THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

American Railcar Industries, Inc. (ARII)

4/28/2006 Proxy Information

TRANSACTIONS WITH CARL C. ICAHN AND ENTITIES AFFILIATED WITH CARL C. ICAHN

Overview

Our company was formed in 1988 as a company beneficially owned by Carl C. Icahn. Mr. Icahn is our principal beneficial stockholder and is the chairman of our board of directors. We grew our company through the transfer of certain assets to us from ACF Industries, Incorporated (now known as ACF Industries, LLC) (“ACF”), a company also beneficially owned by Mr. Icahn. Since our formation, we have entered into agreements relating to the acquisition of assets from and disposition of assets to entities controlled by Mr. Icahn, the provision of goods and services to us by entities controlled by Mr. Icahn, the provision of goods and services by us to entities affiliated with Mr. Icahn and other matters involving entities controlled by Mr. Icahn. We have received substantial benefit from these agreements and we expect that in the future, we will continue to conduct business with entities affiliated with or controlled by Mr. Icahn. In addition, we receive other benefits from our affiliation with Mr. Icahn and companies controlled by Mr. Icahn, such as financial and advisory support, sales support and our participation in buying groups and other arrangements with entities controlled by Mr. Icahn. Until our initial public offering, most of our capital needs had been provided by entities controlled by Mr. Icahn. Lease sales agents of American Railcar Leasing LLC (“ARL”), a company beneficially owned by Mr. Icahn, and ACF, in connection with their own leasing sales activities, have, from time to time, referred their customers or contacts to us that prefer to purchase rather than lease railcars, which has, in some cases, led to us selling railcars to these customers or contacts. At this time there is no formal arrangement under which these referrals are provided and we do not compensate ARL, ACF or any of their leasing sales agents for any railcar sales that we make as a result of these referrals. As an accommodation to some of their customers and contacts that they referred to us, ARL and ACF from time to time accepted orders to purchase our railcars and then assigned those orders to us. ARL and ACF have discontinued accepting orders to sell railcars on our behalf.

We describe below the material arrangements and other relationships that we are, or have been, a party to with Mr. Icahn and entities affiliated with Mr. Icahn since January 1, 2002. As noted below, some of these arrangements and relationships were terminated prior to or in connection with our initial public offering of our Common Stock (the “initial public offering”).

Application of the net proceeds of our initial public offering

Our initial public offering resulted in gross proceeds to us of $205.3 million. Expenses related to the offering were $13.3 million for underwriting discounts and commissions. We received net proceeds of $192.0 million in the offering. Application of these net proceeds included payments to affiliates of Mr. Icahn of $20.5 million for repayment of notes and $93.9 million for the redemption of our outstanding shares of preferred stock. In addition, our Chief Executive Officer and his wife held $0.4 million of the industrial revenue bonds that we repaid in connection with our initial public offering. These transactions are described in more detail below.

Redemption of new preferred stock

Prior to the closing of our initial public offering, all of our new preferred stock was held by entities beneficially owned and controlled by Mr. Icahn. At the closing of our initial public offering, we redeemed each then outstanding share of new preferred stock for an amount equal to the liquidation preference of each share of new preferred stock, which was $1,000 per share, plus all accumulated and unpaid dividends on each share of new preferred stock through the date of the redemption. The aggregate amount we paid to redeem all of the shares of our new preferred stock, including all accumulated and unpaid dividends due on our new preferred stock, was $93.9 million.

Redemption of mandatorily redeemable preferred stock

In anticipation of our initial public offering, and prior to our reincorporation from Missouri to Delaware, we redeemed our one outstanding share of mandatorily redeemable preferred stock, which was held by Mr. Icahn. This share became mandatorily redeemable for $1,000 on February 1, 2005. The aggregate amount we paid to Mr. Icahn to redeem our one share of mandatorily redeemable preferred stock including all accumulated and unpaid dividends due on that share, was $1,805.

CERTAIN TRANSACTIONS WITH ACF INDUSTRIES LLC AND AMERICAN RAILCAR LEASING LLC

Overview

We have entered into a variety of agreements and transactions with ACF Industries LLC (which we refer to, along with its predecessor ACF Industries, Inc., as ACF), American Railcar Leasing LLC (which we refer to as ARL) and certain other parties related to these companies. These transactions and agreements are described in further detail below. During the periods discussed, ACF and ARL were beneficially owned and controlled by Mr. Icahn, and they continue to be so owned and controlled.

On October 1, 1994, under an asset transfer agreement with ACF, we acquired from ACF, properties and assets used in its railcar components manufacturing business and its railcar servicing business at specified locations, and certain intellectual property rights associated with the transferred assets and businesses, as well as specified assets used in the manufacture and sale of industrial size mixing bowls. We refer to this transaction as the 1994 ACF asset transfer.

In 2004, ACF and its subsidiaries, through a series of transactions, transferred some of the railcar fleets that they then owned and held primarily for lease to third parties, to ARL and its subsidiaries. At the time, we owned all the common interests of ARL. As of June 30, 2005, we transferred our entire interest in ARL in exchange for the redemption of shares of our new preferred stock, in a transaction we refer to as the ARL exchange. All of our shares of new preferred stock were then owned by entities beneficially owned and controlled by Mr. Icahn. In connection with our initial public offering, we redeemed all of our shares of new preferred stock, as discussed above.

Manufacturing operations

Prior to the transfer of ACF’s and its subsidiaries’ railcar fleets to ARL and its subsidiaries in 2004, we sold railcars and railcar components to ACF and its subsidiaries for use in their railcar fleets. Since the transfer of these fleets to ARL, we sell railcars to ARL. We believe that since ARL’s formation in 2004, we have been the only supplier of railcars to ARL, although ARL is not precluded from purchasing railcars from others. In 2002, 2003 and 2004, our revenues from manufacturing operations included $63.6 million, $62.9 million and $64.4 million, respectively, from transactions with affiliates. In the year ended December 31, 2005, our revenues from manufacturing operations included $47.2 million from transactions with affiliates. Most of these revenues were attributable to railcars and railcar components that we sold to ACF, ARL and their respective subsidiaries. As of December 31, 2005, our backlog included $77.5 million for railcar orders by ARL. These orders are on substantially the same terms as we provide to our other customers.

On March 31, 2006, we signed an agreement with ARL for us to manufacture and ARL to purchase 1,000 tank railcars in 2007. When we entered into this agreement, we planned to produce these tank railcars with new manufacturing capacity that we expected to have available beginning in January, 2007. The agreement also includes options for ARL to purchase up to an additional 300 covered hopper railcars in 2007, should additional capacity become available, and 1,000 tank railcars and 400 covered hopper railcars in 2008. No assessment has yet been made as to what, if any, impact the recent storm damage to our tank railcar manufacturing facility in Marmaduke, Arkansas might have on this contract. This agreement is on at least as favorable terms to us as our terms with any other party for similar purposes. This agreement was unanimously approved by the independent directors of our Audit Committee.

ACF has also been a significant supplier of components for our business. Components supplied to us by ACF include tank railcar heads, wheel sets and various structural components. In 2002, 2003 and 2004, we purchased inventory of $15.7 million, $19.0 million, and $31.3 million, respectively, of components from ACF. In the year ended December 31, 2005, we purchased inventory of $76.4 million from ACF. As of December 31, 2005, we had outstanding purchase orders for $15.1 million of inventory from ACF.

During 2003 and 2004, Castings LLC, a joint venture partner in Ohio Castings Company, LLC (“Ohio Castings”), was a wholly owned subsidiary of ACF Industries Holding Corp., an indirect parent of ACF that is beneficially owned and controlled by Mr. Icahn. Effective January 1, 2005, we acquired Castings LLC from ACF Industries Holding Corp. as described under “— Certain transactions involving Ohio Castings.” Our cost of railcar manufacturing for the years ended December 31, 2003, 2004 and 2005 included $3.0 million, $19.9 million and $30.9 million, respectively, in railcar components produced by Ohio Castings. Expenses of $0.4 million, $3.2 million and $2.8 million paid to Castings LLC under a supply agreement are also included in the cost of railcar manufacturing for the years ended December 31, 2003, 2004 and 2005, respectively. We also have been charged $0.2 million in the year ended December 31, 2003 relating to certain costs incurred by Castings LLC in the establishment of Ohio Castings. Inventory at December 31, 2003, 2004 and 2005 includes approximately $0.3 million, $5.3 million and $3.0 million, respectively, of purchases from Ohio Castings. In September 2003, Castings LLC loaned Ohio Castings $3.0 million under a promissory note which was due in January 2004. The note was renegotiated for $2.2 million and bears interest at 4.0%. Payments are made in quarterly installments with the last payment due in November 2008. As of December 31, 2005, $1.8 million was outstanding under this note.

Railcar services

We have provided railcar repair and maintenance services and fleet management services to ACF and ARL and we continue to provide these services to ARL. As of December 31, 2005, we managed approximately 22,000 railcars for ARL, and we also provide repair and maintenance services for these railcars. In 2002, 2003 and 2004, our revenues from railcar repair and refurbishment and fleet management services included $12.8 million, $11.0 million and $18.2 million, respectively, from transactions with affiliates. In the year ended December 31, 2005, our revenues from railcar repair and refurbishment and fleet management services included $20.6 million from transactions with affiliates. Almost all of these revenues were attributable to services we provided to ACF, ARL and their subsidiaries.

Cost of railcar services

Through December 31, 2005, ACF and ARL have provided certain leasing and other fleet management services that we were required to provide to subsidiaries of ARL, under management agreements we entered into with those companies in July and October 2004. Through March 31, 2005, we paid to ACF and, from March 31, 2005 through December 31, 2005, we paid to ARL, the leasing and management fees we received under those management agreements. In 2004 and the year ended December 31, 2005, we incurred $1.2 million and $2.0 million, respectively, of cost of railcar services in connection with these arrangements. These arrangements were terminated on June 30, 2005, when we assigned our management agreements to ARL.

Administrative and other support expenses

During the current and last three fiscal years, ACF and ARL have provided us outsourced services related to our information technology needs as well as other administrative and support services. We incurred $0.3 million of expenses in each of 2002, 2003 and 2004 in connection with these arrangements, and in the year ended December 31, 2005, we incurred $1.5 million of such expenses. The increased expenses in 2005 reflect additional information technology services not provided in previous years. Until October 2004, ACF received the majority of our cash receipts and disbursed our cash on our behalf. We maintained a receivable/payable from affiliates bearing interest at ACF’s internal cost of funds in accordance with an administration agreement between ACF and us, which is described below. Under this arrangement, ACF provided financing to us based on our cash flow needs. We have also subleased our headquarters facility which is located in St. Charles, Missouri, from affiliates. The St. Charles property is owned by an affiliate of James Unger, our Chief Executive Officer. In each of 2002, 2003 and 2004, our expenses included $0.1 million of rent and $0.4 million of related facility expense payments required to be made to affiliates associated with our lease of the St. Charles headquarters facility. In the year ended December 31, 2005, our expenses included $7.0 million of rent and $0.8 million of related expense for these facilities.

Amounts due to affiliates

As of December 31, 2005, net amounts due to affiliates were $23.5 million relating to the above referenced transactions and included:

• an amount payable to ACF of $3.1 million;

• an amount payable of $7.6 million to Arnos Corp., a company beneficially owned and controlled by Mr. Icahn, representing the principal and interest due under a demand note in the principal amount of $7.0 million that we issued in connection with a working capital loan from Arnos Corp.; and

• an amount payable of $12.8 million to ACF Industries Holding Corp., a company beneficially owned and controlled by Mr. Icahn, representing the principal and interest due under a demand note in the principal amount of $12.0 million that we issued in connection with our purchase of Castings LLC from ACF Industries Holding Corp.

We used a portion of the net proceeds of our initial public offering to repay in full the notes to Arnos Corp. and ACF Industries Holding Corp.

CERTAIN TRANSACTIONS WITH ACF INDUSTRIES LLC

1994 ACF asset transfer

On October 1, 1994, under an asset transfer agreement with ACF, we acquired properties and assets used in ACF’s railcar components manufacturing business and its railcar servicing business at specified locations, and certain intellectual property rights associated with the transferred assets and businesses, as well as specified assets used in the manufacture and sale of industrial size mixing bowls. We refer to this transaction as the 1994 ACF asset transfer. The properties covered by this agreement included the following: (See page 22 of proxy for table).

Pursuant to the 1994 ACF asset transfer, ACF retained and agreed to indemnify us for certain liabilities and obligations relating to ACF’s conduct of business and ownership of the assets at these locations prior to their transfer to us, including liabilities relating to employee benefit plans, subject to exceptions for transferred employees described below, workers compensation, environmental contamination and third-party litigation. As part of the 1994 ACF asset transfer, we agreed that the ACF employees transferred to us would continue to be permitted to participate in ACF’s employee benefit plans for so long as we remained a part of ACF’s controlled group, and we further agreed to assume the ongoing expense for such employees’ continued participation in those plans. In the event that we cease to be a member of ACF’s controlled group, ACF is required to terminate the further accrual of benefits by our transferred employees under its benefit plans, and we and ACF are required to cooperate to achieve an allocation of the assets and liabilities of the benefits plans accrued after the 1994 ACF asset transfer with respect to each of our and ACF’s employees as we and ACF deem appropriate. Upon completion of our initial public offering, we ceased to be a part of ACF’s controlled group. As of December 31, 2004, we estimate that the total retained liabilities of ACF under the asset transfer agreement were $11.1 million, primarily relating to pension and postretirement liabilities. In 2002, 2003 and 2004, ACF paid $0.7 million, $0.6 million and $1.4 million, respectively, relating to the retained liabilities. This liability was reduced to $0.3 million as of December 31, 2005 consisting mainly of environmental liabilities, as a result of the pension plan swap discussed below.

In anticipation of our no longer being a part of ACF’s controlled group and the completion of our initial public offering, we entered into a retirement benefit separation agreement, effective December 1, 2005, with ACF for allocating the assets and liabilities of the pension benefit plans retained by ACF in the 1994 ACF asset transfer in which some of our employees were participants, and which has relieved us of our further employee benefit reimbursement obligations to ACF under the 1994 ACF asset transfer agreement. The principal employee benefit plans affected by this arrangement are two ACF sponsored pension plans, known as the ACF Employee Retirement Plan and the ACF Shippers Car Line Pension Plan, and certain ACF sponsored retiree medical and retiree life insurance plans.

Under the arrangement, in exchange for our agreement to pay ACF approximately $9.2 million and to become the sponsoring employer under the ACF Shippers Car Line Pension Plan, including the assumption of all obligations for our and ACF’s employees under that plan, we have ceased to be a participating employer under the ACF Employee Retirement Plan and have been relieved of all further reimbursement obligations, including for our employees, under that plan. We estimate that as of December 1, 2005, the ACF Shippers Car Line Pension Plan had $4.0 million of unfunded liabilities on an accounting basis, that were assumed by us in connection with this arrangement. The payment of approximately $9.2 million which was made by us to ACF represents our and ACF’s estimate of the payment required to be made by us to achieve an appropriate allocation of the assets and liabilities of the benefit plans accrued after the 1994 ACF asset transfer, with respect to each of our and ACF’s employees in connection with the two plans. This allocation was determined in accordance with actuarial calculations consistent with those that would be required to used by us and ACF in allocating plan assets and liabilities at such time as we cease to be a member of ACF’s controlled group.

As part of this arrangement, we also assumed sponsorship of a retiree medical and retiree life insurance plan for active and identified former ARI employees that were covered by the ACF sponsored medical and retiree life insurance plans, and ACF was relieved of all further liability under those plans with respect to those employees. We estimate that as of December 1, 2005, the post-retirement liability related to this obligation was approximately $3.9 million. ACF paid us $2.9 million to assume the pre-1994 portion of this liability.

The total amount of the obligations we assumed is estimated to be $14.2 million. We previously accrued an estimated liability related to this settlement of $3.2 million. In December 2005, we recorded an increase in the estimated liability of $10.9 million and a loss on the settlement of the same amount, of which we recorded $2.0 million in cost of railcar services with the remaining amount being shown on our statement of operations as pension settlement expense.

In connection with the 1994 ACF asset transfer, certain of our employees, including Mr. Unger, our President and Chief Executive Officer, continued to participate in the ACF supplemental executive retirement plan, or SERP. The SERP benefit is generally equal to the benefit that would be provided under the Employees’ Retirement Plan of ACF Industries LLC, if certain Internal Revenue Code limits and exclusions from compensation under the retirement plan did not apply, less the actual benefit payable under the ACF retirement plan. ACF remained responsible for payment of that portion of those employees’ SERP benefit related to service with ACF prior to the 1994 ACF asset transfer and we are responsible for payment of that portion of the benefit related to service with us after that transfer. The SERP benefits were frozen effective as of March 31, 2004. As a result, no further benefits are accruing under the SERP. In anticipation of our no longer being a part of ACF’s control group and our initial public offering, we adopted a separate SERP to cover our allocable portion of the SERP obligations to those of our employees who participated in ACF’s SERP. ACF remains obligated to pay that portion of any liability associated with the SERP related to service of those employees performed prior to the 1994 ACF asset transfer. For a description of this SERP, see “Executive Compensation — Retirement Plans — Supplemental Executive Retirement Plan.”

Also in connection with the 1994 ACF asset transfer, we entered into the following administrative and operating agreements with ACF, effective as of October 1, 1994:

• manufacturing services agreement;

• license agreement from ACF;

• license agreement to ACF;

• administration agreement;

• railcar servicing agreement; and

• supply agreement.

Only the manufacturing services agreement and the two license agreements remain in effect. The other agreements were all terminated as of April 1, 2005.

Manufacturing Services Agreement. Under the manufacturing services agreement, ACF has agreed to manufacture and, upon our instruction, to distribute various railcar components and industrial size mixing bowls, using assets that we acquired pursuant to the 1994 ACF asset transfer, but were retained by ACF at its Milton, Pennsylvania and Huntington, West Virginia manufacturing facilities. This equipment included presses and related equipment that were impracticable to move to our premises. ACF transferred its Milton, Pennsylvania repair facility, but not its Milton, Pennsylvania manufacturing facility, to us under the 1994 asset transfer. Under our manufacturing services agreement, ACF is required to maintain and insure the equipment during the term of the manufacturing services agreement and is permitted to use the equipment for its own purposes in the ordinary course of business, provided that it does not interfere with ACF’s timely performance of the manufacturing services under this agreement. Upon termination of the agreement, ACF is required, at our expense, to remove and deliver the equipment to any site designated by us in the continental U.S. As payment for these services, we agreed to pay ACF its direct costs, including the cost of all raw materials not supplied by us, and a reasonable allocation of overhead expenses attributable to the services, including the cost of maintaining employees to provide the services. We believe that payments to ACF under this arrangement are comparable to the cost we would have paid to an independent third party to manufacture such components. This agreement remains in effect and automatically renews on an annual basis unless we provide six months prior written notice of termination. There is no right of termination for ACF under this agreement.

License Agreement from ACF. Under a license agreement with ACF, ACF granted us a non-exclusive, perpetual, royalty-free license to the patents and other intellectual property owned by it, which could be used by us in the conduct of our business, but did not exclusively relate to our business, including the 12 patents and one patent application, now issued as a patent, listed in that agreement. Of these patents, ten patents have expired and the remaining three patents have expiration dates ranging from 2012 to 2013. These remaining patents primarily relate to pneumatic outlets and railcar hopper gaskets. Under this agreement, we could not use the licensed patents for the production of railcar components for third parties without the consent of ACF. In 1997, ACF transferred the patents covered by this license to us. This license is not assignable by either party, without the prior consent of the other, except in connection with the sale of substantially all of either party’s business. This agreement remains in effect.

License Agreement to ACF. Under a license agreement with ACF, we granted ACF a non-exclusive, perpetual, royalty-free license to the intellectual property exclusively relating to our business that was transferred to us in the 1994 asset transfer. There are no restrictions on ACF’s use of the information licensed under this agreement. This license is not assignable by either party, without the prior consent of the other, except in connection with the sale of substantially all of either party’s business. This agreement remains in effect.

Administration Agreement. Under an administration agreement with ACF, ACF agreed to provide us information technology services and other administrative services. We agreed to pay ACF its direct costs, including a reasonable allocation of overhead expenses attributable to providing the services, including the cost of maintaining employees to provide the services. Until October 2004, under this agreement, ACF received the majority of our cash receipts and disbursed our cash on our behalf. We maintained a receivable/payable from affiliates bearing interest at ACF’s internal cost of funds. Under this arrangement, ACF provided financing to us based upon our cash flow needs. We also subleased our headquarters facility in St. Charles Missouri from ACF under this agreement. This agreement was terminated on April 1, 2005.

Railcar Servicing Agreement. Under a railcar servicing agreement with ACF, we agreed to provide railcar repair and maintenance services for railcars owned or managed by ACF and leased or held for lease by ACF, to provide ACF with fleet management services, and to provide ACF with consulting services on safety and environmental matters. For maintenance services, ACF paid us for components at our actual costs plus 15% and for our labor at a fixed rate that has been adjusted from time to time to reflect market conditions. Painting, lining and cleaning services were billed at current market rates, and fleet management services were billed at a monthly fee per railcar serviced. Other services were billed at our direct costs plus 5.0%. Our direct costs included a reasonable allocation of overhead expenses attributable to providing the services, including the cost of maintaining employees to provide the services. This agreement was terminated on April 1, 2005.

Supply Agreement. Under a supply agreement with ACF, we agreed to manufacture and sell to ACF specified components. In addition, under this agreement, we agreed to sell ACF other components manufactured by us on terms not less favorable than the terms on which we sell those products to third parties. We sold specified components under the agreement for a price equal to the then current market price or our cost plus a gross profit percentage. This gross profit percentage has been revised annually and has ranged from 5.0% to 25.0%, depending upon the component and which one of our facilities manufactured the product. This agreement was terminated on April 1, 2005.

2005 consulting agreements

On April 1, 2005, we entered into two business consultation agreements with ACF, whereby each of us has agreed to provide services to the other. ACF has agreed to assist us in labor litigation, labor relations support and consultation, and labor contract interpretation and negotiation. In 2005, we required the services of at least one ACF employee for no more than 20 hours a week under this agreement. We pay $150 per hour for these services. We have agreed to provide ACF with engineering consultation and advice. In 2005, ACF required the services of at least one of our employees for no more than 20 hours a week under this agreement. ACF is required to pay $150 per hour for these services. We do not believe that either party will be required to pay more than $60,000 per year under either of these agreements. These agreements remain in effect through March 2015, subject to the right of either party to terminate the agreement on 30 days notice.

1998 loan to ACF

In October 1998, we loaned $57.2 million to ACF. This loan accrued interest at a variable rate, adjusted quarterly, equal to LIBOR plus 3.0% or the base rate of the Industrial Bank of Japan plus 1.5%, as elected by ACF. This loan was repaid in full in 2004 in connection with the formation and capitalization of ARL. See “Certain transactions involving American Railcar Leasing LLC — Formation of ARL and related contributions.” In 2002, 2003 and 2004, we recorded interest income relating to this loan of $2.8 million, $2.5 million and $1.8 million, respectively.

Guarantees of indebtedness by ACF and other related parties

Industrial Revenue Bonds. ACF and ACF Industries Holding Corp., an indirect parent of ACF, guaranteed our obligations under our industrial revenue bonds. As of December 31, 2005, $8.3 million was outstanding under these bonds. These bonds were payable through 2011 and, as of December 31, 2005, bore interest at rates ranging from 6.75% to 8.5%. We used a portion of the net proceeds of our initial public offering to repay these bonds in full. ACF and ACF Industries Holding Corp. were released from their guarantees upon the repayment of the bonds.

Senior Secured Credit Facility. In 1998, we obtained a senior secured credit facility from the Industrial Bank of Japan, as administrative agent, with a total availability of $150 million. This facility was guaranteed by ACF, ACF Industries Holding Corp., an indirect parent of ACF, and NMI Holding Corp., a wholly owned subsidiary of ACF Industries Holding Corp. This facility was repaid in full in July 2004.

Subordinated Note. In 1998, we obtained a $10.0 million loan from Boeing Financial under a promissory note. This note was guaranteed by ACF and ACF Industries Holding Corp. and was repaid in full in July 2004.

CIT Equipment Lease. In 1999, we entered into a master equipment lease agreement with CIT that was guaranteed by ACF. This lease relates to equipment that we use to manufacture railcars and railcar components at our Paragould, Marmaduke, Jackson and Kennett facilities. The interest rate on the lease is LIBOR plus 2.75% (7.0% at December 31, 2005). As of December 31, 2005, a balance of $6.7 million was outstanding under this lease, including amounts subject to our purchase option at the expiration of the lease term. On January 31, 2006, we exercised an option to purchase all equipment under this equipment lease. The lease allowed for the purchase of all the equipment at estimated fair value. We paid $5.8 million to purchase the lease equipment.

Interest rate swap contract

In 2001, we entered into a derivative instrument in the form of an interest rate swap contract with an underlying notional amount of $49.0 million. We assigned this contract to ACF, effective as of the date of its execution, and all rights and obligations of this contract were passed through to ACF. This contract expired on February 28, 2005.

Raw material and other product purchase agreements

We, together with ACF, have entered into agreements for the purchase of products by each of us, including steel and gas. Under these agreements, we and ACF are entitled to favorable pricing based upon the aggregate amount of our purchases. We allocate the benefits under these purchase agreements proportionally based upon the amount of products that each of us purchases during the applicable period.

Corbitt equipment lease and purchase

We leased from ACF, leasehold improvements and equipment that we placed in service at our Corbitt manufacturing facility in St. Charles, Missouri from July 1, 2001 through June 1, 2003. During 2002, 2003 and 2004, we paid ACF $0.3 million, $0.3 million and $0.4 million, respectively, for the use of these leasehold improvements and equipment. We did not pay any rent for these assets in 2005. Rather, on March 31, 2005, we purchased these assets from ACF for $2.8 million.

CERTAIN TRANSACTIONS INVOLVING AMERICAN RAILCAR LEASING LLC

Formation of ARL and related contributions

We formed ARL as our wholly owned subsidiary in June 2004. As part of the formation of ARL and its further capitalization, ACF and certain of its subsidiaries transferred to us and ARL railcars and related leases, as well as equity in certain of ACF’s subsidiaries that supported ACF’s leasing business, in exchange for shares of our new preferred stock and preferred interests of ARL. We, in turn, contributed the assets we so received to ARL and made a cash investment in ARL of $25.0 million.

In connection with these transactions, all of which occurred in 2004:

• we were issued all of the common interests in ARL;

• ACF and its subsidiaries were issued all of ARL’s B-1 preferred interests;

• Vegas Financial Subsidiary Corp., a company beneficially owned and controlled by Mr. Icahn, was issued all of ARL’s B-2 preferred interests in exchange for an investment of $40 million;

• we issued 34,500 shares of our new preferred stock to ACF and its subsidiaries; and

• our $57.2 million loan to ACF was repaid in full.

The B-1 and B-2 preferred interests of ARL were convertible into shares of our new preferred stock. On June 30, 2005, the terms of these interests were modified, among other things, to eliminate this conversion feature.

The ARL exchange

On June 30, 2005, we transferred all our interest in ARL, consisting of all its outstanding common A units, pro rata, to the holders of our new preferred stock in exchange for the redemption of 116,116 shares of our new preferred stock held by them, including all dividends accumulated on those shares. The value of the total liquidation preference and accumulated dividends on the shares of new preferred stock redeemed in this transaction was $125.0 million. All of the shares of our new preferred stock were held by companies beneficially owned and controlled by Mr. Icahn. As described above, we redeemed all of our new preferred stock at the closing of our initial public offering. We refer to this transaction as the ARL exchange.

Agreements relating to ARL and its subsidiaries

In 2004 and 2005, we entered into the following agreements relating to ARL and its subsidiaries:

• railcar management agreements with ARI First LLC and ARI Third LLC;

• ACF administration agreement;

• ARL railcar services agreement;

• ARL railcar servicing agreement;

• ARL services agreement;

• guarantee of ARI Second LLC loan agreement; and

• ARL trademark license agreement.

The ARL railcar servicing agreement and the ARL services agreement remain in effect. All other agreements were terminated or assigned to ARL at various times during 2005, as described below.

Railcar Management Agreements with ARI First LLC and ARI Third LLC. On July 20, 2004, we entered into a railcar management agreement with ARI First LLC and on October 7, 2004, we entered into a railcar management agreement with ARI Third LLC. ARI First LLC and ARI Third LLC are wholly owned subsidiaries of ARL that hold railcars forming a portion of the railcar lease fleet owned by ARL and its subsidiaries. Under these railcar management agreements, we provided ARI First and ARI Third with marketing, leasing, administration, maintenance, recordkeeping and insurance services for the railcars owned by ARI First and ARI Third. ARI First and ARI Third paid us a monthly management fee, based upon the number of railcars covered, and reimbursed us for all costs incurred in performing these services. We assigned this agreement to ARL effective June 30, 2005.

ACF Administration Agreement. On July 20, 2004, we entered into an ACF administration agreement with ACF and ARL. Under this agreement, ACF agreed to provide us with railcar management services which we were required to provide under the management agreements with ARI First LLC and ARI Third LLC described above (except maintenance, insurance and risk management services). In addition, ACF provided us with lease administration services for the railcars owned by ARI First LLC and ARI Third LLC, respectively. Under this agreement, we were required to pay ACF a per railcar monthly fee equal to the per railcar fee that we were receiving under our railcar management agreements with ARI First LLC and ARI Third LLC. This Agreement terminated on March 31, 2005.

ARL Railcar Services Agreement. On April 1, 2005, we entered into a railcar services agreement with ARL. Under this agreement, ARL provided us with railcar services which we were required to provide to ARI First LLC and ARI Third LLC under our railcar management agreements with ARI First LLC and ARI Third LLC. Under this agreement, we were required to pay ARL all compensation that we received from ARI First LLC and ARI Third LLC under our railcar management agreements with them. This agreement was terminated July 1, 2005 when we assigned our railcar management agreements with ARI First LLC and ARI Third LLC to ARL.

ARL Railcar Servicing Agreement. On April 1, 2005, we entered into a railcar servicing agreement with ARL. Under this agreement, we provide ARL with substantially the same services that we had previously provided to ACF under our 1994 railcar servicing agreement with ACF described above under “Certain transactions with ACF Industries, LLC — 1994 ACF asset transfer — Railcar servicing agreement,” for railcars that ARL or its affiliates own or manage. Under the agreement with ARL, ARL is required to pay us a monthly fee, based upon the number of railcars covered, plus a charge for labor, components and materials. For materials and components we manufacture, ARL pays us our current market price, and for materials and components we purchase, ARL pays us our purchasing costs plus 15%. For painting, lining and cleaning services, ARL pays the then current market rate. For other labor costs, ARL pays us a fixed hourly fee. We have further agreed that the charges for our services will be on at least as favorable terms as our terms with any other party for similar purposes. The per railcar fees paid to us through September 30, 2005 under the railcar management agreements for ARI First LLC and ARI Third LLC are credited against the amounts due us under the ARL railcar servicing agreement. This agreement extends through June 30, 2006, and is automatically renewable for additional one year periods unless either party gives at least six months prior notice of termination. If we elect to terminate this agreement, we must pay a termination fee of $0.5 million.

ARL Services Agreement. On April 1, 2005, we entered into a services agreement with ARL. Under this agreement, ARL has agreed to provide us certain information technology services, rent and building services and limited administrative services. The rent and building services includes our use of our headquarters space which is leased by ARL from an affiliate of James J. Unger, our President and Chief Executive Officer. See “Certain transactions involving James J. Unger.” Also under this agreement, we have agreed to provide purchasing and engineering services to ARL. Each party is required to pay the other a fixed annual fee for each of the listed services under this agreement. The total annual fees that we are required to pay ARL for all services that ARL is providing us under this agreement is $2.2 million, and the total annual fees that ARL is required to pay us for all services that we are providing ARL under this agreement is $0.2 million. The annual fees under our services agreements with ARI and ARL were determined in the following manner: first, we allocated for the cost of each department of ARL providing services to us; second, we calculated these costs based on the number of employees providing these services and the attendant cost associated with them; third, we applied the same formula to value the services we provided to ARL; and finally, we calculated the fee allocations relating to rent and building services using an agreed upon percentage of space utilized and headcount between the two companies. Either party may terminate any of these services, and the associated costs for those services, on at least six months prior notice at any time prior to the termination of the agreement on December 31, 2007.

Guarantee of ARI Second LLC Loan Agreement. On July 20, 2004, ARI Second LLC, a subsidiary of ARL, entered into a loan agreement with HSH Nordbank AG, under which ARI Second borrowed $64.3 million. We guaranteed ARI Second LLC’s obligations under this loan agreement. This loan was repaid in full in October 2004.

ARL Trademark License Agreement. Effective June 30, 2005, we entered into a trademark license agreement with ARL. Under this agreement, for an annual fee of $1,000, we have granted a nonexclusive, perpetual, worldwide license to ARL to use our common law trademarks “American Railcar” and the “diamond shape” of our ARI logo. ARL may only use the licensed trademarks in connection with the railcar leasing business.

Health and welfare benefit plans

Employees of ARL participate in our 401(k) plan and certain of our health and welfare benefit plans. ARL is responsible for the costs and benefits for its employees under these plans. As part of the ARL Exchange, ARL is in the process of establishing its own 401(k) and health and welfare benefit plans.

CERTAIN TRANSACTIONS INVOLVING OHIO CASTINGS

In February 2003, Castings LLC, a wholly owned subsidiary of ACF Industries Holding Corp., a company beneficially owned and controlled by Mr. Icahn, acquired a one-third ownership interest in Ohio Castings Company, LLC, a joint venture with affiliates of two established railcar industry companies, Amsted Industries, Inc. and The Greenbrier Companies, Inc. Ohio Castings operates two foundries that produce heavy castings. Effective as of January 1, 2005, ACF Industries Holding Corp. transferred its interest in Castings LLC to us for total consideration of $12.0 million, represented by a promissory note bearing an interest rate equal to the prime rate plus 0.5%, payable on demand. In connection with this transfer, we agreed to assume certain, and indemnify all liabilities related to and arising from ACF Industries Holding Corp.’s investment in Castings LLC, including the guarantee of Castings LLC’s obligations to Ohio Castings, the guarantee of bonds in the amount of $10.0 million issued by the State of Ohio to one of Ohio Castings’ subsidiaries, of which $8.0 million was outstanding as of December 31, 2005, and the guarantee of a $2.0 million state loan that provides for purchases of capital equipment, of which $0.8 million was outstanding as of December 31, 2005. The two other partners of Ohio Castings have made similar guarantees of these obligations.

We have entered into supply agreements with an affiliate of Amsted Industries, Inc., an affiliate of one of our Ohio Castings joint venture partners, to purchase up to 25% and 33%, respectively, of the products produced at each of two foundries being operated by Ohio Castings. We pay Castings LLC a fee in connection with those purchases. Our purchases and payments relating to these purchases and fees are set forth above under “— Certain transactions with ACF Industries LLC and American Railcar Leasing LLC — Manufacturing operations.”

CERTAIN TRANSACTIONS WITH MR. ICAHN AND OTHER RELATED ENTITIES

Contribution following 2006 storm damage

Effective April 10, 2006, Mr. Icahn contributed approximately $275,000 of personal funds to us to pay the weekly payroll and fringe benefits of all of our employees working at our Marmaduke, Arkansas facility. This contribution followed the tornado and storm damage that caused us to halt operations at this facility and was intended to cover the period of time before our insurance provided funds for us to continue to pay full wages and benefits to all such employees.

Carl C. Icahn and ARL loans

In October 2004, we advanced Mr. Icahn $165.0 million under a secured promissory note due in 2007 and bearing interest at the prime rate plus 1.75%. At the same time, we borrowed $130.0 million from ARL represented by a promissory note due in 2007 and bearing interest at the prime rate plus 1.5%. In January 2005, we transferred our entire interest in the Icahn note to ARL in exchange for additional common interests in ARL and in satisfaction of our obligations under the ARL note. In 2004 and 2005, we recorded interest income of $2.0 million and $0.8 million, respectively, and interest expense of $1.5 million and $0.6 million, respectively, relating to these notes.

Arnos Corp. note payable

In December 2004, we borrowed $7.0 million from Arnos Corp., a company beneficially owned and controlled by Mr. Icahn, under a promissory note. The note bears interest at the prime rate plus 1.75% (9.0% at December 31, 2005) and is payable on demand. We used a portion of the net proceeds of our initial public offering to repay this loan in full.

Transactions with Vegas Financial Corp.

Purchase of Mandatorily Redeemable Payment-in-Kind Preferred Stock. We issued to Vegas Financial Corp., a company beneficially owned and controlled by Mr. Icahn, 15,000 shares of our mandatorily redeemable payment-in-kind preferred stock, known as PIK preferred stock, for $15.0 million in June 2002, and 10,000 shares of PIK preferred stock for $10.0 million in June 2003.

Conversion into and Purchase of New Preferred Stock. In July 2004, Vegas Financial Corp. converted all of its PIK preferred stock, consisting of 95,517.04 shares of PIK preferred stock, representing all of the shares of PIK preferred stock outstanding, into 96,171 shares of our new preferred stock. In addition, Vegas Financial Corp. simultaneously purchased an additional 67,500 shares of new preferred stock for $67.5 million. We used a portion of the net proceeds of our initial public offering to, among other things, redeem all of the outstanding shares and pay all accumulated dividends on our new preferred stock, including those held by Vegas Financial Corp. As a result, Vegas Financial Corp. received $89.2 million of the net proceeds of our initial public offering. See “— Transactions with Carl C. Icahn and entities affiliated with Carl C. Icahn — Redemption of new preferred stock.”

Transactions with Hopper Investments LLC

In 2004, Hopper Investments LLC, a company beneficially owned and controlled by Mr. Icahn, paid $42.5 million for 1,818,976 shares of our Common Stock.

Transactions with Philip Environmental Services Corp.

We engaged Philip Environmental Services Corp., an environmental consulting company beneficially owned and controlled by Mr. Icahn, to provide environmental consulting services to us. In the year ended December 31, 2005 we incurred $0.2 million of expenses associated with that engagement. We have continued to use Philip Environmental Services Corp. to assist us in our environmental compliance.

CERTAIN TRANSACTIONS INVOLVING JAMES J. UNGER

Facilities leasing arrangements

Our headquarters facilities and our Corbitt manufacturing facilities in St. Charles, Missouri are owned by St. Charles Properties, an entity controlled by James J. Unger, our President and Chief Executive Officer. Under two leases dated May 1, 1995 and March 1, 2001, St. Charles Properties leased these facilities to ACF. We reimbursed ACF for our proportionate share of the cost of renting these facilities through April 1, 2005. On that date, ACF assigned the March 1, 2001 lease, covering our Corbitt manufacturing facilities, to us and the May 1, 1995 lease, covering our and ARL’s headquarters facility, to ARL. We continue to maintain our headquarters in the space that has been leased to ARL. Under our services agreement with ARL, we pay ARL $0.5 million per year, which represents the estimate of our proportionate share of ARL’s costs for the space that we use under the lease, including rent and building services. The terms of the underlying leases are as follows.

Under the terms of the lease agreement assigned to ARL, ARL has leased approximately 78,000 square feet of office space. The lease expires on December 31, 2010. Rent is payable monthly in the amount of $25,000. Under the terms of the lease, ARL pays one-tenth of the property tax and insurance expenses levied upon the property. In addition, ARL must pay 17% and 54% of any increase in taxes and property insurances costs, respectively. ARL is also required to repair and maintain the facility at its costs and expense. We use approximately 46% of the office space leased by ARL under this agreement.

Under the terms of the lease agreement assigned to us, we occupy approximately 128,000 square feet of space which we use for our Corbitt manufacturing facility. The lease expires on February 28, 2011 with an option to renew the lease for one successive five-year term. Rent is payable monthly in the amount of $29,763. The maximum monthly rent for the renewal period is $32,442 per month. We are required to pay 27% of all tax increases assessed or levied upon the property and the cost of the utilities we use, as well as repair and maintain the facility at our expense.

In 2002, 2003 and 2004, we incurred $0.8 million of costs to affiliates in each of 2002, 2003 and 2004, under these two leasing arrangements, and in the year ended December 31, 2005, we incurred $0.8 million of such costs.

Industrial revenue bonds

Mr. Unger and his wife owned $0.4 million of the industrial revenue bonds issued by Paragould, Arkansas. Mr. Unger and his wife purchased these bonds at the time of their original issuance on the same terms that all non-affiliated entities purchased the bonds. We used the net proceeds of our initial public offering to repay in full the amounts due under all of our industrial revenue bonds. Mr. Unger and his wife received approximately $0.4 million upon our repayment of the amounts due under the industrial revenue bonds.

Registration Rights

We entered into a registration rights agreement, effective upon the completion of our initial public offering, with certain of our existing stockholders. The stockholders that are party to the new registration rights agreement will have the right to require us, subject to certain terms and conditions, to register their shares of our Common Stock under the Securities Act at any time following expiration of the lock-up period applicable to them. These stockholders collectively will have an aggregate of five demand registration rights, three of which relate solely to registration on a short-form registration statement, such as a Form S-3. In addition, if we propose to register any additional shares of our capital stock under the Securities Act, these stockholders will be entitled to customary “piggyback” registration rights, which will entitle them to include their shares of Common Stock in a registration of our securities for sale by us or by other security holders. In addition, in our letter agreement with James Unger, we have agreed to use commercially reasonable efforts to file a registration statement on Form S-8 with the SEC to cover the registration of 114,286 shares of our Common Stock. We have agreed to include the balance of Mr. Unger’s shares in any registration statement we file on behalf of Mr. Icahn with regard to the registration for sale of our shares held by Mr. Icahn, provided the contractual restrictions and applicable lock-up period of Mr. Unger’s shares have lapsed. The registration rights granted under the registration rights agreement and Mr. Unger’s letter agreement are subject to customary exceptions and qualifications and compliance with certain registration procedures. Approximately 11.4 million shares of our Common Stock are entitled to the benefits of these registration rights.

Shares Purchased By Certain Related Parties In Our Initial Public Offering

The underwriters reserved up to 5% of the shares of our Common Stock for sale in our initial public offering for purchase by certain related parties through a directed share program. In connection with the directed share program, any of our directors, officers, nominees for election as director or an immediate family member of any of these individuals may have purchased shares of our Common Stock with a value in excess of $60,000.