross income; and (ii) pursuant to the Plan terms, the Compensation is or may be payable to or on behalf of the Participant in a later Taxable Year. Deferred Compensation includes Separation Pay paid pursuant to a Separation Pay Plan except as otherwise described in Treas. Reg. §1.409A-1(b)(9) relating to certain excluded Involuntary or Voluntary Separation from Service or Window Programs and certain reimbursements, medical benefits, in-kind benefits and limited payments. Deferred Compensation excludes certain “short-term deferrals” and all other items described in Treas. Reg. §§1.409A-1(b)(3), (4), (5), (6), (8), (10), (11) and (12) or in other Applicable Guidance.

1.19 “Earnings” means earnings, gain or loss applicable to a Participant’s Account provided that such amounts reflect actual predetermined investments or notional amounts which do not exceed a reasonable rate of interest. Amounts credited to an Account that do not reflect actual predetermined investments or a reasonable rate of interest are Deferred Compensation and are not Earnings. For purposes of making the determination of whether an amount is Earnings or is Deferred Compensation, the principles of Treas. Reg. §31.3121(v)(2)-1(d)(2) apply.


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1.20 “Effective Date” of the Plan is the date the Employer specifies in the Adoption Agreement, but which is not earlier than January 1, 2009 unless the Employer specifies an earlier date. If this Plan restates a Plan (written or otherwise) which was in effect before January 1, 2009, for periods before January 1, 2009, as to 409A Amounts, the standards and transition rules in effect under Applicable Guidance applies. See for example, Notice 2007-86.

1.21 “Elective Deferral” means Compensation a Participant elects to defer into the Participant’s Account under the Plan.

1.22 “Elective Deferral Account” means the portion of a Participant’s Account attributable to Elective Deferrals and Earnings thereon.

1.23 “Employee” means a person providing services to the Employer as a common law employee (and not as a Contractor) as described in Treas. Reg. §1.409A-1(f)(1) and who, for any Taxable Year of the Employee, is on the cash receipts and disbursements method of accounting for Federal income tax purposes.

1.24 “Employer” means the person or entity: (i) receiving the services of the Participant (even if another person pays the Deferred Compensation); (ii) with respect to whom the Legally Binding Right to Compensation arises; and (iii) who or which executes an Adoption Agreement establishing the Plan. The Employer includes all persons with whom the Employer would be considered a single employer under Code §§414(b) or (c). In the case of an Ineligible 457 Plan, Employer means a State or a Tax-Exempt Organization. For purposes of this Plan, “Employer” means “service recipient” as that term in used in Treas. Reg. §1.409A-1 through -6.

1.25 “Employer Contribution” means amounts the Employer contributes or credits to an Account under the Plan, including Nonelective Contributions and Matching Contributions but not including Elective Deferrals.

1.26 “Employer Contribution Account” means the portion of a Participant’s Account attributable to Employer Contributions and Earnings thereon.

1.27 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.28 “409A Amount” means: (i) any Compensation Deferred prior to January 1, 2005, unless such Deferred Compensation is a Grandfathered Amount; and (ii) any Compensation Deferred in Taxable Years beginning after December 31, 2004. In determining 409A Amounts, the rules of Section 1.05 regarding Aggregated Plans apply.

1.29 “Grandfathered Amount” means an amount of Deferred Compensation hereunder as to which, prior to January 1, 2005, a Participant: (i) had a Legally Binding Right to be paid Deferred Compensation; and (ii) was Vested. However, if the Employer after October 3, 2004, materially modifies the Plan as described in Treas. Reg. 1.409A-6(a)(4), then such amount ceases to be a Grandfathered Amount. In determining Grandfathered Amounts, the rules of Section 1.05 regarding Aggregated Plans apply.

1.30 “Ineligible 457 Plan” means this Plan which is subject to Code §457(f) and that is not an

eligible 457 plan under Code §457(b).

1.31 “Legally Binding Right” means, in reference to Compensation, the grant by the Employer to the Participant of an enforceable right (under contract, statute or other applicable law) to Compensation where, after the Participant has performed the services which created the Legally Binding Right, the Compensation is not subject to unilateral reduction or elimination by the Employer or any other person. The Employer, based on the facts and circumstances and in accordance with Treas. Reg. §1.409A-1(b)(1), will determine: (i) whether a Legally Binding Right exists; or (ii) whether a Legally Binding Right does not exist on account of the existence of negative discretion which has substantive significance to reduce or eliminate the Compensation. Negative discretion does not exist where the Participant has effective control over the person with the negative


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discretion, has effective control over any portion of compensation of the decision maker or is a family member of the decision maker (within the meaning of Code §267(c)(4) applied as if the family of an individual includes the spouse of any member of the family). Compensation is not subject to unilateral reduction or elimination merely because: (i) it may be reduced or eliminated by operation of objective Plan terms, such as a Substantial Risk of Forfeiture; (ii) the Compensation is determined under a formula that provides for an offset based on benefits provided under another plan, including a qualified plan; or (iii) benefits are reduced on account of actual or notional investment losses, or, in a final average pay plan, because of subsequent decreases in compensation.

1.32 “Matching Contribution” means a fixed or discretionary Employer contribution made with respect to a Participant’s Elective Deferral.

1.33 “Matching Contribution Account” means the portion of a Participant’s Account attributable

to Matching Contributions and Earnings thereon.

1.34 “Nonelective Contribution” means a fixed or discretionary Employer Contribution that is unrelated to a Participant’s Elective Deferrals.

1.35 “Nonelective Contribution Account” means the portion of a Participant’s Account attributable to Nonelective Contributions and Earnings thereon.

1.36 “ Participant” means an Employee or Contractor the Employer designates under Adoption Agreement Section 2.01 or in Exhibit “B” to the Adoption Agreement to participate in the Plan. For purposes of this Plan, “Participant” means a “service provider” as that term is used in Treas. Reg. 1.409A-1 through-6, who is a participant in the Plan. A reference herein to “service provider” means another service provider to the Employer, whether or not that person is a Participant.

1.37 “Performance-Based Compensation” means Compensation (including a Bonus) where the amount of, or entitlement to, the Compensation is contingent on satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least 12 consecutive months. The Employer must establish the organizational or individual performance criteria in writing not later than 90 days after commencement of the performance period and the outcome must be substantially uncertain at the time that the Employer establishes the performance criteria. The Employer may establish performance criteria without the necessity of action by its shareholders, board of directors, compensation committee or similar entities in the case of a non-corporate Employer. Performance-Based Compensation does not include any amount that will be paid regardless of performance or that will be paid based on a level of performance that is substantially certain to be met at the time the criteria are established. If the Plan will pay the Participant’s Performance-Based Compensation in the event of the Participant’s death or disability or if a Change in Control occurs, without regard to whether the performance criteria have been satisfied, the Compensation is not Performance-Based Compensation (and therefore is not entitled to the election timing under Section 2.02(B)(4)) if payment occurs as a result of any of such events. “Disability” for purposes of this Section 1.37 means any medically determinable physical or mental impairment resulting from the Participant’s inability to perform the duties of his/her position or of any substantially similar position, where such impairment can be expected to result in death or to last for a continuous period of not less than 6 months. Performance-Based Compensation does not include an amount of Compensation which is based on a specified number of shares of stock multiplied by the share price at the end of the performance period, but may include an amount of Compensation based on an increase in share price over the performance period or which is not payable unless the share price is at or above a specified price. Performance-Based Compensation may be based on subjective performance criteria provided: (i) the criteria are bona fide and relate the Participant’s performance, a group of service providers that includes the Participant or a business unit for which the Participant provides services which may include the Employer; and (ii) the person who decides whether the subjective performance criteria have been met is someone other than the Participant, the Participant’s family member (within the meaning of Code §267(c)(4) applied as if the family of an individual includes the spouse of any member of the family), or a person under the effective control of the Participant or such a family member. In addition, the decision maker’s compensation may not be controlled in whole or in part by the Participant or such a family member. The Employer will determine the status of Compensation as Performance-Based Compensation in accordance with Treas. Reg. §1.409A-1(e) and Applicable Guidance.


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1.38 “ Plan” means the Nonqualified Deferred Compensation Plan of the Employer established by and including the Adoption Agreement, the Basic Plan Document, the Trust, if any, and all notices, forms, elections and other written documentation to which the Plan refers. The Employer will set forth the name of the Plan in its Adoption Agreement . For purposes of applying Code §409A requirements this Plan, as the Employer elects in its Adoption Agreement, is an Elective Deferral Account Balance Plan, an Employer Contribution Account Balance Plan or both, or is a Separation Pay Plan. This Plan does not constitute: (i) a Code §401(a) plan with an exempt trust under Code §501(a); (ii) a Code §403(a) annuity plan; (iii) a Code §403(b) annuity; (iv) a Code §408(k) SEP; (v) a Code §408(p) Simple IRA; (vi) a Code §501(c)(18) trust to which an active participant makes deductible contributions; (vii) a Code §457(b) plan; or (viii) a Code §415(m) plan.

1.39 “Retirement Age” means the date (if any) the Employer elects in the Adoption Agreement.

1.40 “Separation from Service”

(A) Employees . Separation from Service means in the case of an Employee, the Employee’s termination of employment with the Employer whether on account of death, retirement, Disability or otherwise.

(1) Insignificant or Significant Service/Presumptions . The Employer will determine whether an Employee has terminated employment (and incurred a Separation from Service) based on whether the facts and circumstances as described in Treas. Reg. §1.409A-1(h)(1)(ii). An Employee incurs a Separation from Service if the parties reasonably anticipate, based on the facts and circumstances, the Employee will not perform any additional services after a certain date or that the level of bona fide services (whether performed as an Employee or as a Contractor) will permanently decrease to no more than 20% of the average level of bona fide services performed (whether performed as an Employee or as a Contractor) over the immediately preceding 36-month period (or, if less, the period the employee has rendered service to the Employer) (“average prior service”). An Employee is presumed to have incurred a Separation from Service if the Employee’s service level decreases to 20% or less than the average prior service and an Employee is presumed to not have incurred a Separation from Service if the Employee’s service level continues at a rate which is 50% or more of the average prior service. No presumption applies where the Employee’s service level is more than 20% and less than 50% of the average prior service.

(2) Effect of Leave . An Employee does not incur a Separation from Service if the Employee is on military leave, sick leave, or other bona fide leave of absence if such leave does not exceed a period of 6 months, or if longer, the period for which a statute or contract provides the Employee with the right to reemployment with the Employer. If a Participant’s leave exceeds 6 months but the Participant is not entitled to reemployment under a statute or contract, the Participant incurs a Separation from Service on the next day following the expiration of 6 months. A leave of absence constitutes a bona fide leave of absence for this Section 1.40 only if there is a reasonable expectation that the Employee will return to perform services for the Employer. Where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of at least 6 months, and where the Participant cannot perform his/her duties or the duties of any substantially similar position, in determining when a Separation from Service occurs, the above 6-month period is 29 months unless the Employer or the Employee terminate the leave sooner. For purposes of determining average prior service under Section 1.40 (A)(1), during a paid leave of absence which is not a Separation From Service, the Employee is treated as rendering bona fide services at a level that would have been required to earn the amount paid during the leave. If the leave of absence is unpaid, the leave period is disregarded in determining average prior service.

(3) Alternative Definition . In lieu of applying Section 1.40(A)(1), the Employer or Participant in an initial payment election or in a change payment election may elect a percentage of reduced bona fide services resulting in a Separation from Service which percentage must be greater than 20% and less than 50% of prior average service, determined over the immediately preceding 36 months.

(B) Contractors . Separation from Service, in the case of a Contractor, means the expiration of the contract (or all contracts) under which the Contractor performs services for the Employer provided that the expiration constitutes a good-faith and complete termination of the contractual relationship between the Contractor and the Employer. A good-faith and complete termination does not occur if the Employer anticipates a renewal of the service contract or the Employer anticipates the Contractor becoming an Employee.


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The Employer anticipates the renewal of the contract if the Employer intends to contract again for the services provided under the expired contract and neither the Employer nor the Contractor has eliminated the Contractor as a possible provider of such additional services. The Employer is deemed to intend renewal of the Contractor’s expired contract if renewal is conditioned only upon incurring a need for services, the Employer’s ability to pay for the services, or both. See Section 4.01(E) as to Contractor “deemed” Separation from Service provisions.

(C) Involuntary Separation from Service (including for “good reason”) . “Involuntary Separation from Service” means a Separation from Service due to the Employer’s independent exercise of unilateral authority to terminate the Participant’s services (other than due the Participant’s implicit or explicit request), where the Participant was willing and able to continue performing services for the Employer. Involuntary Separation from Service may include the Employer’s failure to renew the service contract at the time the contract expires provided that the Participant was willing and able to execute a new contract on substantially the same terms and conditions as the expiring contract and to continue providing such services. The Employer will make the determination as to whether an Involuntary Separation from Service has occurred based on all of the facts and circumstances and in accordance with Treas. Reg. §1.409A-1(n). For this purpose, a Participant’s voluntary Separation from Service is treated as an Involuntary Separation from Service if it is for “good reason” as described in Treas. Reg. §§1.409A-1(n)(2). A Separation from Service is deemed to be for a good reason if it occurs during a limited period not to exceed 2 years following the initial existence of the following without the Participant’s consent: (i) a material reduction in the Participant’s base compensation (including Base Salary); (ii) a material reduction in the Participant’s authority, duties or responsibilities; (iii) a material reduction in the authority, duties or responsibilities of the Participant’s supervisor, including a change in the Participant’s reporting responsibilities to a lower level than the board of directors or similar authority in a non-corporate entity; (iv) a material reduction in the Participant’s budget; (v) a material change in the location at which the Participant renders service; or (vi) any other action or inaction that constitutes the Employer’s material breach of the agreement under which the Participant provides services to the Employer. In addition, to be a deemed “good reason” the amount, time and form of payment upon Separation from Service must be substantially identical to the amount payable upon an actual Involuntary Separation from Service, if such right exists, and the Participant must provide notice to the Employer within 90 days of the initial existence of the condition and afford the Employer at least 30 days to remedy the condition without having to pay the Compensation.

(D) Voluntary Separation from Service . “Voluntary Separation from Service” means a Separation from Service which is not an Involuntary Separation from Service under Section 1.40(C).

(E) “Employer” for Purposes of Separation Rules . The “Employer” for purposes of applying this Section 1.40 (determining Separation from Service under the Plan) means as defined under Section 1.24 but by applying 50% in lieu of 80% in applying Code §§414(b) and (c). The Employer in lieu of applying the previous sentence may elect in its Adoption Agreement to use a percentage equal to not less than 20% and not more than 80% in determining related employers under Code §§414(b) and (c); provided that the Employer may not elect to apply a percentage which is less than 50% unless there are legitimate business criteria for doing so.

(F) Dual Capacity . If a Participant renders service to the Employer both in the capacity as an Employee and as a Contractor (or changes status from Employee to Contractor or vice versa), the Participant must incur a Separation from Service in both capacities to constitute a Separation from Service. For this purpose, if a Participant renders service both as an Employee and as a member of the Employer’s board of directors (or an analogous position in the case of a non-corporate Employer) the director services (or the Employee services if this Plan relates to director services) are disregarded in determining whether the Participant has incurred a Separation from Service as to this Plan provided that the plans are not Aggregated Plans.

(G) Certain Asset Sales . In accordance with and subject to Treas. Reg. §1.409A-1(h)(4), if the Employer sells its assets to an unrelated party purchaser where the Participants otherwise would incur a Separation from Service and where such Participants will provide services to the purchaser after the sale closing, the Employer and the purchaser retain discretion no later than the asset sale closing date to specify in writing whether the Participants will incur a Separation from Service. In making such determination, the Employer and the purchaser must treat all affected Participants consistently.


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(H) Collectively Bargained Multiple Employer Plan . If the Plan is established pursuant to a bona fide collective bargaining agreement covering services rendered for multiple employers, the Employer (which for this purpose means the employer which executes the Adoption Agreement) in its Adoption Agreement may elect to define Separation from Service in a reasonable manner that treats an Employee as not having separated during periods in which the Employee is not providing services covered by the collective bargaining agreement but is available to do so for one or more employers. However, such alternative definition must also provide that the Employee is deemed to have incurred a Separation from Service at a specified date not later than the end of any period of at least 12 consecutive months during which time the Employee has not provided any service covered by the collective bargaining agreement to any participating employer. The Employer will apply this section in accordance with the requirements of Treas. Reg. §1.409A-1(h)(6).

1.41 “ Separation Pay” means any Deferred Compensation (applied before application of any exclusion applicable to Separation Pay Plans under Treas. Reg. §1.409A-1(b)(9)) that will not be paid under any circumstances unless the Participant incurs a Separation from Service, whether voluntary or involuntary, including payments in the form of reimbursements for expenses incurred and provision of in-kind benefits. Deferred Compensation that a Participant may receive without incurring a Separation from Service is not Separation Pay merely because the Participant elects to receive or receives payment upon or after Separation from Service. Deferred Compensation does not fail to constitute Separation Pay merely because the Participant must execute a release of claims, noncompetition agreement or nondisclosure agreement or is subject to similar requirements. Any amount or entitlement that acts as a substitute for, or replacement of, Deferred Compensation is a payment of Deferred Compensation and is not Separation Pay.

1.42 “Separation Pay Plan” means any plan that provides for Separation Pay, including the portion of any plan that provides for Separation Pay, under Treas. Reg. §§1.409A-1(m). The Employer in its Adoption Agreement will elect whether this Plan is a Separation Pay Plan and will elect whether the plan pays benefits in the event of Involuntary Separation from Service, Voluntary Separation from Service, pursuant to a Window Program or a combination thereof.

1.43 “Service Year” means a Participant’s Taxable Year in which the Participant performs services which give rise to Compensation. A “service period” or “performance period” means a Service Year or such other period in which a Participant performs services for the Employer giving rise to Compensation.

1.44 “Specified Employee” means a Participant who is a key employee as described in Code §416(i)(1)(A), disregarding paragraph (5) thereof and using compensation as defined under Treas. Reg. §1.415(c)-2(a). However, a Participant is not a Specified Employee unless any stock of the Employer is publicly traded on an established securities market or otherwise and the Participant is a Specified Employee on the date of his/her Separation from Service. If a Participant is a key employee at any time during the 12 months ending on the Specified Employee identification date, the Participant is a Specified Employee for the 12 month period commencing on the Specified Employee effective date. The Specified Employee identification date is December 31. The Specified Employee effective date is the April 1 following the Specified Employee identification date. The Employer, in determining whether this Section 1.44 and all related Plan provisions apply, will determine whether the Employer has any publicly traded stock as of the date of a Participant’s Separation from Service. In the case of certain corporate transactions (a merger, acquisition, spin-off or initial public offering), or in the case of nonresident alien Employees, the Employer will apply the Specified Employee provisions of the Plan in accordance with Treas. Reg. §1.409A-1(i) and other Applicable Guidance. Notwithstanding the foregoing, the Employer in its Adoption Agreement, and in accordance with Treas. Reg. §1.409A-1(i) and other Applicable Guidance, may make the following elections: (i) use of any Code §415 definition of compensation for Specified Employee determination; (ii) designation of an alternative Specified Employee identification date; (iii) designation of an alternative Specified Employee effective date; (iv) use of an alternative method to identify Participants who will be subject to the 6 month delay rule in Section 4.01(D); (v) certain elections in the context of corporate transactions; and (vi) certain elections regarding nonresident alien Employees. The Employer’s election under clauses (ii) or (iii) regarding an identification date or effective date made on or before December 31, 2007, applies to any Separation from Service occurring on or after January 1, 2005, unless the Employer subsequently changes the identification date and/or effective date. Such elections are effective as of the date that all necessary corporate action has been taken to make the election binding as to all nonqualified deferred compensation plans in which service providers of the Employer who would become a Specified Employees participate. The Employer must apply all such elections consistently as to all service providers. The Employer will apply the Specified Employee provisions of the Plan, including the elections described in this Section 1.44, in accordance with Treas. Reg. §1.409A-1(i) and other Applicable Guidance.


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1.45 “Specified Time or Fixed Schedule” means, in reference to a payment of Deferred Compensation, the Employer, at the time of the deferral of the Compensation can objectively determine: (i) the amount payable; and (ii) the payment date or dates. An amount is objectively determinable if the deferral election specifically identifies the amount or if the Employer can determine the amount at the time it is due pursuant to an objective, nondiscretionary formula specified at the time of deferral.

(A) Dates and Period(s) . A payment is scheduled to occur at a specified time if it is a lump sum payment on a specific date, or a specific, objectively determinable date, including following the lapse of a substantial risk of forfeiture. A payment is scheduled to occur on a fixed schedule if it is a series of payments (which may include an annuity or a series of installments) payable on specific dates or on objectively determinable specific dates including following the lapse of a substantial risk of forfeiture. The designation of a Taxable Year of the Participant, or a defined period within a Taxable Year of the Participant, in which payment will occur is adequate designation of a specific date. For purposes of Sections 4.02 and 4.05, if the date specified is only a designated Taxable Year of the Participant, or a period of time during such a Taxable Year, the date specified under the plan is treated as the first day of such Taxable Year or the first day of the period of time, as applicable.

(B) Limitations and Link to Employer Receipts . A Fixed Schedule may include certain: (i) limitations on the amount payable at a specified time of during a specified period expressed either as a stated limit or based on an objective nondiscretionary formula; and (ii) payment schedules based on the timing of payments received by the Employer as described in Treas. Reg. §§1.409A-3(i)(1)(ii) and (iii) and other Applicable Guidance.

(C) Tax Gross-Up Payments . A Specified Time or Fixed Schedule may include tax gross-up payments made by the end of the Participant’s Taxable Year which follows the Taxable Year in which the Participant remits the related taxes resulting from compensation paid or made available to the Participant by the Employer, as described in Treas. Reg. §1.409A-3(i)(1)(v) and other Applicable Guidance.

1.46 “State” means: (i) one of the fifty states of the United States or the District of Columbia, or (ii) a political subdivision of a State, or any agency or instrumentality of a State or its political subdivision. A State does not include the Federal government or an agency or instrumentality thereof.

1.47 “Substantial Risk of Forfeiture”

(A) 409A Amounts . Substantial Risk of Forfeiture means as to 409A Amounts, and other than for purposes of application of Code §457(f), Compensation which is payable conditioned: (i) on the performance of substantial future services by any person including the Participant; or (ii) on the occurrence of a condition related to a purpose of the Compensation, and where under clause (i) or (ii) the possibility of forfeiture is substantial. A condition related to the purpose of the Compensation relates to the Participant’s performance for the Employer or to the Employer’s business activities or organizational goals. A Substantial Risk of Forfeiture includes conditioning payment on the Participant’s Involuntary Separation from Service without cause provided the possibility of not incurring such a Separation from Service is substantial. Except as to payment of Compensation related to a Change in Control, a Substantial Risk of Forfeiture does not include any addition of a condition after a Legally Binding Right to the Compensation arises or any extension of a period during which the Compensation is subject to a Substantial Risk of Forfeiture. Compensation is not subject to a Substantial Risk of Forfeiture merely because payment is conditioned on the Participant’s refraining from performing services. Compensation is not subject to a Substantial Risk of Forfeiture beyond the date or time that the Participant otherwise could have elected to receive the Compensation unless the present value of the amount subject to the Substantial Risk of Forfeiture (determined without regard to the Substantial Risk of Forfeiture) is materially greater than the present value of the amount that the Participant otherwise could have elected to receive, absent the Substantial Risk of Forfeiture. As such, a Participant’s Elective Deferrals generally may not be made subject to a Substantial Risk of Forfeiture if the Participant could have elected to receive an equivalent amount in cash. In addition, Compensation the Participant would receive for continuing to perform service for the Employer (such as through the extension of an employment contract) is disregarded in


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determining whether the present value of such nonvested payment amount is materially greater than the Compensation which the Participant could have elected to receive presently. In determining whether the possibility of forfeiture is substantial in the case of rights to Compensation granted to a Participant who owns significant voting power or value in the Employer, the Employer in accordance with Treas. Reg. §1.409A-1(d)(3) and Applicable Guidance, will take into account all relevant facts and circumstances.

(B) Grandfathered Amounts . A Substantial Risk of Forfeiture for Grandfathered Amounts is defined in Treas. Reg. §1.83-3(c) and in Notice 2005-1, Q/A-16(b) or in Applicable Guidance.

(C) Ineligible 457 Plan . A Substantial Risk of Forfeiture for purposes of application of Code §457(f) under an Ineligible 457 Plan is described in Code §457(f)(3)(B), Treas. Reg. §1.83-3(c) and Applicable Guidance, including any such Guidance which may apply the same or a substantially similar definition as under Section 1.47(A)

1.48 “Tax-Exempt Organization” means any tax-exempt organization other than: (i) a governmental unit; or (ii) a church or a qualified church-controlled organization within the meaning of Code §§3121(w)(3)(A) and 3121(w)(3)(B).

1.49 “ Taxable Year” means as to the Participant, the Participant’s taxable year and means as to the Employer, the Employer’s taxable year, in each case as the Plan provides or as the context otherwise requires.

1.50 “ Trust” means the trust, if any, described in Section 5.03 of the Basic Plan Document and which the Employer in its Adoption Agreement elects to create.

1.51 “Unforeseeable Emergency” means: (i) a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, a Beneficiary or the Participant’s dependent (as defined in Code §152 but without regard to Code §§152(b)(1), (b)(2) and (d)(1)(B)); (ii) loss of the Participant’s property due to casualty; or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant’s control. The Employer in its Adoption Agreement will elect whether to permit payment based on a Participant’s Unforeseeable Emergency. The Employer will determine whether a Participant incurs an Unforeseeable Emergency based on the relevant facts and circumstances and in accordance with Treas. Reg. §1.409A-3(i)(3) or Applicable Guidance, but in any case, the Plan may not make payment to the extent that the Unforeseeable Emergency may be relieved: (i) through reimbursement or compensation from insurance or otherwise; (ii) by liquidation of the Participant’s assets to the extent that such liquidation of assets would not itself cause severe financial hardship; or (iii) by the Participant’s cessation of Elective Deferrals under the Plan. The Plan must limit the amount of any payment based on Unforeseeable Emergency to the amount that is reasonably necessary to satisfy the emergency need, which may include amounts necessary to pay any Federal, state, local or foreign income taxes or penalties reasonably anticipated to result from the payment. The Employer in making the determination as to the amount of payment must take into account any additional Compensation available to the Participant upon cancellation of an Elective Deferral election under Section 2.02(D). However, the Employer in determining “necessity” may disregard amounts available as a hardship distribution or a loan from a qualified plan or as an unforeseeable emergency distribution from another nonqualified plan, regardless of whether such amount is 409A Amount or is a Grandfathered Amount. If the Employer in its Adoption Agreement elects to permit payment based on Unforeseeable Emergency, the Employer further will elect whether to permit payment based on all events that will constitute an Unforeseeable Emergency or to limit such events to a subset of specific events which will so qualify. The Employer will not pay a Participant any Deferred Compensation based an Unforeseeable Emergency unless the Participant requests such payment on a form the Employer provides for this purpose, the Employer determines that the payment would qualify under the Plan terms as being based on the Participant’s Unforeseeable Emergency, and the Employer in its sole discretion otherwise approves the payment. Neither a Participant’s request, or failure to request, an Unforeseeable Emergency payment, nor the Employer’s acceptance or rejection of such a request is a change payment election under Section 4.02(B).

1.52 “USERRA” means the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended.

1.53 “ Valuation Date” means the last day of each of the Employer’s Taxable Year and such other dates as the Employer may determine.


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1.54 “Vested” means an amount of Deferred Compensation which is not subject to a Substantial Risk of Forfeiture or to a requirement to perform further services for the Employer. For purposes of determining whether an amount satisfies the vesting requirement for Grandfathered Amounts under Article VII, the definition of Substantial Risk of Forfeiture in Section 1.47(B) applies.

1.55 “Window Program” means a program the Employer establishes in connection with an impending Separation from Service to provide Separation Pay to separated Participants and which program is available only for a period of up to 12 months for Participants who separate during such period or who separate during such period under specified circumstances. A Window Program does not include a program the Employer establishes under which there is a pattern of repeated provision of similar Separation Pay in similar situations for substantially consecutive limited periods of time. Whether a recurrent program constitutes such a pattern depends upon all of the facts and circumstances, including whether the benefits are account of a specific event or condition, the degree to which the separation pay relates to the event or condition and whether the event or condition is temporary or discrete or is a permanent aspect of the Employer’s business.

1.56 “Wraparound Election” means as to a Participant who also is a participant in a 401(k) or 403(b) plan of the Employer, an election (or elections, if made separately) to defer compensation under both plans with the result that the Participant will achieve under the 401(k) or 403(b) plan, the maximum amount of elective deferrals and matching contributions, if any, as is permissible under the 401(k) or 403(b) plan terms and under Code §§402(g), 401(k)(3), 401(m), 415 and 414(v). For any Participant’s Taxable Year, the maximum amount of Elective Deferrals the Plan will transfer as to the Participant (and corresponding decrease in amounts of Compensation Deferred to this Plan) may not exceed the Code §402(g) limit (but increased by catch-up contributions under Code §§414(v) and 402(g)(7) for any year in which the Participant is catch-up eligible). For any Participant’s Taxable Year, the maximum amount of Matching Contributions the Plan will transfer as to the Participant (and corresponding decrease in amounts of Compensation Deferred to this Plan) may not exceed the maximum amount of matching contributions that would be provided under the 401(k) or 403(b) plan absent any plan-based restrictions which reflect Code limits on qualified plan or 403(b) contributions. Under a Wraparound Election, the Plan promptly following completion of 401(k) or 403(b) plan testing and within any time required under Applicable Guidance, will transfer from the Participant’s Account such Elective Deferrals and related Matching Contributions for the Taxable Year (but without Earnings thereon) as are consistent with the Wraparound Election, to the Participant’s account under the 401(k) or 403(b) plan to be held and administered in accordance with the 401(k) or 403(b) plan. Any remaining amounts not transferred to the 401(k) or 403(b) plan will remain in and be administered in accordance with this Plan. The Employer in its Adoption Agreement will specify whether a participant may make a Wraparound Election. A Participant will make a Wraparound Election subject to any timing requirements of Applicable Guidance and on a form the Employer provides for this purpose.

1.57 “Year of Service” means the requirements, if any, the Employer specifies in its Adoption Agreement.

II. PARTICIPATION

2.01 Participants Designated . The Employer will designate from time to time in its Adoption Agreement those Employees or Contractors (by name, job title or other classification) who are Participants in the Plan.

2.02 Elective Deferrals . The Employer will specify in its Adoption Agreement whether Participants may elect to make Elective Deferrals to their Accounts.

(A) Limitations . The Employer will specify in its Adoption Agreement any amount limitations or conditions applicable to Elective Deferrals.

(B) Election Form and Timing . A Participant must make his/her Elective Deferral election on an election form the Employer provides for that purpose. The Participant must make the election no later than the latest of the applicable times specified below. The Employer in its Adoption Agreement will elect that a Participant must make and deliver his/her election to the Employer no later than: (i) such applicable time; or (ii) the number of days prior to such applicable time as the Employer sets forth in its Adoption Agreement. The Employer will disregard any Elective Deferral election which is not timely under this Section 2.02(B). See Section 6.04.


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(1) General Timing Rule . Except as otherwise provided in this Section 2.02(B), a Participant must deliver to the Employer his/her Elective Deferral election regarding Service Year Compensation no later than the end of the Participant’s Taxable Year which is prior to the Service Year.

(2) New Participant/New Plan . As to the Service Year in which an Employee or a Contractor first becomes a Participant (a “newly eligible Participant”), the Participant must make and deliver an Elective Deferral election for that Service Year not later than 30 days after the Employee or Contractor becomes a Participant. All Participants who are eligible to participate on the Effective Date of a new plan are newly eligible Participants as of the Effective Date.

(a) Participant status . For purposes of this Section 2.02(B)(2), an Employee or Contractor is eligible to participate in the Plan at any time during which, under the Plan terms and without further amendment or action by the Employer, the Employee or Contractor is eligible to accrue Deferred Compensation under the Plan (other than Earnings on prior Deferred Compensation), even if the Employee or Contractor has elected not to accrue any such Deferred Compensation (or has made no election).

(b) Changes in status . For purposes of this Section 2.02(B)(2), if a Participant has been paid all Deferred Compensation and on or before the last payment ceases to be eligible to participate in the Plan, but thereafter becomes eligible to participate, the Employee or Contractor is treated as a newly eligible Participant. If a Participant ceases to be eligible to participate, other than as to Earnings, regardless of whether the Participant has been fully paid all Deferred Compensation under the Plan, and subsequently becomes eligible to participate, the Employee or Contractor is treated as a newly eligible Participant provided that the period during which the Employee or Contractor was ineligible was at least 24 months.

(c) Compensation to which election applies . Under this Section 2.02(B)(2), a Participant’s election may apply only to Compensation for services the Participant performs subsequent to the date the Participant delivers the election to the Employer. For Compensation that is earned for a specified performance period, including an annual bonus, if the newly eligible Participant makes an Elective Deferral election after the performance period commences, the Employer will pro rate the election by multiplying the performance period Compensation by the ratio of the number of days left in the performance period at the time of the election, over the total number of days in the entire performance period.

(d) Excess benefit plan . For purposes of this Section 2.02(B)(2), if this Plan is an excess benefit plan, an Employee is a newly eligible Participant in the Plan as of the first day of the Employee’s Taxable Year immediately following the first year in which he or she accrues a benefit under the Plan. Any election the Employee makes within 30 days following such date applies to any benefits accrued for services provided before the election. An excess benefit plan for purposes of this Section 2.02(B)(2)(d) means a plan under which all Deferred Compensation is attributable to Employer Contributions and is based on the amount the Participant would have accrued under the Employer’s qualified plan(s) but for one or more Code limits which apply to the qualified plan(s) over the benefits the Participant actually accrues in such plan(s). Once a Participant has accrued a benefit or deferred Compensation in any year, the Participant is not eligible to use the delayed election in this Section 2.02(B)(2)(d).

(e) Aggregated Plans . All references to the Plan in this Section 2.02(B)(2) include Aggregated Plans. As such, an Employee or Contractor who participates in an Aggregated Plan is not a newly eligible Participant and this Section 2.02(B)(2) does not apply.

(3) Certain Forfeitable Rights . If payment of Deferred Compensation is subject to a condition requiring the Participant to perform services for the Employer for at least 12 months after the Participant obtains the Legally Binding Right to the Compensation to avoid forfeiture of the payment, the Participant may make an Elective Deferral election no later than 30 days after the Participant obtains the Legally Binding Right to the Compensation, provided the Participant makes the election at least 12 months prior to the earliest date on which the service forfeiture condition could lapse. If the Plan provides for a waiver of the service condition upon the Participant’s death, Disability or upon a Change in Control, and such event occurs before the end of the 12 month minimum service period, the Participant’s elective Deferral election is valid only if the election is timely under the Plan without regard to this Section 2.02(B)(3).


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(4) Performance-Based Compensation . As to any Performance-Based Compensation, a Participant may elect no later than 6 months before the end of the performance period to defer such Compensation, provided that the Participant: (i) continuously performs services from the later of the beginning of the performance period or the date the Employer establishes the performance criteria and at least through the date of the Participant’s election; and (ii) may not make an election after the Compensation has become readily ascertainable. For purposes of this Section 2.02(B)(4), if the Performance-Based Compensation is a specified or calculable amount, the Compensation is readily ascertainable if and when the amount is first substantially certain to be paid. If the Performance-Based Compensation is not a specified or calculable amount, the Compensation or any portion thereof is readily ascertainable when the amount is first both calculable and substantially certain to be paid. In applying this Section 2.02(B)(4), the Employer will bifurcate any right to payment as between amounts which are readily ascertainable and amounts which are not readily ascertainable.

(5) Commissions .

(a) Sales Commissions . For purposes of election timing under this Section 2.02(B), if Compensation consists of Sales Commissions, the Participant is treated as providing the services giving rise to the Commissions in the Participant’s Taxable Year in which the customer remits payment to the Employer, or, if applied consistently to all similarly situated service providers, the Participant’s Taxable Year in which the sale occurs.

(b) Investment Commissions . For purposes of election timing under this Section 2.02(B), if Compensation consists of Investment Commissions, the Participant is treated as providing the services giving rise to the Commissions over the 12 months preceding the date as of which the overall value of the assets or the asset accounts is determined for purposes of calculation of the Investment Commissions.

(6) Final Payroll Period . If Compensation is payable after the last day of the Participant’s Taxable Year, but is Compensation for the Participant’s services during the final payroll period within the meaning of Code §3401(b) (or, as to a Contractor, a period not longer than such period) which contains the last day of the Participant’s Taxable Year, the Compensation is treated for purposes of an election under this Section 2.02(B), as Compensation: (i) for the current Taxable Year in which the final payroll period commenced; or (ii) for the subsequent Taxable Year in which the Employer pays the Compensation, as the Employer elects in its Adoption Agreement. This Section 2.02(B)(6) does not apply to Compensation for services performed over any period other than the final payroll period as described herein, including an annual bonus. If the Employer amends its Adoption Agreement after December 31, 2007, to alter the timing rule of this Section 2.02(B)(6), any such amendment may not take effect until 12 months after the later of the date the amendment is executed and is effective.

(7) Separation Pay/Window Program . If the Participant’s election relates to Separation Pay (based on voluntary or involuntary Separation from Service) and the Separation Pay is the subject of bona-fide, arm’s length negotiations at the time of Separation from Service, the Participant may make an election under this Section 2.02(B) at any time up to the time that the Participant has a Legally Binding Right to the Separation Pay. This Section 2.02(B)(7) does not apply to any Separation Pay to which the Participant obtained a Legally Binding Right before the negotiations at the time of Separation from Service, including a right to payment subject to a condition. If the Separation Pay results from a Window Program, the Participant may make the election at any time up to the time that the Participant’s election to participate in the Window Program becomes irrevocable.

(8) Fiscal Year Employer . In the event that the Employer’s Taxable Year is a not the same as the Participant’s Taxable Year, a Participant may elect to defer Compensation which is co-extensive with one or more of the Employer’s consecutive Taxable Years, and no amount of which is paid or payable during the Employer’s Taxable Year or Years constituting the period of service, by making an election no later than the end of the Employer’s Taxable Year which precedes the Employer’s first Taxable Year in which the Participant performs the service for which the Compensation is payable.

(C) Election Changes/ Irrevocability . The Employer in its Adoption Agreement will elect whether a Participant’s Elective Deferral election made prior to the Section 2.02(B) deadline becomes irrevocable as to a Taxable Year: (i) following the last day on which a Participant may make an election under Section 2.02(B) for


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such Taxable Year; or (ii) if earlier, when the Participant makes the election for a Taxable Year. For this purpose, a Participant’s Elective Deferral election is considered made when the Employer accepts the election. If the Employer elects to permit changes to an election up to the Section 2.02(B) election deadline, a Participant may make any number of changes to his/her Elective Deferral election during the period prior to the election becoming irrevocable. If the Employer elects in its Adoption Agreement and under Section 2.02(D) that a Participant’s election is continuing, the Participant is deemed to have made an irrevocable election as to each Taxable Year on the last day that the Participant could have made an election under Section 2.02(B). As such, the Participant may revoke or modify a continuing election for a Taxable Year up to the date that such election is deemed made and irrevocable for that Taxable Year. A change payment election under Section 4.02(B) or a permissible acceleration under Section 4.02(C)(3) does not render an Elective Deferral election and an accompanying initial payment election under Section 4.02(A) revocable within the meaning of this Section 2.02(C).

(D) Election Duration/Cancellation . As the Employer elects in its Adoption Agreement, a Participant’s Elective Deferral election remains in effect: (i) only for the duration of the Taxable Year or Taxable Years for which the Participant makes the election; or (ii) for the duration of the Taxable Year for which the Participant makes the election and for all subsequent Taxable Years unless the Participant executes a subsequent timely election, modification or revocation. A Participant, subject to Plan requirements regarding election timing, may make a new election, or may revoke or modify an existing election effective no earlier than for the next Taxable Year, provided that under Section 4.02(C)(3), the Employer may cancel an existing and otherwise irrevocable election for a Taxable Year at any time following the Participant’s receipt of an Unforeseeable Emergency distribution or of a distribution from the Employer’s 401(k) plan based upon hardship within the meaning of Treas. Reg. §1.401(k)-1(d)(3).

(E) “Non-Elections” or Deemed Compliance .

(1) Linkage to Qualified or Certain Foreign Plans . The following as described in Treas. Reg. §1.409A-2(a)(9) are not elections under Section 2.02(B): (i) the amount of Compensation Deferred under this Plan is determined under a formula for determining benefits under the Employer’s qualified plan or broad-based foreign retirement plan (but applied without regard to Code or foreign law imposed limitations); or (ii) the amount of Compensation Deferred under this Plan is offset by some or all benefits provided under the Employer’s qualified plan or broad-based foreign plan and where in either case the amount of Compensation Deferred under the Plan increases on account of changes in the Code or foreign law imposed benefit limitations applicable to the qualified plan or foreign plan, provided in either case such operation does not result in a change in the time or form for payment under this Plan and that the change in the amounts of Compensation Deferred do not exceed the change in amounts deferred under the qualified plan or foreign plan.

(2) Actions/Inactions (including Wraparound Elections) . As described in Treas. Reg. §1.409A-2(a)(9), the following Participant actions or in actions are not elections under Section 2.02(B), even if they result in an increase in Compensation Deferred under the Plan: (i) election or non-election under the Employer’s qualified plan or broad-based foreign plan as to receipt of a subsidized or ancillary benefit under such plans; (ii) an amendment of such other plans’ benefits to add or remove a subsidized or ancillary benefit or to freeze or limit future accruals under the qualified plan or foreign plan or to reduce existing benefits under the foreign plan; or (iii) a Participant’s Wraparound Election, provided in all cases such action or inaction does not result in a change in the time or form for payment under this Plan and that under clauses (i) and (ii) above, the change in the amounts of Compensation Deferred do not exceed the change in amounts deferred under the qualified plan or foreign plan.

(3) Elections under a Cafeteria (125) Plan . As described in Treas. Reg. §1.409A-2(a)(10), -if a Participant who is also a participant in a cafeteria (Code §125) plan of the Employer, changes an election under the cafeteria plan with the result that the amount of Compensation Deferred under this Plan changes on account of an increase or decrease in Compensation under this Plan as a result of the cafeteria plan election, the cafeteria plan election is not an election for purposes of Section 2.02(B).

(4) USERRA Rights . The requirements of Section 2.02(B) are deemed satisfied as to any Elective Deferral election (including an initial payment election) which the Plan provides to satisfy the requirements of USERRA.


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(5) Annualizing Recurrent Partial Year Compensation . If a Participant is receiving recurring part-year Compensation, the Participant’s election to defer all or a portion of such Compensation to be earned during a particular service period is deemed to satisfy the requirements of Section 2.02(B) if the Participant makes the election before the services giving rise to the Compensation begin and the election does not defer payment of any of such Compensation to a date beyond the last day of the 13 ^th month following the first date of the service period. For purposes of this Section 2.02(E)(5), recurring part-year Compensation means Compensation paid for services rendered as to a position the Participant and the Employer reasonably anticipate will continue on similar terms and on similar conditions in subsequent years, and will require services to be provided in successive service periods, each of which comprises less than 12 months and each of which begins in one Taxable Year of the Participant and ends in the next Taxable Year. This Section 2.02(E)(5) applies only once to Compensation Deferred such that the same amount may not again be treated as recurring part-year Compensation and subject to a second deferral election.

2.03 Nonelective Contributions . The Employer will specify in its Adoption Agreement whether the Employer will or may make Nonelective Contributions to the Plan, and the terms and conditions applicable to any Nonelective Contributions.

2.04 Matching Contributions . The Employer will specify in its Adoption Agreement whether the Employer will or may make Matching Contributions to the Plan, and the terms and conditions applicable to any Matching Contributions.

2.05 Actual or Notional Contribution . The Employer will specify in its Adoption Agreement whether it will make any Employer Contribution as a notional contribution or as an actual contribution. If the Employer establishes the Trust, any Employer Contributions to the Trust will be actual contributions.

2.06 Allocation Conditions . The Employer will specify in its Adoption Agreement any employment or other condition applicable to the allocation of Employer Contributions for a Taxable Year.

2.07 Timing . The Employer may elect to make any Employer Contribution for a Taxable Year at such times as Code §409A or Applicable Guidance may permit. The Employer is not required to contribute any actual contribution (or to post any notional contribution) to an Account at the time that the Employer makes its contribution election.

2.08 Administration . The Employer will administer all Employer Contributions in the same manner as Elective Deferrals, and will treat the Employer’s election to make Employer Contributions as an Elective Deferral election, except as the Plan otherwise provides. If the Employer establishes the Trust, the Employer will remit any Elective Deferrals to the Trust and will make any Employer Contributions to the Trust. Any Employer Contribution is not subject to an immediate Participant right to elect a cash payment in lieu of the Employer Contribution and such amounts are payable only in accordance with the Plan terms.

III. VESTING AND SUBSTANTIAL RISK OF FORFEITURE

3.01 Vesting Schedule or other Substantial Risk of Forfeiture . The Employer will specify in its Adoption Agreement any vesting schedule or other Substantial Risk of Forfeiture applicable to Participant Accounts. If the Plan is an Ineligible 457 Plan, the Employer must specify a Substantial Risk of Forfeiture.

3.02 Immediate Vesting on Specified Events . The Employer will specify in its Adoption Agreement whether a Participant’s Account is Vested without regard to Years of Service if the Participant Separates from Service on or following Retirement Age, or as a result of death, Disability, or other events.

3.03 Application of Forfeitures . A Participant will forfeit any non-Vested Accrued Benefit (where vesting is based on a service condition) upon Separation from Service. A Participant will forfeit any other non-Vested Accrued Benefit when the condition constituting a Substantial Risk of Forfeiture can no longer be satisfied, such as its expiration date. The Employer will specify in its Adoption Agreement how it will apply Participant forfeitures under the Plan.


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IV. BENEFIT PAYMENTS

4.01 Payment Events . The Employer in its Adoption Agreement will specify the Plan permissible payment events as all or some of the following payment events affecting a Participant: (i) Separation from Service; (ii) death; (iii) Disability; (iv) a Specified Time or pursuant to a Fixed Schedule; (v) Change in Control; or (vi) Unforeseeable Emergency. As to payment events (i), (ii),(iii), (v) and (vi), the Plan will pay to the Participant the Vested Accrued Benefit held in the Participant’s Account on the applicable payment event or on another specified payment date as provided in Section 4.01(A). Payment will commence at the time and payment will be made in the form and medium specified under Section 4.02. See Section 4.02 as to payment elections, including as to payment events under this Section 4.01.

(A) Payment on Objective and Nondiscretionary (Specified) Payment Date(s) . The Plan or an initial payment election or change payment election must provide for a payment date that the Employer, at the time of the payment event, can determine objectively and without the exercise of discretion. Such payment date may, but need not, coincide with a payment event, but any payment date must be on or following and must relate to a Plan payment event.

(1) Payment Schedule as Payment Date . A specified payment date as required under this Section 4.01(A) may include a payment schedule which is objectively determinable and nondiscretionary based on the date of the payment event and that would qualify as a Fixed Schedule if the payment event were a fixed date. An election of a payment schedule must be made at the time of the election of the payment event.

(2) Designation of Year or Other Period . A specified payment date or a specified payment schedule as required under this Section 4.01(A) with regard to any payment event other than a Specified Time or pursuant to a Fixed Schedule may include: (i) a Participant’s Taxable Year or Years; or (ii) a designated period of time but only if the designated period both begins and ends within one Taxable Year of the Participant or the designated period is not more than 90 days and the Participant does not have the right to designate the Taxable Year of payment except under a change payment election under Section 4.02(B). For purposes of clause (ii), this includes designation of payment on or before the last date of the designated (maximum 90 day) period but after the payment event occurs.

(3) Deemed Payment Date. If the Adoption Agreement or any such election provides for payment only in a designated Taxable Year or Years, the payment date is deemed to be January 1 of that Taxable Year or Years. If the Adoption Agreement or any such election provides for payment only in a designated period, the payment date is deemed to be the first day in the relevant period.

(B) Payment Event Default. This Section 4.01(B) applies if the Employer in its Adoption Agreement fails to elect one or more payment events described in this Section 4.01, if a Participant or the Employer under Section 4. 02 fails to elect one of more payment events where the Adoption Agreement affords them such an election, or if the Employer under Section 4.06 rejects the election and the Participant does not timely file a new election the Employer accepts. In such event, the Plan will pay the affected Participant’s Vested Benefit held in the Participant’s Account following the earlier of the Participant’s Separation from Service or death. See Section 4.02(A)(5) as to the applicable default for the time, form and medium of such payments. If this default provision applies, the default payment is deemed to be an initial payment election under the Plan.

(C) Multiple Payment Events; Sequencing . The Plan or an initial payment election or a change payment election may provide for more than one permissible payment event and may provide for payment upon the earliest or latest of more than one permissible payment event. See Section 4.02(A)(4) as to limitations on the number of time and form of payment elections which may apply to a single payment event. In a Separation Pay Plan, the Plan or any election may provide for any payment only upon Separation from Service (including as a result of death or Disability).

(D) Payment to Specified Employees . Notwithstanding anything to the contrary in the Plan or in a Participant or Employer payment election, the Plan may not make payment based on Separation from Service to a Participant who, on the date of Separation from Service is a Specified Employee, earlier than 6 months following Separation from Service (or if earlier, upon the Specified Employee’s death), except as permitted under this Section 4.01(D). This limitation applies regardless of the Participant’s status as a Specified Employee or otherwise on any other date including the next Specified Employee effective date had the Participant continued to render services through such date. The Employer, operationally and without any direct


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or indirect Participant election, will elect whether any payments that otherwise would be payable to the Specified Employee during the foregoing 6 month period: (i) will be accumulated and payment delayed until the first day of the seventh month that is after the 6 month period; or (ii) will be delayed by 6 months as to each installment otherwise payable during the 6 month period. This Section 4.01(D) does not apply to payments made on account of a domestic relations order, payments made because of a conflict of interest, or payment of employment taxes, all as described in Treas. Reg. §1.409A-3(i)(2)(i). This Section 4.01(D) also does not apply to any reimbursement or in-kind benefit which is Separation Pay but which is not Deferred Compensation under Section 1.18.

(E) Deemed Separation of Contractor . The Employer in its Adoption Agreement may elect to apply the special payment timing rules in this Section 4.01(E) as to Contractors. Compliance with this Section 4.01(E) results in the Contractor being deemed to have incurred a Separation from Service under Section 1.40. Under this Section 4.01(E): (i) the Plan will not pay a Contractor’s Account, or any portion thereof, before a date that is at least 12 months after the expiration of the contract (or all contracts) under which the Contractor performs services for the Employer; and (ii) no amount payable under clause (i) will be paid to the Contractor if the Contractor (whether as a Contractor or an Employee) performs services for the Employer after the contract(s)’ expiration and before the payment date.

4.02 Timing, Form and Medium/ Payment Elections . Unless the Employer under Section 4.02(A) and/or 4.02(B) permits Employer or Participant elections, the Employer (in addition to its election of permissible payment events under Section 4.01) will elect in its Adoption Agreement the permissible: (i) payment timing; (ii) payment form (lump-sum, installments, annuity or other form, including a combination thereof); and (iii) payment medium (cash or property) applicable to Plan Accounts (all of which elections are collectively, “payment elections”). Until the Plan pays a Participant’s entire Vested Accrued Benefit, the Plan will continue to credit the Participant’s Account with Earnings, in accordance with Section 5.02(A) or Section 5.03(B) as applicable. A permissible payment medium election may, but is not required to be, made at the same time as the initial payment election or change payment election, but must be made a reasonable time before any payment date. No election as to payment medium may change the time or form of payment except in accordance with Section 4.02(B) .

(A) Initial Payment Election . The Employer will elect in its Adoption Agreement: (i) whether a Participant or the Employer may make an initial payment election from the payment events, timing, form and medium options available under the Adoption Agreement or whether there are no Participant or Employer initial payment elections; and (ii) whether any Participant payment election applies to all Account types or only applies to a Participant’s Elective Deferral Account. A Participant must make any permissible initial payment election on a form the Employer provides for that purpose.

(1) No elections are a Deemed Initial Election . If the Employer elects in its Adoption Agreement not to provide any Participant or Employer initial payment elections, the elected Adoption Agreement and applicable Plan provisions constitute an initial payment election under the Plan.

(2) Timing .

(a) Participant Election . A Participant must make an initial payment election at the time of the Participant’s Elective Deferral election under Section 2.02(B), or in the absence of such an Elective Deferral election but where the Participant may make an initial payment election as to Employer Contributions, within the same time period as such an Elective Deferral election would be permitted.

(b) Employer Election . The Employer must make an initial payment election as to a Participant at the time that the Employer grants a Legally Binding Right to Deferred Compensation to the Participant, or, if later, by the time that the Participant would have had to make such election, if the Plan had permitted the Participant to make such an election. In the case of a newly eligible Participant or a new Plan described under Section 2.02(B)(2), the Employer must make the initial payment election no later than 30 days after the date the Employee or Contractor becomes a Participant and the proration provisions of Section 2.02(B)(2)(c) do not apply to such Employer election.


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(3) Future Deferred Compensation and Earnings . A payment election may apply only to the Deferred Compensation that is the subject of the Elective Deferral election or the Employer Contribution or may apply to such Deferred Compensation and to all future Deferred Compensation, as the payment election indicates. A payment election separately may apply to Deferred Compensation and to the Earnings thereon provided that the Plan credits Earnings at least annually.

(4) Limitations on Payment Time and Form; Multiple Payment Events . Except as otherwise provided in this Section 4.02(A)(4), the Plan or a payment election may designate only one time and form of payment for each of the following payment events: Separation from Service, Disability, death or Change in Control.

(a) Disability, Death or Change in Control . In the case of payment in the event of Disability, death or Change in Control, the Plan or payment election may provide for one time and/or method of payment if the event occurs on or before one specified date and may provide for an alternative time and form of payment if the event occurs after the specified date.

(b) Separation From Service . In the case of payment in the event of Separation from Service, the Plan or payment election may provide for an alternative time and form of payment where: (i) Separation from Service occurs within a limited period of time not exceeding two years following a Change in Control; (ii) Separation from Service occurs before or after a specified date or Separation occurs before or after the combination of a specified date and a specified period of service determined under a predetermined, nondiscretionary objective formula or pursuant to the method for crediting service under a qualified plan of the Employer (but not both of the options under clause (ii)); and (iii) Separation from Service which is not described in clause (i) or (ii). However, neither the Plan nor a payment election may provide for a different time and form of payment based on whether Separation from Service is Voluntary or Involuntary or based on the Participant’s marital status at the time of Separation from Service.

(c) Unforeseeable Emergency . If the Employer in its Adoption Agreement elects to permit Unforeseeable Emergency as a payment event, a Participant at any time may request payment based on Unforeseeable Emergency by submitting to the Employer a form the Employer provides for this purpose. The Plan will make payment to the Participant within 90 days following the Employer’s acceptance of the Participant’s Unforeseeable Emergency payment request. If that 90-day period spans more than one Taxable Year of the Participant, the Participant will not have any discretion over the Taxable Year of payment. See Section 1.51 as to additional requirements relating to an Unforeseeable Emergency payment.

(d) Addition, Change or Deletion of Time and Form . The addition, change, or deletion of an alternative time and form of payment (after the initial payment election has become irrevocable) as permitted under this Section 4.02(A)(4) is a change payment election subject to Section 4.02(B) and is subject to Section 4.02(C).

(5) Time, Form and Medium Default . If the Participant or the Employer as applicable has the right to make an initial payment election but fails to do so, or if the Employer rejects the Participant’s election under Section 4.06 and the Participant does not make a new timely election the Employer accepts, the Plan will pay the affected Participant’s Vested Accrued Benefit attributable to the non-election under this default provision, in a lump-sum cash payment 13 months following the earliest event permitting payment of the Participant’s Account under Section 4.01 (including, if applicable, the default payment events under Section 4.01(B)). If this default provision applies, the default payment is deemed to be an initial payment election under the Plan.

(B) Change Payment Election . The Employer will elect in its Adoption Agreement whether the Employer or a Participant may make a change payment election under this Section 4.02(B). If the Plan permits change elections, the Employer in its Adoption Agreement will elect whether to limit the number of change payment elections. If the Plan permits a Participant or the Employer to change existing payment elections (initial or change payment elections) as to any or all Deferred Compensation, including any Plan specified initial payment election or a default payment applicable in the absence of an actual initial payment election, any such change payment election must comply with this Section 4.02(B). A change payment election may add or delete payment events, may delay payment and/or may change the form of payment, provided the change does not result in an impermissible acceleration under Section 4.02(C). The Employer in its Adoption Agreement will elect whether a Beneficiary following a Participant’s death may make a change payment election under this Section 4.02(B). A Participant’s change of Beneficiary is not a change payment election provided that the time and method of payment is not otherwise changed. See Section 4.02(B)(3) as to changes of Beneficiary where the payment method is a life annuity. A Participant or Beneficiary must make any change payment election on a form the Employer provides for such purpose.


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(1) Conditions on Change Payment Elections .

(a) Election Timing/Deferral of Payment . Any change payment election: (i) may not take effect until at least 12 months following the date the change payment election is made; (ii) if the change payment election relates to a payment based on Separation from Service or on Change in Control, or if the payment is at a Specified Time or pursuant to a Fixed Schedule, the change payment election must result in payment being made not earlier than 5 years following the date upon which the payment otherwise would have been made (or, in the case of a life annuity or installment payments treated as a single payment, 5 years from the date the first amount was scheduled to be paid); and (iii) if the change payment election relates to payment at a Specified Time or pursuant to a Fixed Schedule, the Participant or Employer must make the change payment election not less than 12 months prior to the date the payment is scheduled to be made (or, in the case of a life annuity or installment payments treated as a single payment, 12 months prior to the date the first amount was scheduled to be paid).

(b) Application of Other Rules . A change payment election must satisfy the Plan provisions applicable to initial payment elections under Section 4.02(A)(4) regarding time and form elections and multiple payment events and under Section 4.02(A)(3) regarding scope and Earnings. For purposes of application of Section 4.02(A)(4), Section 4.02(B)(1)(a) applies separately as to each payment described under Section 4.02(B)(2) and due upon each payment event.

(c) Rejection . If the Employer under Section 4.06 rejects a Participant or Beneficiary change payment election, the Participant’s initial payment election or deemed initial payment election continues to apply unless and until the Participant makes another change payment election which the Employer accepts.

(d) USERRA Rights . The requirements of Section 4.02(B) are deemed satisfied as to any change payment election which the Plan provides to satisfy the requirements of USERRA. Such elections are not an acceleration under Section 4.02(C).

(2) Definition of “Payment.” Except as otherwise provided in Section 4.02(B)(3), a “payment” for purposes of applying Section 4.02(B)(1) is each separately identified amount the Plan is obligated to pay to a Participant on a determinable date and includes amounts paid for the benefit of the Participant. An amount is “separately identified” only if the amount is objectively determinable under a nondiscretionary formula. A payment includes the provision of any taxable benefit, including payment in cash or in-kind. A payment includes, but is not limited to, the transfer, cancellation or reduction of an amount of Deferred Compensation in exchange for benefits under a welfare benefit plan, fringe benefits excludible under Code §§119 or 132, or any other benefit that is excluded from gross income. In the case of a Specified Time or a Fixed Schedule, “payment” for purposes of Section 4.02(B)(1) means as further described in Treas. Reg. §1.409A-3(i)(1).

(3) Life Annuities and Installment Payments .

(a) Life Annuities . A life annuity is treated as a single payment. For purposes of this Section 4.02(B)(3), a “life annuity” is a series of substantially equal periodic payments, payable not less frequently than annually, for the life (or life expectancy) of the Participant, or the joint lives (or life expectancies) of the Participant and of his/her Beneficiary. A change of Beneficiary which occurs before the initial payment of a life annuity is not a change payment election. A change in the form of payment before any annuity payment has been made from one type of life annuity to another with the same scheduled date for the first payment is not subject to the change payment election requirements provided that the annuities are actuarially equivalent applying reasonable actuarial assumptions and that at any given time, the same actuarial assumptions and methods are used to value each annuity. The requirement of actuarial equivalence applies for the duration of the Participant’s participation in the Plan such that the annuity payment must be actuarially equivalent at all times for the annuity payment options to be treated as a single time and method of payment. The Plan over time may change actuarial assumptions and methods provided such methods and assumptions are reasonable. The following features are disregarded in determining if the payment is a life annuity but are


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taken into account in determining if one life annuity is the actuarial equivalent of another: (i) term certain features under which payments continue for the longer of the annuitant’s life or for a fixed period of time; (ii) pop-up features under which payments increase upon the death of the Beneficiary or other event which eliminates the survivor annuity; (iii) cash refund features under which there is a payment on the death of the last annuitant in an amount not greater than the excess of the present value of the annuity at the annuity starting state over the total payments before the last annuitant’s death; (iv) a feature under which the annuity provides higher periodic payments before the expected commencement of Social Security or Railroad Retirement Act benefits and lower payments after the expected commencement of such benefits, such the combined payments are approximately level before and after the expected commencement date; and (v) features providing for a cost-of-living increase in the annuity payment in accordance with Treas. Reg. §1.401(a)(9)-6, Q & A-14(A)(1) or (2). A joint and survivor annuity does not fail to be actuarially equivalent to a single life annuity solely due to the value of a subsidized survivor benefit provided the annual lifetime annuity to the Participant is not greater than the annual lifetime benefit to the Participant under the single life annuity and the annual survivor annuity benefit is not greater than the annual lifetime annuity to the Participant under the joint and survivor annuity.

(b) Installments . The Employer in its Adoption Agreement will elect whether to treat a series of installment payments which are not a life annuity as a single payment or as a series of separate payments. If the Employer fails to so elect, the Employer must treat the installments as a single payment. Any election to treat installments as separate payments applies at all times with respect to the amount deferred. For purposes of this Section 4.02(B)(3), a “series of installment payments” means payment of a series of substantially equal periodic amounts to be paid over a predetermined number of years, except to the extent that any increase in the payment amounts reflects reasonable Earnings through the date of payment. For this purpose, a series of installment payments over a predetermined period and: (i) a series of installments over a shorter or longer period; and (ii) a series of installments over the same period but with a difference commencement date, are different times and methods of payment and a change in the predetermined period or commencement date is subject to this Section 4.02(B). An installment payment does not fail to be an installment solely because the plan provides for an immediate payment of all remaining installments if the present value of the Deferred Compensation to be paid in the remaining installments falls below a predetermined amount, and the immediate payment in not an acceleration under Section 4.02(C) provided that the payment election establishes this feature, including the predetermined amount triggering immediate payment and that any change to the feature is subject to this Section 4.02(B). If the Plan is a restated Plan, whatever election the Employer made in writing on or before December 31, 2007, applies to any Compensation deferred for the period spanning 2005 through 2007.

(4) Coordination with Anti-Acceleration Rule . The definition of “payment” in Sections 4.02(B)(2) and (3) also applies to Section 4.02(C). A change payment election may change the form of payment to a more rapid schedule (including a change from installments to a lump-sum payment) without violating Section 4.02(C), provided any such change remains subject to the change payment election provisions under this Section 4.02(B).

(5) Multiple Payment Events . If the Plan permits multiple payment events, the change payment election provisions of Section 4.02(B)(1) apply separately as to each payment due upon each payment event. The addition or deletion of a permissible payment event to Deferred Compensation previously deferred is subject to the change election provisions of Section 4.02(B)(1) where the additional event may cause a change in the time or form of payment. However the addition of death, Disability or Unforeseeable Emergency as an “earliest of” payment event is not a change payment election and is not an impermissible acceleration under Section 4.02(C ).

(6) Domestic Relations Orders . An election, pursuant to or reflected in a domestic relations order under Code §414(p)(1)(B), by someone other than the Participant, as to payments to a person other than the Participant, is not a change payment election subject to this Section 4.02(B).

(7) Certain Payment Delays not Subject to Change Payment Election Rules . The Employer operationally will elect whether to apply the some or all of the following payment delay provisions. The Employer in applying such provisions must treat all payments to similarly situated service providers on a reasonably equivalent basis. If applicable, these provisions do not result in the Plan failing to provide for payment upon a permissible event as Code §409A requires nor are the delays treated as a change payment election under this Section 4.02(B).


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(a) Non-deductible Payment . The Plan may delay payment to a Participant if the Employer reasonably anticipates that the Employer’s deduction for the scheduled payment of the Participant’s Deferred Compensation will be barred under Code §162(m). In such event, the Plan (without any Participant election as to timing) will pay such Deferred Compensation either in the Participant’s first Taxable Year in which the Employer reasonably anticipates or should reasonably anticipate that Code §162(m) will not apply or during the period beginning on the date the affected Participant Separates from Service and ending on the later of the last day of the Participant’s Taxable Year in which the Separation occurs or the 15 ^th day of the third month following the Separation. If the Employer fails to delay under this Section 4.02(B)(7)(a) all scheduled payments during a Taxable Year which could be so delayed, the Employer’s delay of any payment is a change payment election subject to this Section 4.02(B). If the Employer delays payment until the Participant’s Separation from Service, the payment is considered as made based on Separation from Service for purpose of application of Section 4.01(D) and payment to a Specified Employee will be made on the date that is six months after Separation from Service.

(b) Securities or Other Laws . The Plan may delay payment to a Participant if the Employer reasonably anticipates that the payment will violate Federal securities law or other applicable law. The Plan will pay such Deferred Compensation at the earliest date at which the Employer reasonably anticipates that the payment will not cause a violation of such laws. For purposes of this Section 4.02(B)(7)(b), a violation of “other applicable law” does not include a payment which would cause inclusion of the Deferred Compensation in the Participant’s gross income or which would subject the Participant to any Code penalty or other Code provision.

(c) Change in Control . The Plan may delay payment to a Participant related to a Change in Control and that occur under the circumstances described in Treas. Reg. 1.409A-3(i)(5)(iv).

(d) Other . The Plan may delay payment to a Participant upon such other events as Applicable Guidance may permit.

(8) Extension of Short-Term Deferral . A Participant who, after the deadline for an initial payment election under Section 4.02(A)(2)(a), makes an election to defer payment of an amount which, but for the election, would be a short-term deferral under Treas. Reg. 1.409A-1(b)(4) and not subject to 409A, makes a change payment election subject to this Section 4.02(B) and in applying Section 4.02(B), the Plan treats the scheduled payment date as the date the Substantial Risk of Forfeiture lapses; provided that a Participant making such an election may provide for payment upon a Change in Control without regard to the 5 year requirement under clause (ii) of Section 4.02(B)(1)(a).

(1) General Rule . No person may accelerate the time or schedule of any Plan payment or amount scheduled to be paid under the Plan. For this purpose, the payment of an amount substituted for the Deferred Compensation is a payment of the Deferred Compensation, as provided in Treas. Reg. §1.409A-3(f).

(2) N ot an Acceleration. Certain actions as described in Treas. Reg. §§1.409A-3(j)(1), (2), (3), (5) and (6) are not an acceleration including: (i) certain payments made as a result of an intervening payment event and made in accordance with Plan provisions or pursuant to an initial payment election under Section 4.02(A) or a change payment election under Section 4.02(B); (ii) the Employer’s waiver or acceleration of the satisfaction of any condition constituting a Substantial Risk of Forfeiture provided that payment is made only upon a permissible payment event; (iii) the addition of death, Disability or Unforeseeable Emergency as payment events where such addition results in an earlier payment than would have occurred without the addition of such events (iv) an election to change Beneficiaries (including before the commencement of a life annuity) the if the time and form of payment does not change (except where under a life annuity a change in time of payments results solely from the different life expectancy of the new Beneficiary); (v) a decrease in the Compensation Deferred under the Plan as a result of certain linkage to qualified plans or broad-based foreign plans or certain other actions or inactions, including related to Wraparound Elections; or (vi) a change to a cafeteria plan election (under Code §125(d)) resulting in a change in the Compensation Deferred under this Plan.


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(3) Permissible Accelerations/ Including Cash-Out . Notwithstanding Section 4.02(C)(1), the Employer in its sole discretion and without any Participant discretion or election, operationally may elect accelerations of the time or schedule of payment from the Plan in any or all of the circumstances described in Treas. Reg. §§1.409A-3(j)(4)(ii) through (xiv). Such circumstances include, but are not limited to, the mandatory lump-sum payment of the Participant’s entire Vested Accrued Benefit at any time or only at the time payment will commence (the latter as permitted by Applicable Guidance), provided that the Employer evidences its discretion to make such payment in writing no later than the date of payment, the payment results in the termination and liquidation of the Participant’s interest under the Plan and under all Aggregated Plans, and the payment amount does not exceed the applicable dollar amount under Code §402(g)(1)(B). The Employer in applying this Section 4.02(C)(3) must treat all similarly situated service providers on a reasonably equivalent basis. See Section 6.03 as to Plan termination which also results in a permissible acceleration.

4.03 Withholding . The Employer will withhold from any payment made under the Plan and from any amount taxable under Code §409A, all applicable taxes, and any and all other amounts required to be withheld under Applicable Guidance.

4.04 Beneficiary Designation . A Participant may designate a Beneficiary (including one or more primary and contingent Beneficiaries) to receive payment of any Vested Accrued Benefit remaining in the Participant’s Account at death. The Employer will provide each Participant with a form for this purpose and no designation will be effective unless made on that form and delivered to the Employer. A Participant may modify or revoke an existing designation of Beneficiary by executing and delivering a new designation to the Employer. In the absence of a properly designated Beneficiary, the Employer will pay a deceased Participant’s Vested Accrued Benefit to the Participant’s surviving spouse and if none, to the Participant’s then living lineal descendants, by right of representation, and if none, to the Participant’s estate. If a Beneficiary is a minor or otherwise is a person whom the Employer reasonably determines to be legally incompetent, the Employer may cause the Plan or Trust to pay the Participant’s Vested Accrued Benefit to a guardian, trustee or other proper legal representative of the Beneficiary. The Plan’s or Trust’s payment of the deceased Participant’s Vested Accrued Benefit to the Beneficiary or proper legal representative of the Beneficiary completely discharges the Employer, the Plan and Trust of all further obligations under the Plan.

4.05 Payments Treated as Made on Payment Date .

(A) Certain Late Payments . The Plan’s payment of Deferred Compensation is deemed made on the Plan required payment date or payment election required payment date even if the Plan makes payment after such date, provided the payment is made by the latest of: (i) the end of the Taxable Year in which the payment is due; (ii) the 15 ^th day of the third calendar month following the payment due date provided that the Participant is not able, directly or indirectly, to designate the Taxable Year of payment; (iii) in case the Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Participant’s control (or the control of the Participant’s Beneficiary), in the first Taxable Year of the Participant in which payment is practicable; or (iv) in case the making of the payment on the specified date would jeopardize the Employer’s ability to continue as a going concern, in the first Taxable Year of the Participant in which the payment would not have such effect. The Employer may cause the Plan or Trust to pay a Participant’s Vested Accrued Benefit on any date which satisfies this Section 4.05(A) and that is administratively practicable following any Plan specified payment date or the date specified in any valid payment election.

(1) Change in Control . In the case of certain Change in Control events, as described in Treas. Reg. §1.409A-3(i)(5)(iv), certain transaction based compensation paid on the same schedule and on the same terms as apply to shareholders generally with respect the Employer’s stock or as the payments to the Employer, is treated as paid on the designated payment date. Further, such payments made within 5 years after the Change in Control event are deemed compliant with Sections 4.02(A) and (B).

(2) Disputed Payments/Other Failure to Pay . In the event of a dispute between the Employer and a Participant as to whether Deferred Compensation is payable to the Participant or as to the amount thereof, or any other intentional or unintentional failure to pay, other than with the Participant’s express or implied consent, payment is treated as paid on the designated payment date if such payment is made in accordance with Treas. Reg. §1.409A-3(g).


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(B) Early Payments . The Employer also may cause the Plan or Trustee to pay on a date no earlier than 30 days before the specified payment date provided the Participant is not able, directly or indirectly, to designate the Taxable Year of the payment. Such “early” payments are not an accelerated payment under Section 4.02(C).

4.06 Payment Election Requirements . The term “payment election,” for purposes of this Section 4.06(B) and the Plan generally, means either an initial payment election under Section 4.02(A) or a change payment election under Section 4.02(B).

(A) Compliance with Plan Terms . All initial payment elections and change payment elections must be consistent with the Plan and with the Adoption Agreement.

(B) When Election is Considered Made; Irrevocability .

(1) Participant Elections . A Participant’s payment election is not considered made for any purpose under the Plan until both: (i) the Employer approves the election; and (ii) the election has become irrevocable. A Participant’s payment election is always revocable until the Employer accepts the election, which acceptance must occur within the time period described in Section 4.06(C). A Participant’s payment election becomes irrevocable as the Employer elects in its Adoption Agreement.

(2) Employer Elections. The Employer’s payment election is not considered made for any purpose under the Plan until the election has become irrevocable. The Employer’s initial payment election is irrevocable after the last permissible date for making the election under Section 4.02(A)(2)(b). The Employer’s change payment election relating to payment at a Specified Time or pursuant to a Fixed Schedule is irrevocable after the last permissible date for making the election under Section 4.02(B)(1)(a). The Employer’s change payment election relating to payment based on any other payment event (not a Specified Time or Fixed Schedule) remains revocable for 30 days following the Employer’s execution of the change payment election.

(3) Effect of Changes While Election is Revocable. Any change made to a payment election while the election remains revocable is not a change payment election, either for purposes of Section 4.02(B)(1)(a) timing rules or in applying any Plan limit on the number of change payment elections a Participant may make as to any amount of Deferred Compensation. Any modification to a payment election after the election has become irrevocable is a change payment election (if made with respect to an initial payment election) or is a new change payment election (if made with respect to a change payment election).

(4) Continuing Elections. If an initial payment election is continuing under Section 4.02(A)(3), such that it applies to Compensation Deferred in one or more Taxable Years beginning after the first Taxable Year to which the payment election applies, the payment election is revocable as to such future Taxable Years until the last permissible date under Section 4.02(A)(2) for making the election with regard to such future Taxable Year or Years.

(C) Employer Approval of Participant and Beneficiary Elections . The Employer expressly and in writing must approve any Participant or Beneficiary payment election (payment event, timing, form and medium), even if the Plan and Adoption Agreement permit such election. The Employer, in its absolute discretion, may withhold approval for any reason, including, but not limited to, non-compliance with Plan terms. However, the Employer must approve or reject any such election within the time period during which the Participant or Beneficiary would have had to make the election. If the Employer does not so approve or reject a payment election, the election is deemed rejected within such time period. With regard to initial payment elections, unless the Participant subsequently makes a timely initial payment election the Employer accepts, the Employer will pay the Participant’s Vested Accrued Benefit under the payment event, timing, form and medium default provisions of Sections 4.01(B) and 4.02(A)(5).

(D) Preservation of Pre-2009 Payment Elections . If the Plan is a restatement of a Plan which was in effect before January 1, 2009, as to pre-2009 Deferred Compensation (and Earnings thereon) which is a 409A Amount, the Plan preserves any 409A permissible payment elections under the Plan which elections are not available under the Plan as to Compensation Deferred after 2008, subject to any change payment election made as to such pre-2009 Deferred Compensation.


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V. TRUST ELECTION AND PLAN EARNINGS

5.01 Unfunded Plan . The Employer as it elects in its Adoption Agreement intends this Plan to be an unfunded plan that is wholly or partially exempt under ERISA. No Participant, Beneficiary or successor thereto has any legal or equitable right, interest or claim to any property or assets of the Employer, including assets held in any Account under the Plan except as the Plan otherwise permits. The Employer’s obligation to pay Plan benefits is an unsecured promise to pay. Any assets held in Plan Accounts remain subject to claims of the Employer’s general creditors and no Participant’s or Beneficiary’s claim to Plan assets has any priority over any general unsecured creditor of the Employer. Except as otherwise provided in the Plan or Trust, all Plan assets, including all incidents of ownership thereto, at all times will be the sole property of the Employer.

5.02 No Trust. Except as provided in its Adoption Agreement, this Plan does not create a trust for the benefit of any Participant. If the Employer does not establish the Trust: (i) the Employer may elect to make notional contributions in lieu of actual contributions to the Plan; and (ii) the Employer may elect not to invest any actual Plan contributions. If the Employer elects to invest any actual Plan contributions, such investments may be held for the Employer’s benefit in providing for the Employer’s obligations under the Plan or for such other purposes as the Employer may determine.

(A) Earnings . If the Employer does not establish the Trust, the Employer will elect in its Adoption Agreement whether the Plan periodically will credit actual or notional Plan contributions with a determinable amount of notional Earnings (at a specified fixed or floating interest rate or other specified index) or will credit or charge each Participant’s Account with the Earnings actually incurred by the Account.

(B) Investment Direction . If the Account is credited and charged with actual Earnings, the Employer will specify in the Adoption Agreement whether the Employer or the Participant has the right to direct the investment of the Participant’s Account and also may specify any limitations on the Participant’s right of investment direction. If the Adoption Agreement provides for Employer investment direction, the Employer may make any investment of Plan assets it deems reasonable or appropriate. If the Adoption Agreement provides for Participant investment direction, this right is limited strictly to investment direction and the Participant will not be entitled to the distribution of any Account asset except as the Plan otherwise permits.

5.03 Trust. If the Employer elects in its Adoption Agreement to create the Trust, the applicable provisions of the Basic Plan Document continue to apply, including those of Section 5.01. The Trustee will pay Plan benefits in accordance with the Plan terms or upon the Employer’s direction consistent with Plan terms.

(A) Restriction on Trust Assets . If an Employer establishes, directly or indirectly, the Trust (or any other arrangement Applicable Guidance may describe), the Trust and the Trust assets must be and must remain located within the United States, except with respect to a Participant who performs outside the United States substantially all services giving rise to the Deferred Compensation. The Trust may not contain any provision limiting the Trust assets to the payment of Plan benefits upon a Change in the Employer’s Financial Health, even if the assets remain subject to claims of the Employer’s general creditors. For this purpose, the Employer, upon a Change in the Employer’s Financial Health, may not transfer Deferred Compensation to the Trust. The Employer (and any member of a controlled group which includes the Employer) during the “restricted period” also may not transfer Deferred Compensation to the Trust and the Trust may not be restricted to payment of Plan benefits, to the extent that such transfer or restriction would violate the at-risk limitation of Code §409A(b)(3). Any Trust the Employer establishes under this Plan shall be further subject to Applicable Guidance, compliance with which is necessary to avoid the transfer of assets to the Trust being treated as a transfer of property under Code §83.

(B) Trust Earnings and Investment . If the Employer establishes the Trust, the Trust earnings provisions apply to all Plan contributions and constitute Earnings for purposes of the Plan. The Trustee will invest the assets held in the Trust in accordance with the Trust terms but are not subject to Participant direction of investment.

VI. MISCELLANEOUS

6.01 No Assignment . No Participant or Beneficiary has the right to anticipate, alienate, assign, pledge, encumber, sell, transfer, mortgage or otherwise in any manner convey in advance of actual receipt, the Participant’s Account. Prior to actual payment, a Participant’s Account is not subject to the debts, judgments or other obligations of the Participant or Beneficiary and is not subject to attachment, seizure, garnishment or other process applicable to the Participant or Beneficiary.


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6.02 Not Employment Contract . This Plan is not a contract for employment between the Employer and any Employee who is a Participant. This Plan does not entitle any Participant to continued employment with the Employer, and benefits under the Plan are limited to payment of a Participant’s Vested Accrued Benefit in accordance with the terms of the Plan.

6.03 Amendment and Termination .

(A) Amendment . The Employer reserves the right to amend the Plan at any time to comply with Code §409A, Treas. Reg. §1.409A and other Applicable Guidance or for any other purpose, provided that such amendment will not result in taxation to any Participant under Code §409A. Except as the Plan and Applicable Guidance otherwise may require, the Employer may make any such amendments effective immediately.

(B) Termination . The Employer may terminate, but is not required to terminate and liquidate the Plan which includes the distribution of all Plan Accounts, under the following circumstances:

(1) Dissolution/Bankruptcy . The Employer may terminate and liquidate the Plan within 12 months following a dissolution of a corporate Employer taxable under Code §331 or with approval of a Bankruptcy court under 11 U.S.C. §503(b)(1)(A), provided that the Deferred Compensation is paid to the Participants and is included in the Participants’ gross income in the latest of (or, if earlier, the Taxable Year in which the amount is actually or constructively received): (i) the calendar year in which the plan termination and liquidation occurs; (ii) the first calendar year in which the amounts no longer are subject to a Substantial Risk of Forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

(2) Change in Control . The Employer may terminate and liquidate the Plan by irrevocable action taken within the 30 days preceding or the 12 months following a Change in Control, provided the Employer distributes all Plan Accounts (and must distribute the accounts under any Aggregated Plans which plan the Employer also must terminate and liquidate as to each Participant who has experienced the Change in Control) within 12 months following the date of Employer’s irrevocable action to terminate and liquidate the Plan and Aggregated Plans. Where the Change in Control results from an asset purchase transaction, the “Employer” with discretion to terminate and liquidate the Plan is the Employer that is primarily liable after the transaction to pay the Deferred Compensation.

(3) Other . The Employer may terminate the Plan for any other reason in the Employer’s discretion provided that: (i) the termination and liquidation does not occur proximate to a downturn in the Employer’s financial health; (ii) the Employer also terminates all Aggregated Plans in which any Participant also is a participant; (ii) the Plan makes no payments in the 12 months following the date of Employer’s irrevocable action to terminate and liquidate the Plan other than payments the Plan would have made irrespective of Plan termination; (iii) the Plan makes all payments within 24 months following the date of Employer’s irrevocable action to terminate and liquidate the Plan; and (iv) the Employer within 3 years following the date of Employer’s irrevocable action to terminate and liquidate the Plan does not adopt a new plan covering any Participant that would be an Aggregated Plan.

(4) Applicable Guidance . The Employer may terminate and liquidate the Plan under such other circumstances as Applicable Guidance may permit.

(C) Effect on Vesting . Any Plan amendment or termination will not reduce the Vested Accrued Benefit held in any Participant Account at the date of the amendment or termination and will not accelerate vesting except as the Employer may expressly provide for in connection with the amendment or termination, provided that any such vesting acceleration does not subject any Participant to taxation under Code §409A.

(D) Cessation of Future Contributions . The Employer in its Adoption Agreement may elect at any time to amend the Plan to cease future Elective Deferrals, Nonelective Contributions or Matching Contributions as of a specified date. In such event, the Plan remains in effect (except those provisions permitting the frozen contribution type) until all Accounts are paid in accordance with the Plan terms, or, if earlier, upon the Employer’s termination of the Plan.


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6.04 Fair Construction . The Employer, Participants and Beneficiaries intend that this Plan in form and in operation comply with Code 409A, the regulations thereunder, and all other present and future Applicable Guidance. The Employer and any other party with authority to interpret or administer the Plan will interpret the Plan terms in a manner which is consistent with Applicable Law. However, as required under Treas. Reg. §1.409A-1(c)(1), the “interpretation” of the Plan does not permit the deletion of material terms which are expressly contrary to Code §409A and the regulations thereunder and also does not permit the addition of missing terms necessary to comply therewith. Such deletions or additions may be accomplished only be means of a Plan amendment under Section 6.03(A). Any Participant, Beneficiary or Employer permitted Elective Deferral election, initial payment election, change payment election or any other Plan permitted election, notice or designation which is not compliant with Applicable Law is not an “election” or other action under the Plan and has no effect whatsoever. In the event that a Participant, Beneficiary or the Employer fail to make an election or fail to make a compliant election, the Employer will apply the Plan’s default terms under Sections 4.01(B) and 4.02(A)(5).

6.05 Notice and Elections . Any notice given or election made under the Plan must be in writing and must be delivered in person or electronically in a manner reasonably designed to ensure receipt, or mailed by certified mail, to the Employer, the Trustee or to the Participant or Beneficiary as appropriate. The Employer will prescribe the form of any Plan notice or election to be given to or made by Participants. Any notice or election will be deemed given or made as of the date of delivery, or if given or made by certified mail, as of 3 business days after mailing.

6.06 Administration/Correction . The Employer will administer and interpret the Plan, including making a determination of the Vested Accrued Benefit due any Participant or Beneficiary under the Plan. As a condition of receiving any Plan benefit to which a Participant or Beneficiary otherwise may be entitled, a Participant or Beneficiary will provide such information and will perform such other acts as the Employer reasonably may request. The Employer may cause the Plan to forfeit any or all of a Participant’s Vested Accrued Benefit, if the Participant fails to cooperate reasonably with the Employer in the administration of the Participant’s Plan Account, provided that this provision does not apply to a bona fide dispute under Section 4.05(A)(2). The Employer may retain agents to assist in the administration of the Plan and may delegate to agents such duties as it sees fit. The decision of the Employer or its designee concerning the administration of the Plan is final and is binding upon all persons having any interest in the Plan. The Employer will indemnify, defend and hold harmless any Employee designated by the Employer to assist in the administration of the Plan from any and all loss, damage, claims, expense or liability with respect to this Plan (collectively, “claims”) except claims arising from the intentional acts or gross negligence of the Employee. The Employer, to minimize or avoid any sanction or damages to a Participant or Beneficiary, to itself or to any other person resulting from a violation of Code §409A under the Plan, may undertake correction of any violation or participate in any available correction program, as described in Notice 2007-100 or other Applicable Guidance.

6.07 Account Statements . The Employer from time to time will provide each Participant with a statement of the Participant’s Vested Accrued Benefit as of the most recent Valuation Date. The Employer also will provide Account statements to any Beneficiary of a deceased Participant with a Vested Accrued Benefit remaining in the Plan. Any such statements are for information purposes only prior to an actual Plan payment, are subject to adjustment or correction, and are not binding upon the Employer.

6.08 Accounting . The Employer will maintain for each Participant as is necessary for proper administration of the Plan, an Elective Deferral Account, a Matching Contribution Account, a Nonelective Contribution Account, and separate sub-accounts reflecting 409A Amounts and Grandfathered Amounts in accordance with Section 7.03.

6.09 Costs and Expenses . Investment charges will be borne by the Account to which they pertain. The Employer will pay the other costs, expenses and fees associated with the operation of the Plan, excluding those incurred by Participants or Beneficiaries. The Employer will pay costs, expenses or fees charged by or incurred by the Trustee only as provided in the Trust or other agreement between the Employer and the Trustee.

6.10 Reporting . The Employer will report Deferred Compensation for Employee Participants on Form W-2 for and on Form 1099-MISC for Contractor Participants in accordance with Applicable Guidance.


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6.11 ERISA Claims Procedure . If this Plan is established as a “top-hat plan” within the meaning of DOL Reg. §2520.104-23, the following claims procedure under DOL Reg. §2560.503-1 applies. For purposes of the Plan’s claims procedure under this Section 6.11, the “Plan Administrator” means the Employer. A Participant or Beneficiary may file with the Plan Administrator a written claim for benefits, if the Participant or Beneficiary disputes the Plan Administrator’s determination regarding the Participant’s or Beneficiary’s Plan benefit. However, the Plan Administrator will cause the Plan to pay only such benefits as the Plan Administrator in its discretion determines a Participant or Beneficiary is entitled to receive. The Plan Administrator under this Section 6.11 will provide a separate written document to affected Participants and Beneficiaries which explains the Plan’s claims procedure and which by this reference is incorporated into the Plan. If the Plan Administrator makes a final written determination denying a Participant’s or Beneficiary’s claim, the Participant or Beneficiary must file an action with respect to the denied claim within 180 days following the date of the Plan Administrator’s final determination.

VII. 409A AMOUNTS AND GRANDFATHERED AMOUNTS

7.01 409A Amounts . The terms of this Plan control as to any 409A Amount.

7.02 Grandfathered Amounts . A Grandfathered Amount remains subject to the terms of the Plan as in effect before January 1, 2005, unless the Employer makes a material modification to the Plan as described in Treas. Reg. §1.409A-6(a)(4).

7.03 Separate Accounting/Earnings . The Employer will account separately for 409A Amounts and for Grandfathered Amounts within each Participant’s Account. The Employer also will account separately for Earnings on the 409A Amounts and Earnings on the Grandfathered Amounts. Post-2004 Earnings on Grandfathered Amounts are included in the Grandfathered Amount.

* * * * * * * * * * * * * * *


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Exhibit 10.5

THE GREENBRIER COMPANIES, INC.

NONQUALIFIED DEFERRED COMPENSATION PLAN

2018 AMENDMENT AND RESTATEMENT

ADOPTION AGREEMENT

(Including Code §409A provisions)

Nonqualified Deferred Compensation Plan

2018 Amendment and Restatement

Adoption Agreement

THE GREENBRIER COMPANIES, INC.

NONQUALIFIED DEFERRED COMPENSATION PLAN

2018 AMENDMENT AND RESTATEMENT

ADOPTION AGREEMENT

The undersigned The Greenbrier Companies, Inc. (“Employer”) by execution of this Adoption Agreement hereby amends and restates this Nonqualified Deferred Compensation Plan (“Plan”) effective as of June 15, 2018. The Plan consists of the Basic Plan Document, this Adoption Agreement, the Addendum attached hereto, and all other Exhibits and documents to which they refer. The Employer makes the following elections concerning this Plan. All capitalized terms used in the Adoption Agreement have the same meaning given in the Basic Plan Document. References to “Section” followed by a number in this Adoption Agreement are references to the Basic Plan Document.

PREAMBLE

ERISA/Code Plan Type : The Employer establishes this Plan as ( choose one of (a) or (b) ):


[ x ]	(a) Nonqualified Deferred Compensation Plan . An unfunded nonqualified deferred compensation plan which is ( choose only one of (i), (ii), (iii) or (iv) ):

	[ ]	(i) Excess benefit plan. An “excess benefit plan” under ERISA§3(36) and exempt from Title I of ERISA.

	[ x ]	(ii) Top-hat plan. A “SERP” or other plan primarily for a “select group of management or highly compensated employees” under ERISA and partially exempt from Title I of ERISA.

	[ ]	(iii) Contractors only. A plan benefiting only Contractors (non-Employees) and exempt from Title I of ERISA.

	[ ]	(iv) Church plan . A church plan as described in Code §414(e) and ERISA §3(33) and maintained by a church or church controlled organization under Code §3121(w)(3) and exempt from Title I of ERISA..

[ ]	(b) Ineligible 457 Plan . An ineligible 457 Plan subject to Code §457(f). The Employer is ( choose only one of (i), (ii) or (iii) ):

	[ ]	(i) Governmental Plan. A State.

	[ ]	(ii) Tax-Exempt Plan. A Tax-Exempt Organization. The Plan is intended to be a “top-hat” plan or an excess benefit plan as described in (a)(ii) and (a)(ii) above or the Plan benefits only Contractors.

	[ ]	(iii) Church plan . A church plan as described in Code §414(e) and ERISA §3(33) but which is not maintained by a church or church controlled organization under Code §3121(w)(3).

Note: If the Employer elects (a)(i), the Plan benefits only Employees. If the Employer elects (a)(ii), the Plan generally may not benefit Contractors based on the “primarily” requirement. If the Employer elects (a)(iii), the Plan benefits only Contractors. If the Employer elects (a)(iv), (b)(i), or (b)(iii) the Plan may benefit Employees and Contractors. If the Employer elects (b)(ii), the plan is either a top-hat plan, an excess benefit plan or benefits only Contractors.


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409A Plan Type: The Employer establishes this Plan ( choose one of (a) or (b) ):


[ x ]	(a) Account Balance Plan. As the following type(s) of Account Balance Plan(s) under Section 1.02 ( choose one of (i), (ii) or (iii) ):

	[ ]	(i) Elective Deferral Account Balance Plan . See Section 2.02.

	[ ]	(ii) Employer Contribution Account Balance Plan. See Sections 2.03 and 2.04.

	[ x ]	(iii) Both. Both an Elective Deferral Account Balance Plan and an Employer Contribution Account Balance Plan.

Note: For purposes of aggregation under Section 1.05, a Separation Pay Plan based only on Voluntary Separation from Service is treated as an Account Balance Plan. Nevertheless, if the Employer maintains this Plan as any type of Separation Pay Plan, the Employer should elect (b) below.


[ ]	(b) Separation Pay Plan. As the following type(s) of Separation Pay Plan(s) under Section 1.42 ( choose one of (i) through (iv) ):

	[ ]	(i) Involuntary Separation .

	[ ]	(ii) Window Program .

	[ ]	(iii) Voluntary Separation.

	[ ]	(iv) Combination : ( specify )

Note: Under a Separation Pay Plan, the Employer must limit its payment election to Separation from Service but it may also include death. Electing death as a separate payment event would permit a different payment election for death versus any other Separation from Service.

Uniformity or Nonuniformity: The nonuniformity provisions described in the Preamble to the Basic Plan Document ( choose one of (a) or (b) ):



[ x ]		(a) Do not apply. All Adoption Agreement elections and Plan provisions apply to all Participants.

[ ]		(b) Apply . See Exhibit A to the Adoption Agreement.

ARTICLE I

DEFINITIONS


	1.11	Change in Control . Change in Control means ( choose (a) or choose one of (b), (c) or (d) ):

[ ]	(a) Not applicable. Change in Control does not apply for purposes of this Plan.

[ x ]	(b) All events. Change in Control means all events under Section 1.11.


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[ ]	(c) Limited events. Change in Control means only the following events under Section 1.11 ( choose one or two of (i), (ii) and (iii) ):

	[ ]	(i) Change in ownership of the Employer.

	[ ]	(ii) Change in the effective control of the Employer.

	[ ]	(iii) Change in the ownership of a substantial portion of the Employer’s assets.

[ ]	(d) (Specify): .

Note: The Employer may not use the blank in (d) to specify events not described in Treas. Reg. §1.409A-3(i)(5). However, the Employer may increase the percentages required to trigger a Change in Control under one or all three of the listed events.

1.15 Compensation. The Employer makes the following modifications to the “gross W-2” definition of Compensation ( choose (a) or at least one of (b) – (e) ):


[ ]		(a) No modifications .

[ ]		(b) Net Compensation. Exclude all elective deferrals to other plans of the Employer described in Section 1.15.

[ ]		(c) Base Salary only. Exclude all Compensation other than Base Salary.

[ ]		(d) Bonus only. Exclude all Compensation other than Bonus.

[ x ]		(e) ( Specify ): Eligible compensation shall include only Base Salary (which for non-salaried Employees means regularly recurring base wages, including over-time and shift differential), annual bonus, compensation under Employer’s Long-Term Cash Incentive Program, and equity-based compensation, and shall exclude all other forms of compensation. Dividends and dividend equivalent payments payable on or after January 1, 2017 with respect to equity-based compensation deferred under the Plan shall be automatically deferred and credited as earnings under the Plan .

Note: See Section 1.15(B) as to Contractor Compensation.

1.17 Disability. Disability means ( choose one of (a) or (b) ):



[ x ]		(a) All impairments. All impairments constituting Disability.

[ ]		(b) Limited. Only the following impairments constituting Disability: .

		1.20 Effective Date. The effective date of the Plan is ( choose one of (a) or (b) ):

[ ]		(a) New Plan. This Plan is a new Plan and is effective .

Note: The effective date should be no earlier than January 1, 2009.


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[ x ]		(b) Restated Plan. This Plan is a restated Plan and is restated effective as of June 15, 2018 . The Plan was previously restated to comply with Code §409A. The Plan was originally effective March 1, 1994 .

Note: If the Plan (whether or not in written form) was in effect before January 1, 2009, the Plan is a restated Plan.

1.38 Plan Name . The name of the Plan as adopted by the Employer is: The Greenbrier Companies Nonqualified Deferred Compensation Plan .

1.39 Retirement Age. A Participant’s Retirement Age under the Plan is ( choose only one of (a )-(d) ):


[ x ]		(a) Not applicable. Retirement Age does not apply for purposes of this Plan.

[ ]		(b) Age. The Participant’s attainment of age:______.

[ ]		(c) Age and service. The Participant’s attainment of age ____ with ____ Years of Service (defined under 1.57) with the Employer.

[ ]		(d) ( Specify ): .

1.40 Separation from Service. In determining whether a Participant has incurred a Separation from Service under the Plan ( choose one or both or (a) and (b) ):



[ x ]		(a) Determination of “Employer.” In determining the “Employer” under Section 1.40(E) and Code §§414(b) and (c), apply the following percentage: ____80%____ ( specify percentage ).

Note: The specified percentage may not be more than 80% and may not be less than 20%. If the percentage is less than 50%, there must be legitimate business criteria.


[ ]		(b) Collectively Bargained Multiple Employer Plan. Under Section 1.40(H), the following reasonable definition of Separation from Service applies: ( specify ).

		1.44 Specified Employees-Elections. The Employer makes the following elections relating to the determination of Specified Employees ( choose (a) or choose one or more of (b)-(e) ):

[ x ]		(a) Not applicable. The Employer does not have any Specified Employees or none which benefit under the Plan. Alternatively, the Employer makes no special elections under Section 1.44.

[ ]		(b) Alternative Code §415 Compensation. The Employer elects the following alternative definition of Code §415 Compensation: ( specify ).

[ ]		(c) Alternative Specified Employee identification date. The Employer elects the following alternative Specified Employee identification date: ( specify ).

[ ]		(d) Alternative Specified Employee effective date. The Employer elects the following alternative Specified Employee effective date: ( specify ).


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[ ]

(e) Other elections. The Employer makes the following other elections relating to Specified

Employees: (specify).

Note: See Treas. Reg. 1.409A-1(i)(8) as to uniformity requirements affecting the above Specified Employee elections.

1.51 Unforeseeable Emergency. Unforeseeable Emergency means ( choose (a) or choose one of (b) or (c)):



[ ]	(a) Not applicable. Unforeseeable Emergency does not apply for purposes of this Plan.

[ x ]	(b) All events. All events constituting Unforeseeable Emergency.

[ ]	(c) Limited. Only the following events constituting Unforeseeable Emergency: .

1.56 Wraparound Election. The Plan ( choose one of (a) or (b) ):

[ x ]	(a) Permits. Permits Participants who participate in a 401(k) or 403(b) plan of the Employer to make Wraparound Elections.

[ ]	(b) Not permitted. Does not permit Wraparound Elections (or the Employer does not maintain a 401(k) or 403(b) plan covering any Participants).

1.57 Year of Service. The following apply in determining credit for a Year of Service under the Plan ( choose (a) or choose one or more of (b) – (e) ):

[ x ]	(a) Not applicable. Year of Service does not apply for purposes of this Plan.

[ ]	(b) Year of continuous service. To receive credit for one Year of Service, the Participant must remain in continuous employment with the Employer (or render contract service to the Employer) for the Participant’s entire Taxable Year.

[ ]	(c) Service on any day . To receive credit for one Year of Service, the Participant only need be employed by the Employer (or render contract service to the Employer) on any day of the Participant’s Taxable Year.

[ ]	(d) Pre-Plan service. The Employer will treat service before the Plan’s Effective Date for determining Years of Service as follows (choose one of (i) or (ii)) :

	[ x ]	(i) Include.

	[ ]	(ii) Disregard.

[ ]	(e)	(Specify) : .


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ARTICLE II

PARTICIPATION

2.01 Participant Designation. The Employer designates the following Employees or Contractors as Participants in the Plan ( choose one of (a), (b) or (c) ):



[ x ]		(a) All top-hat Employees. All Employees whom the Employer from time to time designates in writing as part of a select group of management or highly compensated employees.

		Effective December 8, 2015, the Employer designates as Participants in the Plan: (1) All Employees who currently have an Account balance (regardless of level of base compensation); and (2) all Employees with Base Salary of $150,000 or greater.

[ ]		(b) All Employees with maximum qualified plan additions or benefits. All Employees who have reached or will reach their limit under Code §§415(b) or (c) in the Employer’s qualified plan for the Taxable Year, or for the 415 limitation year ending in the Taxable Year.

[ ]		(c) Specified Employees/Contractors by name, job title or classification : . ( e.g., Joe Smith, Executive Vice President or those Employees/Contractors specified in Exhibit B).

Note: An Employer might elect (c) and reference Exhibit B to maintain confidentiality within the workforce as to the identity of some or all Participants.

2.02 Elective Deferrals. Elective Deferrals by Participants are ( choose one of (a), (b) or (c) ):

[ x ]		(a) Permitted. Participants may make Elective Deferrals.

[ ]		(b) Not permitted. Participants may not make Elective Deferrals.

[ ]		(c) Frozen Elective Deferrals. The Plan does not permit Elective Deferrals as of: .

2.02(A) Amount limitation/conditions. A Participant’s Elective Deferrals for a Taxable Year are subject to the following amount limitation(s) or other conditions ( choose (a) or choose at least one of (b) – (d)):

[ ]		(a) No limitation.

[ x ] (b) Maximum Elective Deferral amount: 50% of Base Salary, bonus and other cash Compensation other than Compensation under Employer’s Long-Term Cash Incentive Program (“LTCIP”); 100% of Compensation under LTCIP; and 100% of stock-based Compensation, including all stock-based awards made pursuant to the Employer’s Stock Incentive Plan, whether paid in cash or shares of Employer stock .

[ ]		(c) Minimum Elective Deferral amount: .

[ ]		(d) (Specify) : .

2.02(B) Election timing. A Participant must provide the Elective Deferral election under Section 2.02 to the Employer ( choose one of (a) or (b) ):


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[ x ]	(a) By the deadline. No later than the applicable election deadline under Section 2.02(B).

[ ]	(b) Specified date. No later than days before the applicable election deadline under Section 2.02(B).

2.02(B)(6) Final payroll period. The Plan treats final payroll period Compensation under Section 2.02(B)(6) as ( choose one of (a) or (b) ):

[ ]	(a) Current Year. As Compensation for the current Taxable Year in which the payroll period commenced.

[ x ]	(b) Subsequent Year. As Compensation for the subsequent Taxable Year in which the Employer pays the Compensation.

2.02(C) Election changes/Irrevocability. A Participant who makes an Elective Deferral election before the applicable deadline under Section 2.02(B) ( choose one of (a) or (b) ):

[ x ]	(a) May change. May change the election until the applicable election deadline.

[ ]	(b) May not change. May not change the election as to the first Taxable Year to which the election applies.

Note: A payment election under Section 4.02(A) or (B) is a separate election which is not controlled by this Section 2.02(C). See Section 4.06(B).

2.02(D) Election duration. A Participant’s Elective Deferral election ( choose one of (a) or (b) ):

[ x ]	(a) Taxable Year(s) only. Applies only to the Participant’s cash Compensation earned and/or equity awarded for the Taxable Year or Taxable Years for which the Participant makes the election.

[ ]	(b) Continuing. Applies to the Participant’s Compensation for all Taxable Years, commencing with the Taxable Year for which the Participant makes the election, unless the Participant makes a new election or revokes or modifies an existing election.

2.03 Nonelective Contributions. During each Taxable Year the Employer will contribute a Nonelective Contribution for each Participant equal to ( choose (a) or (f) or choose one or more of (b) – (e) ):

[ ]	(a) None. The Employer will not make Nonelective Contributions to the Plan.

[ ]	(b) Fixed percentage . % of the Participant’s Compensation.

[ ]	(c)	Fixed dollar amount. $ per Participant.

[ ]	(d) Discretionary. Such Nonelective Contributions (or additional Nonelective Contributions) as the Employer may elect, including zero.


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[ x ]		(e)		(Specify) :

Target Benefit Program . The Greenbrier Companies, Inc. (the “Company”) has adopted this Target Benefit Program in place of the Greenbrier Leasing Company LLC Manager Owned Target Benefit Plan (the “Prior Target Benefit Plan”), which has been terminated. Benefits accrued by Participants under the Prior Target Benefit Plan are taken into account for purposes of determining allocation of contributions under this Target Benefit Program.

A. Selection of Eligible Participants . The Compensation Committee may, from time-to-time select employees of the Company or its affiliates who shall be eligible to participate in the “Target Benefit Program” under the Plan. Eligible Participants may receive an allocation of discretionary Company target benefit contributions, which allocations shall be credited to a Target Benefit Program account on their behalf under the Plan. The employees who are eligible to participate in the Target Benefit Program under the Plan as of the Effective Date are: Mark J. Rittenbaum; Timothy A. Stuckey; Maren C. Malik; James T. Sharp; and Alejandro Centurion. Any additional employees shall begin participating in the Target Benefit Program on the date specified in their designation of eligibility. If no date is specified in the designation of eligibility, participation shall begin on the January 1 next following the date of the designation. Once an employee has been designated as eligible to participate in the Target Benefit Program, the designation of eligibility may not be revoked, and participation shall continue until the Participant’s termination of employment with the Company and any affiliate (including any extended eligibility period that may be provided for in an individual agreement between the Company and the Participant).

B. Target Benefit Contributions . The Target Benefit Program is designed to provide eligible Participants with a retirement benefit in an amount (the “Target Benefit Amount”) equal to 50% of a Participant’s Final Base Salary, payable in monthly installments over 180 months beginning on the Participant’s Normal Retirement Date. The foregoing notwithstanding, no amount or level of benefits is assured or guaranteed, and no provision of the Target Benefit Program is intended or shall be construed to create any entitlement to a specific amount or level of benefits or to impose any obligation on the Company to make contributions of any specified amount or level whatsoever. The Compensation Committee shall determine the amount of the Company’s annual Target Benefit Program contribution to the Plan, if any, in its sole discretion. Participants’ benefits under the Target Benefit Program shall be fully vested and non-forfeitable at all times.

C. Allocation of Contributions . Each Target Benefit Program contribution to the Plan shall be allocated among eligible Target Benefit Program Participants except those (i) who reached age 65 any time prior to or during the Plan Year in respect of which the contribution is made, (ii) whose employment with the Company and affiliates terminates during the Plan Year in respect of which the contribution is made, or (iii) for whom the amount of the Retirement Benefit plus benefits accrued under the Prior Target Benefit Plan is projected to equal or exceed the Target Benefit Amount. The foregoing notwithstanding, the Compensation Committee may designate a Participant as eligible to receive an allocation for a Plan Year notwithstanding the Participant having reached age 65 or terminated employment during the Plan Year, in its sole discretion. Each year for which the Company makes a Target Benefit Program contribution, the Administrator shall allocate the contribution among eligible Participants in such amounts as the Administrator determines in its sole discretion and using such actuarial methodology or methodologies as the Administrator deems appropriate, which amount may be zero, with the goal or providing each eligible Participant a Retirement Benefit of the Target Benefit Amount (taking into account the value of benefits accrued by the Participant under the Prior Target Benefit Plan as of the Effective Date, regardless of whether the Participant elects or has elected to take an early distribution of benefits under the Prior Target Benefit Plan).


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D. Change in Control . Within 30 days following the termination of a Participant’s employment without Cause or for Good Reason that occurs within 24 months following a Change in Control of the Company, the Company shall contribute on behalf of the affected Participant an amount equal to the discounted present value of the aggregate projected annual allocations to the Participant for the Plan Year in which the Participant’s employment is terminated and all future Plan Years until the Participant’s Normal Retirement Date. The amount of each future annual allocation will equal the amount of the Participant’s average allocation for the prior three Plan Years of participation immediately preceding the year in which the Participant’s termination of employment occurred (or all Plan Years of participation, if less than three). A full year’s allocation shall be credited for both the year in which the Participant’s termination of employment occurs and the year in which the Participant’s Normal Retirement Date occurs. The interest rate used in determining present value shall be the interest rate applicable to the Company’s principal bank borrowings as of the effective date of the Change in Control or, if no such rate is readily determinable, at a rate equal to the current prime rate as listed in the Eastern print edition of the Wall Street Journal as of the effective date of the Change in Control transaction plus1.5%

E. Definitions . For purposes of the Target Benefit Program:

(i)

“Effective Date” means August 28, 2012.

(ii)

“Final Base Salary” shall mean a Participant’s annualized base salary rate in effect as of the last day of the calendar year preceding the calendar year during which the Participant attains age 65.

(ii)

“Normal Retirement Date” shall mean the date of a Participant’s 65th birthday.

(iii)

“Retirement Benefit” shall mean payment of the amount credited to a Participant’s Target Benefit Program account in substantially equal month installments beginning on the Participant’s Normal Retirement Date and continuing for 180 months.

(iv)

The “Administrator” shall be the Chief Financial Officer of the Company, or such other person or persons as may be appointed by the Chief Executive Officer of the Company to administer the Target Benefit Program. The Administrator shall decide any questions about the rights of Participants and in general administer the Target Benefit Program. The Administrator may delegate all or part of his administrative duties to one or more agents and may retain advisors for assistance. The Administrator may consult with and rely upon the advice of counsel, who may be counsel for the Company.

(v)

“Cause” shall mean the conviction of a Participant (including a plea of nolo contendere) of a felony or gross misdemeanor under federal or state law which is materially and demonstrably injurious to the Company or which impairs the Participant’s ability to perform substantially the Participant’s duties for the Company.

(vi)

“Good Reason” shall mean the occurrence of any of the following:

(A)

Any material diminution in a Participant’s title, position, duties or responsibilities or authorities (which shall include, without limitation, any change such that the Participant is no longer serving in the position in which he serves as of the Effective Date in publicly-traded company); the


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assignment to him of duties that are materially inconsistent with, or materially impair his ability to perform, the duties then assigned to him, in each case as determined by the Participant in good faith; or any change in the reporting structure so that the Participant is required to report to any person other than the Company’s Chief Executive Officer;

(B)

A reduction by the Company of a Participant’s base salary exceeding 5 percent of Participant’s base salary as in effect immediately prior to the Change in Control, or an adverse change in the form or timing of the payment of the Participant’s base salary;

(C)

A reduction by the Company of a Participant’s annual bonus exceeding 20 percent of the Participant’s prior year’s annual bonus (unless such reduction relates to the amount of annual bonus payable to the Participant for the achievement of specified performance goals, or to the attainment of profitability levels of the Company or certain of its subsidiaries, and the non-achievement of such goals and/or the non-attainment of profitability levels of the Company or certain of its subsidiaries, is the reason for the reduction in the Participant’s annual bonus compared to the prior year’s bonus);

(D)

The Company’s requiring a Participant to be based at any office more than 30 miles from where the Participant’s office is located immediately prior to the Change in Control.

(E)

The Company fails to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, to assume expressly and agree to perform its obligations under the Target Benefit Program, provided that such successor has received at least ten days’ prior written notice from the Company of such obligations.

F. Investment Options . Participants may direct the investment of their Target Benefit Program accounts in accordance with the terms of the Plan. The Administrator may make available to Target Benefit Program Participants additional investment alternatives that are not generally available under the Plan which may be made available for investment of Target Benefit Program accounts only, including without limitation annuity investment vehicles.

Supplemental Retirement Program . The Company has adopted this Supplemental Retirement Program to provide supplemental retirement benefits to selected employees of the Company who do not participate in the Target Benefit Program under the Plan.

A. Selection of Eligible Participants . The Compensation Committee may, from time to time, select employees of the Company or its affiliates who shall be eligible to receive annual discretionary Company contributions which shall be credited to a Supplemental Retirement Program Account on their behalf under the Plan. Employees who participate in the Target Benefit Program under the Plan shall not be eligible to receive Supplemental Retirement Program Contributions. The employees who are eligible to participate in the Supplemental Retirement Program under the Plan as of October 28, 2014 are: William A. Furman; Martin Baker; Adrian Downes; William Glenn; Walter T. Hannan; Lorie L. Tekorius; Anne T. Manning; Brian Comstock; James Cowan; Martin Graham; and Rick Turner. Any additional employees shall begin participating in the Supplemental Retirement Program on the date


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specified in their designation of eligibility. If no date is specified in the designation of eligibility, the initial contribution shall be made in January next following the date of the designation, for the calendar year during which the Participant was designated as eligible to participate in the Supplemental Retirement Program.

B. Supplemental Retirement Program Contributions . Beginning with respect to the 2014 calendar year, the Company shall, subject to approval by the Compensation Committee, make an annual discretionary Supplemental Retirement Program Contribution on behalf of each eligible Participant, in an amount equal to 6% of the Participant’s annual base salary as then in effect plus actual bonus earned in the most recent fiscal year. Supplemental Retirement Program contributions shall be credited to eligible Participants’ accounts in January of the calendar year following the year for which the contribution is made. Participants’ benefits under the Supplemental Retirement Program shall be fully vested and non-forfeitable at all times.

C. Investment Options . Participants may direct the investment of their Supplemental Retirement Program accounts in accordance with the terms of the Plan.

[ ]	(f) Frozen Nonelective Contributions. The Employer will not make any Nonelective Contributions as of: .

2.04 Matching Contributions. During each Taxable Year, the Employer will contribute a Matching Contribution equal to ( choose (a) or (i) or choose one or more of (b) – (h) ):

[ ]	(a) None. The Employer will not make Matching Contributions to the Plan.

[ ]	(b) Fixed match-flat. An amount equal to % of each Participant’s Elective Deferrals for each Taxable Year.

[ ]	(c) Fixed match-tiered. An amount equal to the following percentages for each specified level of a Participant’s Elective Deferrals or Years of Service for each Taxable Year:


		Elective Deferrals				Matching Percentage
						%
						%
						%
						%

Note: Specify Elective Deferrals subject to match as a percentage of Compensation or a dollar amount.


		Years of Service				Matching Percentage
						%
						%
						%
						%

[ ]	(d) No other caps. The Employer in applying the Matching Contribution formula under 2.04(b) or (c) above will not limit the Participant’s Elective Deferrals taken into account (except as indicated above) and otherwise will not limit the amount of the match.


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[ ]

(e) Limit on Elective Deferrals matched. The Employer in making Matching Contributions will disregard a Participant’s Elective Deferrals exceeding ( specify percentage or dollar amount of Compensation ) for the Taxable Year.

[ ]

(f) Limit on matching amount. The Matching Contribution for any Participant for a Taxable Year may not exceed: ____________________________ ( specify percentage or dollar amount of Compensation ) .

[ x ] (g) Discretionary. Such Matching Contributions as the Employer may elect, including zero.

[ ]

(h) ( Specify ): .

[ ]

(i) Frozen Matching Contributions. The Employer will not make any Matching Contributions as of: .

2.05 Actual or Notional Contribution . The Employer’s Contributions will be ( choose one of (a) or (b) and choose (c) as applicable ):

[ x ] (a) Actual. Made in cash or property to Participant Accounts or to the Trust.

[ ]

(b) Notional. Credited to Participant Accounts only as a bookkeeping entry.

[ ]

2.06 Allocation Conditions. To receive an allocation of Employer Contributions, a Participant must satisfy the following conditions during the Taxable Year ( choose (a) or choose one or both of (b) and (c) ):

[ x ] (a) No allocation conditions.

[ ]

(b) Year of continuous service. The Participant must remain in continuous employment with the Employer (or render contract service to the Employer) for the entire Taxable Year.

[ ]

ARTICLE III

VESTING AND SUBSTANTIAL RISK OF FORFEITURE

3.01 Vesting Schedule/Other Substantial Risk of Forfeiture. The following vesting schedule or other Substantial Risk of Forfeiture applies to a Participant’s Accrued Benefit ( choose (a) or choose one or more of (b) – (f) ):

[ x ] (a) Not applicable. The Plan does not apply a vesting schedule or other Substantial Risk of Forfeiture.

[ ]

(b) Immediate vesting. 100% Vested at all times with respect to the entire Accrued Benefit.

[ ]

(c) Immediate vesting (Elective Deferrals)/vesting schedule (Employer Contributions) . A Participant’s Elective Deferral Account is 100% Vested at all times. A Participant’s Nonelective


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Contributions Account and/or Matching Contributions Account are subject to the following vesting schedule:


Years of Service		Vesting %

	or less	0 %
		%
		%
		%
	or more	100 %

[ ]	(d) Vesting schedule - entire Accrued Benefit. The Participant’s entire Accrued Benefit is subject to the following vesting schedule:


Years of Service		Vesting %

	or less	0 %
		%
		%
		%
		%
		%
	or more	100 %

[ ]

(e) Vesting schedule – class year or all years. The Plan’s vesting schedule applies as follows ( Choose one of (i) or (ii) ):

[ ]

(i) Class year. Apply the vesting schedule separately to the Deferred Compensation for each Taxable Year.

[ ]

(ii) All years. Apply the vesting schedule to all Deferred Compensation.

[ ]

(f) Other Substantial Risk of Forfeiture. (Specify): .

Note: An Employer may elect both a vesting schedule and an additional Substantial Risk of Forfeiture. In such event, a Participant failing to satisfy the conditions resulting in a Substantial Risk of Forfeiture will forfeit his/her Account, even if 100% Vested under any vesting schedule. If the Plan is an Ineligible 457 Plan, the Employer must specify a Substantial Risk of Forfeiture, which may be a vesting schedule provided that under any “graded” vesting schedule, an Ineligible 457 Plan Participant will be taxed as and when each portion of his/her Deferred Compensation vests.

3.02 Immediate Vesting upon Specified Events. A Participant’s entire Accrued Benefit is 100% Vested without regard to Years of Service if the Participant’s Separation from Service with the Employer on or following or as a result of ( choose (a) or choose one or more of (b) – (e) ):

[ x ] (a) Not Applicable.

[ ]

(b) Retirement Age. On or following Retirement Age.

[ ]


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[ ]	(d)	Disability. As a result of Disability.

[ ]	(e)	(Specify) : .

Note: An early vesting provision generally does not result in prohibited acceleration of benefits under Code §409A. See Section 4.02(C)(2).

	3.03 Application of Forfeitures. The Employer will ( choose only one of (a) – (d) ):

[ x ]	(a) Not Applicable. Not apply any provision regarding allocation of forfeitures since there are no Plan forfeitures.

[ ]	(b)	Retain. Keep all forfeitures for the Employer’s account.

[ ]	(c) Allocate. Allocate (in the year in which the forfeiture occurs) any forfeiture to the Accounts of the remaining (nonforfeiting) Participants, in accordance with one of the following methods ( choose one of (i) or (ii) ):

	[ ]	(i) Per Compensation. In the same ratio each Participant’s Compensation for the Taxable Year bears to the total Compensation of all Participants sharing in the forfeiture allocation for the Taxable Year.

	[ ]	(ii) Per Account balances. In the same ratio each Participant’s Account balance at the beginning of the Taxable Year bears to the total Account balances of all Participants sharing in the forfeiture allocation for the Taxable Year.

[ ]	(d)	( Specify ): .

Note: If the Employer elects to create the Trust under Section 5.03, the Employer should coordinate its forfeiture application elections with the provisions of the Trust.

ARTICLE IV

BENEFIT PAYMENTS


		4.01 Payment Events/Elections. The Plan payment events are ( choose one or more of (a) through (i) as applicable):

Note: The Employer must elect the Plan permitted payment events. The Employer may elect all of the 409A permitted events or limit the payment events, but the Employer must elect at least one payment event. If the Plan is a separation pay plan, the Employer must elect 4.01(a) and the Employer also may elect 4.01(b). If the Plan permits initial payment elections, change payment elections, or both, as to any or all of the Plan permitted payment events, the Employer should elect 4.01(d)(iv), (e)(ii) and (i) as applicable. The Employer also should elect under 4.02(A) and 4.02(B) as to who has election rights and to specify any limitations on such rights. If the Plan will not offer any initial or change payment elections, the Employer should not elect 4.01(d)(iv), (e)(ii) or (i). If the Plan will not offer any initial payment elections the Employer also should elect 4.02(A)(a). If the Plan will not offer change payment elections, the Employer also should elect 4.02(B)(a).


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[ x ]	(a)	Separation from Service.

[ x ]	(b)	Death.

[ x ]	(c)	Disability.

[ ]	(d)	Specified Time. The Plan permits payment to a Participant at a Specified Time ( choose one of (i) - (iv)):

	[ ]	(i) Forfeiture Lapse . At the time that the Deferred Compensation no longer is subject to a Substantial Risk of Forfeiture.

	[ ]	(ii) S tated Age . Upon attainment of age: ( specify age ).

	[ ]	(iii) ( Specify ): On: ( e.g. , January 1, 2015).

	[ ]	(iv) Election . In accordance with a Participant or Employer election under 4.02(A) or (B).

Note: The Employer must approve any Participant payment election. See Section 4.06. Payment at a Specified Time will be a lump-sum payment.

[ ]	(e)	Fixed Schedule. The Plan Permits payment to a Participant in accordance with the following Fixed
Schedule ( choose one of (i) or (ii) ):

	[ ]	(i) Schedule : .

	[ ]	(ii) Election. In accordance with a Participant or Employer election under 4.02(A) or (B).

Note: The Employer must approve any Participant payment election. See Section 4.06. Payment pursuant to a Fixed Schedule will be installments or an annuity commencing at a specific time.

[ x ]	(f)	Change in Control. The Plan permits payment to a Participant based on a Change in Control.

[ x ]	(g)	Unforeseeable Emergency. The Plan permits payment to a Participant who has an Unforeseeable
	Emergency.

[ ]	(h)	( Specify ): .
		( e.g. , based on Unforeseeable Emergency, but only as the Elective Deferral Accounts).

Note: The Employer in (h) may modify any of (a)-(g) but only if such modifications are consistent with Code §409A.

[ x ]	(i)	Election. As to 4.01 (a), (b), (c), (f), (g) and/or (h), in accordance with a Participant or Employer
	election under 4.02(A) or (B).

Note: The Employer must approve any Participant payment election. See Section 4.06.

	4.01(E) Contractor deemed Separation from Service. In making any payment to a Contractor based on
Separation from Service, the Plan ( choose (a) or choose one of (b) or (c) ):

[ x ]	(a)	Not applicable. Only Employees are Participants in the Plan.


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[ ]	(b)	Applies deemed Separation from Service. Applies the deemed Separation from Service
	provisions of Section 4.01(E).

[ ]	(c)	Does not apply. Does not apply the deemed Separation from Service provisions of Section 4.01(E).

4.02 Timing, Form and Medium of Payment/Elections. The Plan will pay a Participant’s Vested Accrued Benefit as follows ( complete (a), (b) and (c) ):

	(a)	Timing. Payment will commence or be made ( choose only one of (i) - (vi) ):

	[ x ]	(i) 30 days . On a date which is 30 days following the payment event, unless otherwise made at a Specified Time or in accordance with a Fixed Schedule.

	[ ]	(ii) 90 days . On a date which is within 90 days following the payment event, unless otherwise made at a Specified Time or in accordance with a Fixed Schedule.

	Note: A Participant may not designate the Taxable Year of Payment under (a)(ii).

	[ ]	(iii) 6 months. On a date that is 6 months following the payment event, unless otherwise made at a Specified Time or in accordance with a Fixed Schedule.

	[ ]	(iv) Specified Time/Fixed Schedule. At the Specified Time under Section 4.01(d) or pursuant to the Fixed Schedule under Section 4.01(e).

	[ ]	(v) ( Specify ): .

	[ ]	(vi) Election. In accordance with a Participant or Employer election under Sections 4.02(A) or (B).

Note: The Employer must approve any Participant payment election. See Section 4.06(C).

Note: See Section 4.01(D) as to restrictions on timing of payments to Specified Employees.

	(b)	Form. The Plan will make payment in the form of ( choose one or more of (i) – (v) ):

	[ x ]	(i) Lump-sum . A single payment.

	[ x ]	(ii) Installments. In installments as follows: Annual installments over a period not to exceed 10 years .

	[ ]	(iii) Annuity. An immediate annuity contract.

	[ ]	(iv) ( Specify ) : .

	[ ]	(v) Election. In accordance with a Participant or Employer election under Sections 4.02(A) or (B).

Note: The Employer must approve any Participant payment election. See Section 4.06.


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	(c)	Medium. The form of payment will be ( choose only one of (i) - (iv) ):

	[ x ]	(i) Cash only .

	[ ]	(ii) Property only .

	[ ]	(iii) Property or cash ( or both).

	[ ]	(iv) Election. In accordance with a Participant or Employer election under 4.02(A) or (B).
Note: The Employer must approve all Participant payment elections. See Section 4.06.

Note: A choice between cash or property is not subject to Code §409A. See Treas. Reg. §1.409A-2(a)(1).
The Plan treats this election as not being subject to the timing rules applicable to payment elections.

	4.02(A) Initial payment elections. The Plan ( choose only one of (a) - (d) ):

[ ]	(a) No initial payment elections. The Plan and Adoption Agreement specify the payment events and the timing, form and medium of payment. If there are multiple payment events, the Plan will make payment based on the earliest event to occur except as follows: ( indicate no exceptions or specify sequencing ).

[ x ]	(b) Participant initial payment election. Permits a Participant initially to elect the payment event and the timing, form and medium of payment of his/her Deferred Compensation in accordance with Section 4.02(A) ( choose only one of (i) or (ii) ):


	[ x ]	(i) All Accounts. The Plan applies a Participant’s elections to all of the Participant’s Accounts under the Plan.

	[ ]	(ii) Elective Deferral Account. The Plan applies a Participant’s elections only to the Participant’s Elective Deferral Account. The Employer will make all payment elections as to Nonelective and Matching Contribution Accounts.

Note: A Participant must elect a payment event from those which the Employer has elected under 4.01 above, which might include all of the 409A permissible payment events. A Participant in his/her election form may limit the payment election to Compensation Deferred at the time of the election or also may apply the payment election to all future Deferred Compensation.

[ ]	(c)	Employer initial payment election . Permits the Employer (and not the Participant) initially to elect the payment
	events and the timing, form and medium of payment of all Participant Accounts in accordance with Section 4.02(A).

[ x ]	(d) ( Specify ): Participant initial payment elections are permitted in accordance with Section 4.02(A) for amounts deferred on or after January 1, 2010. Participant initial payment elections are not permitted for amounts deferred prior to January 1, 2010 ( e.g. , the Participant may make an election only as to the Participant’s Grandfathered Amounts).


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Note: If a Participant or the Employer does not make an initial payment election, see Sections 4.01(B) and 4.02(A)(5).

4.02(B) Change payment elections. The Plan ( choose only one of (a) or (b); choose (c) if (b) applies and choose (d) if applicable) :

Note: Even if the Employer under 4.02(A)(a) elects not to permit any Participant or Employer initial payment elections, the Plan under Section 4.02(A)(1)treats a Plan designation of the payment events and of the timing, form and medium of payment as an initial election for purposes of applying any change election the Plan permits.


[ ]	(a)	Change payment elections not permitted. Does not permit a Participant, a Beneficiary or the Employer to
	make a change payment election in accordance with Section 4.02(B).

[ x ]	(b)	Permits change payment elections. Permits change payment elections or changes to change payment
	elections in accordance with Section 4.02(B) and as follows ( choose one or more of (i) -(iv) ):

	[ x ]	(i) Participant election. Permits a Participant to make change payment elections.

	[ ]	(ii) Employer election. Permits the Employer to make change payment elections.

	[ ]	(iii) Beneficiary election. Permits a Beneficiary following the Participant’s death to make change payment elections.

	[ x ]	(iv) (Specify): See Addendum for payment provisions applicable to amounts deferred under the Plan prior to January 1, 2010 ( e.g. , a Beneficiary may make a change payment election only if the Participant had the right to do so, OR a Participant may make a change payment election only after attaining age 60).

[ x ]	(c)	Limit on number of change payment elections . The number of change payment elections (as to any initial
	payment election) that a Participant, a Beneficiary or the Employer (as applicable) may make is ( choose one of (i) or (ii) ):

	[ x ]	(i) Unlimited. Not limited except as required under Section 4.02(B).

	[ ]	(ii) Limited. Limited to: ________ ( specify number ).

[ x ]	(d)	( Specify ): See Addendum for payment provisions applicable to amounts deferred under the Plan prior
	to January 1, 2010 ( e.g., permits change payment elections only as to Elective Deferral Account).

4.02(B)(3)(b) Installment payments. The Plan under Section 4.02(B)(3)(b) for purposes of application of the change payment election provisions treats an installment payment as a ( choose one of (a) or (b) or choose (c) if applicable ):


[ x ]	(a)	Single payment.

[ ]	(b)	Series of payments.


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Note: If the Plan is a restated Plan, and the Employer otherwise before January 1, 2008, did not make a written designation regarding the treatment of installment payments, the installments under the Plan as to pre-2008 deferrals must be treated as a single payment. See Treas. Reg. 1.409A-2(b)(2)(iv).


[ ]	(c)	Not applicable. The Plan does not permit installment payments.

	4.06(B) Election changes/Irrevocability. A Participant who makes an initial payment election or a change
payment election which the Employer has accepted ( complete (a) and (b) ):

	(a)	Initial payment elections. ( choose one of (i), (ii) or (iii) ):

	[ x ]	(i) May change. May change the initial payment election as to the Deferred Compensation to which the election applies, until the applicable election deadline under 4.02(A)(2)(a). Any change to an initial payment election made after the initial payment election becomes irrevocable is a change payment election.

	[ ]	(ii) May not change. May not change the initial election as to the Deferred Compensation to which the election applies.

	[ ]	(iii) Not applicable. As elected above, a Participant may not make an initial payment election.

	(b)	Change payment elections. ( choose one of (i), (ii) or (iii) ):

	[ x ]	(i) May change. May change the change payment election as to the Deferred Compensation to which the election applies. Where the payment event is a Specified Time or a Fixed Schedule, the Participant may change the election until the applicable deadline under Section 4.02(B)(1)(a). Where the change payment election relates to any other payment event (not a Specified Time or a Fixed Schedule), the Participant must make the change within 30 days following the Participant’s making of the change payment election which the Participant seeks to change. Any change to a change payment election made after the change payment election becomes irrevocable is a new change payment election.

	[ ]	(ii) May not change. May not change the change payment election as to the Deferred Compensation to which the election applies.

	[ ]	(iii) Not applicable. As elected above, a Participant may not make a change payment election.

Note: An Elective Deferral election under Section 2.02(C) is a separate election which is not controlled by this election 4.06(B).

ARTICLE V

TRUST ELECTION AND INVESTMENTS

5.02 No Trust. The Employer by electing (a) or (b) below does not create the Trust described in Section 5.03. Section 5.02 applies. The Employer will credit each Participant’s Account with ( choose one or both of (a) or (b) ):


[ ]		(a)		Actual Earnings ( choose only one of (i) through (iv) ):


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	[ ]	(i) Employer direction. As a result of the Employer’s directed investment of the Account.

	[ ]	(ii) Participant direction. As a result of the Participant’s directed investment of his/her own Account.

	[ ]	(iii) Participant direction over Elective Deferrals. As a result of the Participant’s directed investment of his/her own Elective Deferral Account, and the Employer’s directed investment of the balance of the Participant’s Account.

	[ ]	(iv) ( Specify ): .

[ ]	(b)	Notional Earnings. ( choose one or both of (i) or (ii) ):

	[ ]	(i) Fixed/floating interest. Interest at the rate of and applied to (choose only one of (A), (B) or (C)) :

Note: Use blank to specify rate, fixed or floating with index, time interval, simple or compounded interest, etc.


	[ ]	(A) Total Account. The Participant’s entire Account.

	[ ]	(B) Deferrals only. The Participant’s Elective Deferral Account, with the balance of the Account being subject to actual Earnings as specified in 5.02(a).

	[ ]	(C) Employer Contribution only. The Participant’s Employer Contribution Accounts with the balance of the Account being subject to actual Earnings as specified in 5.02(a).

[ ]	(ii)	(Specify) : .

5.03 Trust. The Employer by electing (a) or (b) below will establish the Trust described in Section 5.03 and designated as Exhibit C. The Trust will be identical in form to the Model Rabbi Trust issued by the Internal Revenue Service under Rev. Proc. 92-64 or any successor thereto. The Employer also may modify the Trust if necessary to comply with Applicable Guidance. The Employer will select among the optional and alternative features available under the Trust, and the Employer will not establish or adopt any other trust under the Plan. The version of the Trust the Employer adopts is ( choose one of (a) or (b) ):



[ x ]	(a)	Individually designed version .

[ ]	(b)	Adoption agreement version.


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EMPLOYER SIGNATURE

The Employer hereby agrees to the provisions of this Plan, and in witness of its agreement, the Employer, by its duly authorized officer, has executed this Adoption Agreement on June 15, 2018 .


Name of Employer: The Greenbrier Companies, Inc.

Employer’s EIN: 93-0816972

Signed:

Name and Title:


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ADDENDUM TO NONQUALIFIED

DEFERRED COMPENSATION PLAN

ADOPTION AGREEMENT

(Pour-Over Plan)

This Addendum supplements the Adoption Agreement executed by The Greenbrier Companies, Inc. (“Employer”) in connection with the amendment and restatement of its Nonqualified Deferred Compensation Plan (the “Plan”) consisting of the Basic Plan Document, the Adoption Agreement, the Exhibits and documents to which they refer, and this Addendum, effective as of June 15, 2018.

This Addendum was initially adopted effective as of January 1, 2010.

BACKGROUND

The Gunderson Savings Maximizer Plan (the “Gunderson Savings Plan”), a nonqualified deferred compensation plan originally adopted effective on September 1, 1994 by the predecessor of Gunderson LLC, a subsidiary of the Employer, has been amended and restated and merged with and into the Plan effective as of January 1, 2010.

Amounts that were deferred and fully vested under the Gunderson Savings Plan as of December 31, 2004 were and are separately accounted for and “grandfathered” under the terms of the Gunderson Savings Plan in effect as of that date and are not subject to the requirements of IRC § 409A and implementing Treasury Regulations and other guidance (collectively, “§ 409A”). Such accounts are referred to in this Addendum as “Grandfathered Accounts.”

Amounts that were deferred under the Gunderson Savings Plan on or after January 1, 2005 but prior to January 1, 2010 (“Existing Accounts”) are subject to the distribution provisions of the Gunderson Savings Plan in effect immediately prior to January 1, 2010.

This Addendum incorporates into the Plan certain provisions of the Gunderson Savings Plan that apply only to the Grandfathered Accounts, and the distribution provisions that apply to Existing Accounts.

The Plan and Adoption Agreement are hereby supplemented as follows:

1.	Grandfathered Accounts.

1.1

“Haircut” Withdrawals . Notwithstanding any other provision of the Plan to the contrary, a Participant may at any time elect that a specified amount of his benefits from a Grandfathered Account be payable from the Plan. Such a withdrawal request shall be made in writing and delivered to the Administrative Committee. Of the amount so specified by the Participant, 10% shall be forfeited and the balance paid to the Participant in a lump sum as soon as practicable.

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1.2

Optional Forms of Benefit Distribution . A Participant may elect an optional form of benefit distribution from his Grandfathered Account at any time prior to the commencement of benefit payments. Such an election shall be made in writing and delivered to the Administrative Committee. A distribution of benefits from a Participant’s Grandfathered Account may be made in any alternate form which the Administrative Committee approves, including a lump sum payment, or semi-annual, quarterly or monthly installments of substantially equal amounts over a period of years, provided that such period does not extend beyond the life expectancy of the Participant.

1.3

Normal Form of Benefit Distribution . Unless a Participant elects an optional form of benefit distribution from his Grandfathered Account, a Grandfathered Account will be paid in annual installments over the life expectancy of the Participant. The life expectancy of the Participant will be rounded to the nearest integer and based on Table V of Treasury Regulation § 1.79-9. Each annual installment is to be based on the number of remaining years of original life expectancy and the re-valued account balance remaining to the credit of the Participant.

2.	Distribution of Benefits from Existing Accounts. Sections 4.01(e), 4.02(b)(iv), 4.02(A)(a), 4.02(A)(d), 4.02(B)(b) and 4.02(B)(d) of the Adoption Agreement shall incorporate the following provisions by reference:

Distribution of Benefits to Participant.

Unless a Participant elects a different payment election in accordance with Section 4.02.B of the Plan for his Existing Account, a Participant’s Existing Account will be paid in six installments which are considered a “single payment” and not a “series of separate payments.” The first installment will be the lesser of $1,000 or 100% of the Participant’s Existing Account balance and will be paid on the date that the Participant attains age 55. Installments two through six will be paid in approximately equal amounts annually for five years beginning after the later of the date of the Participant’s (i) Separation from Service, or (ii) attainment of age 60.

In the case of a Participant who first becomes eligible to participate in the Plan after attainment of age 54, his Existing Account balance will be paid in five annual installments of approximately equal amounts beginning after the later of the date of the Participant’s (i) Separation from Service, or (ii) attainment of age 60.

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Distribution of Benefits to Beneficiary Due to Participant’s Pre-Retirement Death.

If a Participant dies prior to retirement and commencement of benefit payments and the total death benefit due to his Beneficiary from his Existing Account is less than $100,000, then one-half of the Participant’s Existing Account balance will be paid no later than December 31 of the calendar year after the year of the Participant’s death, and the remaining balance of his Existing Account will be paid no later than December 31 of the following calendar year.

If a Participant dies prior to retirement and commencement of benefit payments and the total death benefit due to his Beneficiary from his Existing Account is $100,000 or more, then the Participant’s Existing Account balance will be paid in five annual installments which are considered a “single payment” and not a “series of separate payments.” The first installment will be paid on the last day of the month that is 16 months after the Participant’s death, and each subsequent installment will be paid on the anniversary of such date. The first installment will equal one-fifth of the Existing Account balance; the second installment will equal one-fourth of the remaining Existing Account balance; the third installment will equal one-third of the remaining Existing Account balance; the fourth installment will equal one-half of the remaining Existing Account balance, and the fifth and final installment will equal the remaining Existing Account balance.

The Employer hereby agrees to the provisions of the Plan as supplemented in this Addendum to Adoption Agreement as of the date first written above.

THE GREENBRIER COMPANIES, INC.


By:
Title:

Nonqualified Deferred Compensation Plan

2018 Amendment and Restatement

Addendum to Adoption Agreement

Page 3

Exhibit 10.6

THE GREENBRIER COMPANIES, INC.

NONQUALIFIED DEFERRED COMPENSATION PLAN

AMENDMENT NO. 1 TO TRUST AGREEMENT

This Amendment No. 1 to Trust Agreement (this “ Amendment ”) is entered into as of June 15, 2018 (the “ Effective Date ”) by and between The Greenbrier Companies, Inc., an Oregon corporation (the “ Company ”), and Reliance Trust Company, a trust organization under the laws of the United States of America.

RECITALS

A. The parties have entered into that certain Trust Agreement, dated as of October 1, 2012 (the “ Trust Agreement ”), establishing a trust (the “ Company Share Trust ”) to hold shares of the Company’s common stock that are subject to deferral elections by participants in The Greenbrier Companies Nonqualified Deferred Compensation Plan (the “ Plan ”).

B. The parties wish to amend the Trust Agreement to provide that voting rights associated with shares of Company common stock held in the Company Share Trust will be exercised by the Company.

The parties therefore agree as follows:

AGREEMENT

1. Amendment to Trust Agreement . Section 5(b) of the Trust Agreement is deleted in its entirety and replaced with the following:

“(b) All rights associated with assets of the Trust shall be exercised by the Trustee and shall in no event be exercised by or rest with Plan participants, except that notwithstanding any other provision of this Trust Agreement, voting rights with respect to Trust assets will be exercised by the Company.”

2. No Further Amendments . Except as amended hereby, the Trust Agreement remains in full force and effect.

This Amendment has been executed as of the Effective Date by a duly authorized representative of each party.


The Greenbrier Companies, Inc.						Reliance Trust Company

By:						By:

Title:						Title:

Exhibit 10.7

THE GREENBRIER COMPANIES, INC.

NONQUALIFIED DEFERRED COMPENSATION PLAN FOR DIRECTORS

AMENDMENT NO. 1 TO TRUST AGREEMENT

RECITALS

A. The parties have entered into that certain Trust Agreement, dated as of July 1, 2012 (the “ Trust Agreement ”), establishing a trust (the “ Company Share Trust ”) to hold shares of the Company’s common stock that are subject to deferral elections by participants in The Greenbrier Companies Nonqualified Deferred Compensation Plan for Directors (the “ Plan ”).

B. The parties wish to amend the Trust Agreement to provide that voting rights associated with shares of Company common stock held in the Company Share Trust will be exercised by the Company.

The parties therefore agree as follows:

AGREEMENT

1. Amendment to Trust Agreement . Section 5(b) of the Trust Agreement is deleted in its entirety and replaced with the following:

2. No Further Amendments . Except as amended hereby, the Trust Agreement remains in full force and effect.

This Amendment has been executed as of the Effective Date by a duly authorized representative of each party.


The Greenbrier Companies, Inc.						Reliance Trust Company

By:						By:

Title:						Title:

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, 2018;

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;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

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

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

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

(b)

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


Date: June 29, 2018

		/s/ William A. Furman
		William A. Furman
		President and Chief Executive Officer

THE GREENBRIER COMPANIES, INC.

Exhibit 31.2

CERTIFICATIONS (cont’d)

I, Lorie L. Tekorius, 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, 2018;

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;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(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 29, 2018

		/s/ Lorie L. Tekorius
		Lorie L. Tekorius
		Executive Vice President and
		Chief Financial Officer

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, 2018, 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 29, 2018

		/s/ William A. Furman
		William A. Furman
		President and Chief Executive Officer

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, 2018, as filed with the Securities and Exchange Commission on the date therein specified (the “Report”), I, Lorie L. Tekorius, Executive 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 29, 2018

		/s/ Lorie L. Tekorius
		Lorie L. Tekorius
		Executive Vice President and
		Chief Financial Officer